2. Navigating the Seas of Section 501 (r) and Schedule H Changes “Captain” Ryan Lindsay, Gray Griffith & Mays CPAS

3. Welcome Aboard!! I wanted to select a vessel for our trip…

4. Welcome Aboard!!

5. Maiden Voyage Muster Station-Tax news IRC § 501 (r) & Sched H Impact & Burden of 501 (r) Return to Port

6. Muster Drill- Tax News For the Fiscal year Oct 1, 2013 thru Sept 30, 2014 the IRS received 765,395 Tax Exempt Organization Returns. They examined 1.06% of these returns. That compares to.86% of individual returns and.57% Business Returns.

7. Muster Drill- Tax News IRS BUDGET CUTS Between Fed FY 2010 and 2015 the IRS’s annual budget was cut by more than $1.2billion.

8. Muster Drill- Tax News IRS BUDGET CUTS For FY 2016, President Obama proposed a nearly $2 billion increase in this year’s budget. House Republicans responded with a proposed $838M overall budget cut!!

9. Muster Drill – Tax News In April 2015, the NFL tossed their tax exempt status “overboard”. Why? – Was a “distraction” –Privacy –Image –Not saving them that much money ($10B in revenues only made $9M bottom line) REALLY?!? –Gets Congress, press… off their back!

10. Muster Drill – Tax News In June 2015 – the Supreme Court Upholds Obamacare Tax Subsidies –“The Affordable Care Act is here to stay” – President Obama IRS is behind on charitable organization applications. Applications are sometimes received 9-12 months before they are approved. 1023-EZ may be available but burden falls to donor. A lot of political discussions on “Consumption” or “Sales tax”

11. Excursion- IRC §501(r) Timeline (Summary) ACA, enacted March 23, 2010 – law was signed. US Supreme Court upheld ACA on June 18, 2012. In June 2012 and April 2013 we received proposed regulations on all 4 parts of IRC §501 (r) that affect hospitals December 2014 - Final Regulations published in Federal Register.

12. IRC §501(r)-FINAL REGS! WHEN?? “Apply to a tax-exempt hospital facility’s taxable year beginning after December 29, 2015” December Year Ends – January 1, 2016 to be fully compliant June Year Ends – July 1, 2016 to be fully compliant September Year Ends – October 1, 2016 to be fully compliant

13. IRC §501(r) What got us here? Patient Expectations Respect Integrity Stewardship Excellence Collaboration Kindness

14. IRC §501(r) What the patient experiences Patient Experience Multiple & Complex Bills Not aware of charity policy Sent to collections No flexibility Collections on undiscounted prices Lawsuits Foreclosure & Liens High interest rates Stress

15. IRC §501(r) Brief Summary – Section 501(r)(3)- –Community Health Needs Assessment Section 501(r)(4)- –Financial Assistance Policy and emergency medical care policy Section 501(r)(5)- –Limitation on charges for medical necessary healthcare services and emergency medical care. Section 501(r)(6)- –Reasonable efforts with respect to billing and collections before proceeding with extraordinary collection actions

16. IRC §501(r)-Final Regs Community Health Needs Assessment (CHNA) Definition of the community served Description of the process and methods used to conduct the CHNA Describe how the hospital solicited info from public Prioritized description of the process and criteria used to identify the health need as significant Describe – resources to potentially address the health need

17. IRC §501(r)-Final Regs Community Health Needs Assessment (CHNA) Implementation strategy – must evaluate the impact of any actions taken since prior CHNA. –Did you do what you said you were going to do? –How did it impact community health? Joint CHNAs – Allows hospital facilities with overlapping communities to collaborate Must be done by the 15 th day of the fifth month following the end of the tax year which the hospital approves the CHNA.

18. IRC §501(r)-Final Regs FAPs & Emergency Medical Care Policies Requires Written FAP and EMC policies Must apply to all emergency and other medically necessary care. Final regs expand to require the FAP to apply to all “Substantially-related entities” that provide emergency and other Med necessary care in the hospital facility.

19. IRC §501(r)-Final Regs FAP/EMC policy Only requires the FAP to describe discounts “available under the FAP” FAPs must include a listing of all providers delivering emergency or medical necessary care in the hospital Must have a plan language summary – offered to patients at the intake process or upon discharge. Hospitals may maintain joint policies for multiple facilities.

