Presentation on theme: "Proposed 501r Rules and the Use of Charity Screening"— Presentation transcript:
1Proposed 501r Rules and the Use of Charity Screening TX AAHAMJune 5, 2014
2Today’s Speakers Debra Stall firstname.lastname@example.org (615) 633-4663 Debra Stall is a Managing Partner at PARO Teamworks, LLC. PARO Teamworks provides healthcare consulting including revenue cycle redesign, policy and procedure design and restructuring, interim management and financial assistance process redesign.Neil Smithson, Managing Member and Founder, PARO Decision Support, LLC. PARO provides charity screening and revenue cycle scoring solutions to hundreds of hospitals nationwide. PARO has help millions of consumers receive free or discounted care since its inception in 2006.Neil Smithson(954)
3Agenda Section 501 r Review Industry Response to New Environment Presumptive Eligibility SafeguardsFinancial Assistance & Community NeedsOpportunities for Improving Processes, Reducing Bad Debt and Bad PRRecommendations for Implementation
4Internal Revenue Code Section 501 r (based on Notice of Proposed Rulemaking issued in June 2012) Establishes the following requirements:Financial assistance policyLimitation on chargesBilling and collection practicesCommunity health needs assessment
5Financial Assistance Requirements Written financial assistance policyCriteria for eligibility – income, assets, insurance statusType of assistance provide (i.e. free care, discounted care, medical indigent or hardship)Clearly inform patients of how and where to applyExplain documentation requirementsAssistance may not be denied based on omission of documentation not specified in the policyApplicants must be notified in writing of eligibility determinationPolicy must be approved by the Board or Trustees or another governing body of the tax-exempt hospitalConsidered implemented when the policy is consistently carried out by the facility
6Limitation on ChargesFees charged to patients eligible for financial assistance must to limited to amounts generally billed those with insurance. Regulations cite specific examples for calculating AGB AGB is applied to all ER care and medically necessary care
7Billing and Collection Policy May stand as a separate policy or beincorporated into the overall financialassistance policyDescribe permissible collection actions that may be taken in event of nonpayment and time frame for taking actionApplies to both internal hospital collection efforts and efforts undertaken by authorized third partiesIf a patient is determined to be FAP qualified later in the revenue cycle, the extraordinary collection actions must be reversed
8Extraordinary Collection Actions Extraordinary Collection Actions (ECA)are defined as actions taken by the hospital, or a third party acting on behalf of the hospital, that require legal or judicial process. Hospitals must refrain from taking ECAs throughout the notification period and prior to reasonable efforts to determine eligibility for FAP.They include, but are not limited to the following:Reporting adverse information to credit bureausSale of debt to another partyInitiating civil litigationLiens on propertyForeclosure on real estateAttaching or seizing bank accountCausing and Individuals arrestBody attachmentsGarnishment of wages
9Reasonable Efforts120 day notification period which begins after issuing the first bill to the patientHospitals are prohibited from engaging in extraordinary collection actions while making reasonable efforts to determine whether an individual is eligible for assistance under their financial assistance policy.
10Application Period120 application period, a patient may submit an application.With an incomplete application, the hospital must refrain from collection actions and provide information on what is needed to complete application.
11Efforts to Inform Patients Distribute plain language summary of policy and offer application prior to dischargeInclude summary in at least three billing statements and other written communication during notification periodInform patient of policy in all oral communication regarding amount of bill due during notification period
12Notice on Collection Action Provide with at least on written notice, a minimum of 30 days prior to deadline specified within notice, informing patient about collection actions that may be taken if patient does not submit application for assistance or pay the outstanding balance
13Presumptive Eligibility Safeguard Presumptive eligibility screening provides hospitals with an important safeguard regarding collection actions and demonstrates effort made to qualify patients for assistancePresumptive eligibility must be extended for the most generous level of financial assistance
14Industry Response in New Environment HFMA/ACA Medical Debt Task ForceIn January of this year, HFMA and ACA released best practice guidelines for fair resolution of the patient portion of medical bills.
15Summary of Collection Actions Policies related to extraordinary collections activity (ECAs) (as defined by the IRS— i.e. liens, credit reporting, lawsuits, wage garnishments, or sale of debt) are board approved, and communicated to and practiced by collection agencies.Ongoing provider efforts to educate patients about the account resolution process including informing patients of the ECAs that are board sanctioned.If account is delinquent, communicate to the patient that the potential exists for all board-approved ECAs (including reporting to credit bureaus) prior to initial placement.
16Tracking Patient Billing/ Collection Complaints All business affiliates involved in account resolution activities are required to report patient complaints.Review by management teams to monitor billing/registration and other revenue cycle issues that result in inappropriate accounts sent to collectionsCall audits and other quality assurance activities to ensure that policies are followed and provide process improvement
17Access to Financial Assistance Policy All collection efforts (either internal or external) should adhere to internal written/formal provider collection policies, which include but are not limited to screening individuals for and applying charity care/financial assistance policies to those who are eligible and permissible account resolution tactics.
