1. Jonathan G. Wiik, MSHA, MBA
501r – Are we there yet?
Jonathan G. Wiik, MSHA, MBA
May 11th, 2017

2. Agenda (3), (4), (5), (6) – Where they fit and Why you should care
Components of 501(r)
(3), (4), (5), (6) – Where they fit and Why you should care
Compliance Gaps / Risks
Strategies & Best Practice
Tools and workflows

4. Deductibles are out of control and rising fast…
63% increase in Deductibles since 2011; outpacing Inflation (6%) and Earnings (11%)
Average deductible quadrupled:
2003 = $518
2016 = $2069
WIIK
Percent of workers with deductibles:
2003 = 52%
2016 = 83%
Source: Kaiser Family Foundation, kff.org

5. $1200 / $400 deductibles respectively
ACA exchange plan deductibles are resulting in more funding gaps for patients in 2017
Bronze
$6100 deductible
Silver
$3600 deductible
Gold
$1200 / $400 deductibles respectively
Platinum
WIIK
Government is pushing patients to the bronze plans. $5000 deductible. People do not have that type of disposable income. People think they have bought insurance, but in fact, have purchased more debt.
Source: Healthpocket

6. Scary problems for families because medical bills
FAMILY PAIN…
1 in 4 have an unpaid at risk health care bill
1 in 5 are paying a medical bill over time
Almost 1 in 10 have a bill that cannot pay at all

7. Adults with medical bill problems had lingering financial problems because of their medical bills
Commonwealth Fund – The problem of underinsurance and how rising deductibles make it worse

8. Hospitals have increased Financial risk…
As more consumers are insured and their self-pay responsibility increases, healthcare providers need to update their collections approach to making sure revenue is coming in.
Accounts receivable (A/R) from insured self-pay patients increased 13 percent in the past year.
Total A/R over the same time period from uninsured self-pay patients decreased 22 percent, mostly as a result of high financial risk patients joining Medicaid in expansion states.
For every one uninsured self-pay patient payment dollar in the first quarter this year, there were approximately 22 insured self-pay patient payment dollars.
Source: ACA International,

9. Components of 501(r)
(3), (4), (5), (6)

10. 501(r) Background:
PPACA added to the IRS code and proposed in 2012
Imposes new requirements on 501(c)(3) organizations (aka “Not- for-profit”)
Outlines general requirements on a facility-by-facility basis for:
Financial Assistance P&Ps
Charge ceiling for “eligible individuals”
Insulate non screened patients from “extraordinary” collection actions
Effective in 2016 based on the facilities FY end

11. Components of 501(r) 501(r) has 4 primary sections that are impactful
501(r)(3) Community Health Needs Assessment (CHNA)
501(r)(4) Financial Assistance Policy (FAP)
501(r)(5) Limitation on Charges – Amounts Generally Billed (AGB)
501(r)(6) Extraordinary Collection Actions (ECA)

12. 501(r)(3) Community Health Needs Assessment (CHNA)
Conduct a CHNA every three (3) years…
“not only the need to address financial and other barriers to care but also the need to prevent illness, to ensure adequate nutrition, or to address social, behavioral, and environmental factors that influence health in the community.”
Components:
Joint CHNA reports and implementation allowed
Governmental public health should be involved
Defining the needs of community - Solicit input from persons representing the broad interests of the community
Widely available – available on website and upon request*
Excise tax – total or partial failures

13. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy 2
Plain Language Summary 3
Reasonable Efforts for notification 4
Widely Publicized Criterion 5
Emergency Medical Care Policy

14. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy
Plain Language Summary
Reasonable Efforts for notification
Widely Publicized Criterion
Emergency Medical Care Policy
CLEARLY specify the eligibility criteria (charity or discounted care) for receiving financial assistance
Document, document, document - If you do not request any documentation you cannot deny based upon lack of documentation
What’s NOT covered – is it listed?
Which -physicians are included (employed/non-employed?)
TIMETABLES – how long is it effective, when is it rechecked?

15. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy
Plain Language Summary
Reasonable Efforts for notification
Widely Publicized Criterion
Emergency Medical Care Policy
A simple written summary, explaining Financial Assistance and distributed as:
Available at Admissions and Emergency Department
Translated for patients typically treated at your facility
Mailing with the Final Notice

16. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy
Plain Language Summary
Reasonable Efforts for notification
Widely Publicized Criterion
Emergency Medical Care Policy
DOCUMENTATION of “Reasonable Efforts”
Three (3) bills
Written (Dunning Cycle, FINAL notice) vs Oral (not conversational)
Plain language summary (included with statements?)

17. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy
Plain Language Summary
Reasonable Efforts for notification
Widely Publicized Criterion
Emergency Medical Care Policy
Signage - “Conspicuous Public Displays”
Website
s / flyer
Community notification
Statement (final notice) inclusion

18. 501(r)(4) – Financial Assistance Policies
Financial Assistance Policy
Plain Language Summary
Reasonable Efforts for notification
Widely Publicized Criterion
Emergency Medical Care Policy
Written policy that requires the hospital, without discrimination, to care for emergency medical conditions to individuals regardless of whether they are FAP-eligible
Prohibits debt collection activities in the emergency department or in other areas of the hospital facility where such activities could interfere with the provisions, without discrimination, of emergency medical care

19. 501(r)(5) Amounts Generally Billed (AGB)
Requires hospital organization not to use gross charges and to limit amounts charged for care provided to individuals eligible for assistance to not more than the amounts generally billed to individuals who have insurance

20. Does NOT allow calculation to be limited to just commercial insurance
501(r)(5) AGB
Two Methods
Look-back
Prospective
Uses Medicare fee-for-service and private health insurers paying claims to the hospital facility
Calculate AGB percentages at least annually
Estimate the amount it would be paid by Medicare, Medicaid, Medicare and Medicaid together, and “discount” as if the patient were a Medicare fee-for-service beneficiary.
Does NOT allow calculation to be limited to just commercial insurance

21. 501(r)(5) AGB
“Uh oh…”
IRS 501r open forum
“The Treasury Department and the IRS note that section 501(r)(5) does not distinguish between insured and uninsured FAP‐eligible individuals. Accordingly, the final regulations continue to apply the AGB limitation of section 501(r)(5) to all individuals eligible for assistance under the hospital facility’s FAP, without specific reference to the individual’s insurance status.”

22. 501(r)(5) AGB When - calculated/updated
Standard Operating Procedure Considerations for AGB:
When - calculated/updated
Where - stored/available/accessed – in FAP (best)
How – communicated
Why - Plain language summary implications?

23. 501(r)(5) AGB When - calculated/updated
Standard Operating Procedure Considerations for AGB:
When - calculated/updated
Where - stored/available/accessed – in FAP (best)
How – communicated
Why - Plain language summary implications?

25. 501(r)(6) – Extraordinary Collection Actions (ECA)
May not engage in “extraordinary collection actions” before an organization has made “reasonable efforts” to determine whether individual is eligible for financial assistance for the care provided.

26. 501(r)(6) – ECA
What are ECAs?
Upfront collections before medically necessary or emergency care
Deferral or Denial of Care based upon nonpayment of one or more bills for previously provided care
Reporting the individual to consumer credit reporting agencies or credit bureaus
Legal actions such as garnishing wages or liens / foreclosure

27. 501(r)(6) – Extraordinary Collection Actions (EAC)
What are NOT ECAs?
Listing with a collection agency
Calling a patient by telephone
Writing off the account to Bad Debt
Sending a patient a bill
Charging interest – considered extension of credit
Filing bankruptcy claim
Upfront Collections for the current care
Others…

28. Strategies & Best Practices
Workflows and tools to ensure compliance and efficiency

29. So What? Risk of 503(c) tax exemption
Non compliance penalties ($50k excise tax per facility)
Patient Satisfaction
Collection Costs
Community Benefit

30. Good enough, versus the risk?
501(r) requirements affect almost every aspect of a hospital's financial operations
Noncompliance can trigger sanctions ranging from a simple correction of a minor error to revocation of exempt status
Even at the most careful facility, the current guidance makes it clear that no violation is too small to be ignored
Source: Michalowski, CPA, Washington June 30, 2015;

31. How does 501(r) Impact Providers?
Providers must adapt their financial screening, billing and collections strategies:
Financial Assistance should be offered and DOCUMENTED on all self pay and high balance accounts
Upfront collections critical to capture whole or partial payments
Patient payment discussions should occur throughout the treatment process
Medical bill financing services, either directly or through partnerships, are an option to allow patients to pay over time
Charity care plans will need to incorporate underinsured patients

32. Tax Exempt Status Risks…
“Not-for-profit hospital will pay up in tax dispute as exemptions draw widespread heat”...
New Jersey hospital has agreed to pay $26 million to the town where it's located to end a dispute over the hospital's property tax exemption
Judge Vito Bianco: “…then for purposes of the property-tax exemption, modern nonprofit hospitals are essentially legal fictions.”
Michael Meissner, a tax partner at Squire Patton Boggs - “I think a hospital that is in a city with financial challenges, which pretty much describes most cities, ought to be aware of the changing landscape …include keeping records about how a hospital is benefiting its community and tracking its programs in case they're questioned…”
SOURCE: “Not-for-profit hospital will pay up in tax dispute as exemptions draw widespread heat”. Schencker, Lisa. Modern healthcare 11/11/15.