19Policies: Charity Types Traditional Charity CarePatient Engaged and completes processUsually contains documentation from the patient and is most accepted by auditors and for reimbursement purposesMedically IndigentOut of pocket expense exceed a specified amount or ratio to household income or assetsPresumptive CharityProvider able to document specific indicative conditionsPatient already qualifies for means-tested public programDeceased with no estate or known familyTransient, homeless personsPersons estranged from family with no support groupPersons with unknown identityValidated 3rd party score establishing charity-qualified conditionsPatients unresponsive or incapable of completing traditional processMay not be accepted for reimbursement or disproportionate share
20Presumptive Charity and Audit Presumptive scoring does not replace traditional FAP application processes; it is used to supplement these effortsScoring/electronic screening results are used in the absence of additional information from the patientFAP requires updates to include language that:States that the Hospital recognizes that some patients will be unable or otherwise unresponsive to traditional FAP processes; andIn an effort to remove barriers for these patients and improve community benefits, the hospital will utilize an electronic screening process prior to bad debt assignment after all other funding sources have been exhausted; andThat the information returned via this electronic screening will constitute adequate documentation under the Hospital’s policy; andThe patients eligible through this process will not be assigned to bad debtConsider language that emphasizes consistency of processPARO solution was built to identify patients deserving of financial assistanceDeveloped in collaboration with leading not-for-profit hospitals around the USMeets Form 990 requirementsThe cost of the scoring service can often be taken as a community benefitPredicts poverty income through socio-economic factorsLeverages third party data about geography, education, household structureOvercomes the challenge of literacy, culture, or simply inaccessibilityIdentifies those patients who would be non-responsive through normal processEvery implementation includes a facility calibrationHospitals have different policies and local market characteristicsCalibration activity runs documented charity care cases through the model so we can set the model decision levelsWe know that the model matches your fully documented experienceComprehensive in its coverage without soft hitsNo credit bureau information is accessedLeverages multiple datasets including public recordsDatasets are constantly updatedIn deployment, PARO can be done at bad debt assignment or earlier, bill drop.At bad debt, PARO is a way to remove account from bad debtAt bill-drop, PARO is a prioritization tool for financial counselors and part of the file development.If the account fails to be fully documented on timely basis, the score can be used for presumptive eligibility filing prior to bad debt assignment
21Issues Unique to Consumers Living in Poverty Basic charity application and documentation processes barriers for many, often poorest, consumers1 in 5 consumers are functionally illiterate and cannot complete an application processUS Department of Education33% of the uninsured are high school dropouts compared to only 7% for insured patientsEmployment Policy Institute1 in 12 Families do not have household transaction accounts – 8.7% of US PopulationThe Federal Reserve“Financial Shadows” are roughly 26 million consisting largely of minorities, low income and the youngThe Federal Reserve
22Technology: Picking A Charity Analytic Elements to consider in selecting a charity modelWhat kind of calibration occurs?Is it calibrated to your market and your FAP?How does it handle non-traditional financial profiles?What percent are not able to be evaluated?When not evaluated, what does the service do?How much and which patient data is required?SSN, name, address, otherWhat 3rd party data is utilized?Credit files, public records, etc.How current are these records?Patient permission requirementsDoes it utilize multiple “checks” on the recommendation?Adequate measures for income, liquidity and asset testingAcceptance by the IRS, your Auditor and other groups?What audit support is available?What reporting and Community Benefit and analysis reports are available?22
28Compliance and Timing – What to Do Now Take this opportunity to reaffirm that the hospital organization currently satisfies all of the express requirements of Section 501(r) of the Tax Code (which are currently in effect).Begin compliance efforts now by reviewing existing financial assistance policies, charge methodologies, and billing and collection policies and procedures.The tax community anticipates that the final regulations will generally track the overall framework of the proposed regulations.The tax community does not anticipate lengthy transition relief once final regulations are announced.Hospitals should be mindful of their responses to the questions on Form 990, Schedule H, that address their financial assistance policy, billing and collection policy, and emergency medical care policy, and regarding how a hospital charges individuals eligible for financial assistance.Develop implementation process and train staff.Inform governing Board of new requirements and secure Board approval for new policiesInvolve professional advisors to help ensure that all regulatory issues are addressed.
29Financial Assistance Policy (FAP) – Fundamental Elements
30PFS Interaction– What to Do Now Perform a Readiness Assessment NOWReview and Revise your new FAP (considering using an outside expert – avoid a search and replace approach)Publish your new FAPTrain your Staff (including applicable vendors) with initial training and periodic updatesMonitor Performance and seek “lessons learned”Start telling your Story – FAP is valuable to your tax status and your community – share the results in terms of patients served
32Additional Resources and Contact InformationSpecial Thanks to Mark Rukavina. Mark is the Principal at Community Health Advisors, LLC and has served on a number of HFMA task forces including the Bad Debt and Collection Task Force. His firm provides services related to design and develop for Financial Assistance Policies, Community Health Needs Assessments, and other outreach program. He can be reached at or or (617)Debra Stall(615)Neil Smithson(954)