33. More non-compliance legal opinion for tax exemption
The rejections could be costly. If a non-profit hospital loses its tax-exempt status, it likely would have to shell out millions of dollars a year in property taxes

34. Significant Risk under the new guidelines:
If collections actions are underway and the patient applies for assistance, the hospital is responsible for reversing all of those collection actions
Hospitals cannot deny financial assistance for missing or incomplete information from the patient. Even an incomplete charity application is not a basis for refusing aid
You might be able to correct the mistake, but you may have lost a patient and damaged your reputation in the process
Source: Michalowski, CPA, Washington June 30, 2015;

35. Presumptive Eligibility1
Cannot use presumptive determinations for ineligibility 2
Consider using presumptive determinations to assess which patients are unlikely to be eligible (e.g. above a FPL of 500%) 3
EOSP / collection agency partner should KNOW which patients they can perform ECAs on…

36. Presumptive Eligibility (PE)
Use third party data to presumptively determine eligibility for FAP!
The use of third party data facilitates a consistent (unbiased) method for identifying patient eligibility for financial assistance
PE allows more efficient identification of patients - sooner in the revenue cycle
Automatically qualify a subset of individuals without having to interview them and have them prove their eligibility through supporting documentation
This can result in increased/accelerated cash flow as well as save money by converting manual workflows into automated processes
501r requires documentation of screening efforts on all potential FAP recipients for eligibility before sending them to collections or employing extraordinary collection actions

37. Presumptive Eligibility
Approaches:
Demographic Scrub – “Community Rating”
Credit Check – Soft Hit (only can be seen by the patient)
Tools and datasets available from TU to help perform these functions effectively

38. Sample Workflow
SELF-PAY / HIGH BAI
Ask for payment
Payment collected?
YES NO
Done, patient proceeds
Credit info returned?
Cascade to Community-Based Model
Probability of financial aid?
Potential Charity
Need application
FPL 201%-350%
100% Charity No FA required FPL < 200%
No FA required, collection zero
Collect FA, collect payment, sliding scale, based on AGB
Not eligible for Charity
FPL > 500%
Payment required or reschedule services
Potential Charity
Need application
FPL 351%-500%
Payment of AGB on uninsured, pay difference between allowable and AGB if insured
For self-pay you want to see if they qualify for charity
You’re at 100% risk so you want to put into deposit or charity bucket right away
Gateway to putting something on an OR schedule

39. In Summary…. 1
Get a team together – Risk, Compliance, Finance, Revenue Cycle, BOD update 2
Update your Financial Assistance Policy(s) and Application Process(es) 3
Scrub and update your Signage, Statements, Flyers, Website, etc… 4
Standard work for - AGB (Amount Generally Billed) 5
Evaluate a Billing and Collection Policy addition 6
Billing Statements Audit and Language Update 7
Referral Base Inventory (physicians) and align with Financial Assistance (employed vs non-employed) 8
DOCUMENT, DOCUMENT, DOCUMENT (did I say document???) 9
Identify gaps – put processes and tools in place

40. QUESTIONS?

41. THANK YOU

42. Jonathan G. Wiik, MSHA, MBA
Principal - Revenue Cycle Management
Health Care Solutions

43. Appendix

44. Best Practice Checklist
Community Health Needs Assessment:
CHNA defines community served and how that community was identified
CHNA assesses needs of community and outline methods used
CHNA has a prioritized list of community health needs and criterion used
CHNA defines potential resources and measures utilized to meet community needs
CHNA is “widely available” to community
CHNA reflects collaboration and input from a health department community resources at the local, state, or regional level
CHNA describes how broad interests of the community were represented
CHNA reflects input received from underserved, low- income, minority population(s) in the community
CHNA outlines hospital’s implementation strategy intends to meet the community needs, AND clearly defines which community needs it does NOT intend to meet
CHNA outlines the hospital’s implementation strategy anticipated impact and plan to evaluate impacts

45. Best Practice Checklist
Financial Assistance Policies:
FAP language that clearly defines non-covered and discounted services
FAP specifies amounts charges to patients and how discounts are applied
FAP describes the method(s) in which patients can apply
FAP outlines the collections process and what actions are taken for non-payment
FAP lists the discount applied under the AGB provision for the charges ceiling and outlines the method
FAP Policies Reviewed Annually
Method of how FAP is “widely publicized” is described
Website Charity Assistance Information - Prominent
Charity Signage in Place at all Waiting / Intake Areas
FAP outlined ECTP and “conspicuous” signage is in place
Documentation of FAP in EMR/HIS/Other (each patient)

46. Best Practice Checklist
Extraordinary Collections Actions:
Process for ECA suppression for non-screened patients
Procedure for incomplete, not received, or in process FA applications
EOSP/TPCA Education and P&Ps Updated
Debt Collection Policy Reviewed Annually
Statement Language for Charity Assistance in place
Financial Waiver/HIPAA HITECH opt out form in place
Financial Counselors (or CAS) educated to new rules

47. Financial Clearance Workflow
These are some high level workflows that are very effective. There is a kit we can send you where you can get a larger, more detailed version. These are based on industry-best practice, and follow a path to ensure patients and the provider are on the same page.

48. High-balance patient account workflow
These are some high level workflows that are very effective. There is a kit we can send you where you can get a larger, more detailed version. These are based on industry-best practice, and follow a path to ensure patients and the provider are on the same page.