20. IRC §501(r)-Final Regs FAP/EMC policy “Widely Publicized” –Put FAP, FAP Application & PLS on Website –Paper copies available upon request by mail and in public locations in hospital –Inform members of the community –Notify and inform individuals who receive care from the hospital facility

21. IRC §501(r)-Final Regs Limits on Charges Patients should not be charged more than amounts generally billed (AGB) –Look-back or Prospective Final Regs permit hospital to change methods at any time Must update the FAP first though AGB must be calculated on a facility-specific basis – not healthcare system. –Can use different AGB approaches within the facility

22. IRC §501(r)-Final Regs Look-Back Method Computing an annual percentage discount to apply against the hospital facility’s gross charges for FAP eligible individuals –2012 Regs Permitted hospital to use MEDICARE Fee-for-service claims alone or combined with all Private Health Insurers –Final Regs Allowed hospitals to use MEDICAID claims: alone, in combination with Medicare fee-for service, or in combination with Medicare + Private Health Insurers

23. Question What if Total amount paid by a FAP eligible individual + his/her health insurance is > ABG? OK…hospital is still in compliance with section 501(r) AGB limitation applies only to the amount the patient is personally responsible for

24. IRC §501(r)-Final Regs Prospective Method 2012 Regs –Set rates as if individual were a Medicare fee-for- service beneficiary and setting AGB at the amount Medicare would allow for the care Final Regs –Permit the hospital to use Medicaid; either in lieu of or in combination with Medicare

25. IRC §501(r)-Final Regs AGB must be calculated annually and implemented within 120 day of the calculation period

26. IRC §501(r)-Final Regs AGB TO DO LIST – Confirm we have processes in place that prevent eligible patients from being charged more than AGB Develop a method for calculating AGB that is consistent with the regulation Change the financial assistance policy and procedures to reflect the limit on AGB Determine if a change in the calculation method would make sense

27. IRC §501(r)-Final Regs This will more than likely shift bad debt to Community (Charity) Care in many of your facilities

28. IRC §501(r)-Final Regs Presumptive Eligibility –Best to first make reasonable effort to determine eligibility –Can use scoring method based on known facts – residence, autos, size of household, etc. –CAN’T use the presumptive method to DENY Financial Assistance!!

29. IRC §501(r)-Final Regs WAIVERS A signed waiver is not enough!! Will not constitute a determination that the individual is not FAP-eligible and will not satisfy the requirement of reasonable efforts

30. Billing and Collection-Final Regs Extraordinary Collection Actions (ECAs) = Can’t engage in these actions before making reasonable efforts to determine FAP eligibility first NEW ECA- deferring or denying, or requiring payment before providing medical necessary care. Hospital accountable for the ECAs of all third parties collecting debt on it’s behalf and to which is sells debt Must give notice = 30 days written notice-including PLS and FAP

31. Question What are some of the other ECAs? 1.Placing a lien on an individuals property 2.Foreclosing on ind real property 3.Seizing an ind bank account or other personal property 4.Commencing a civil action against an ind 5.Causing an ind arrest 6.Garnishing an individuals wages 7.Making an individual sit through one of Ryan’s presentations

32. IRC §501(r) WHO Care’s?? Federal Lawmakers – “Stop Suing Poor Patients” Advocacy Groups IRS Your Board of Directors/Trustees CFPB-Consumer Financial Protection Bureau

33. Who Else is watching? Your Captain of course! “There’s some rough waters ahead” Of the 7 hospitals your Captain selected NONE of them were currently in compliance with 501(r)

34. What’s at stake? Excise tax for failure to comply with CHNA requirements ($$$$) Revocation of Status Under 501(c)(3) of the Code Facility Level tax ($$$$$$$)

35. 2 nd Excursion-Impact and Burden of 501(r) “No time and money in our budget” –IRS initially estimated 11.5 hours annually to comply –AHA estimated 200-2,000 hrs –HFMA estimated 120-2,700 hrs –IRS final regs say 136 hours What’s it going to take in your hospital?

36. Impact and Burden of 501(r) Paperwork Reduction Act In the Final regulations the word “Notify” is used 38 times. IRS estimates total annual reporting burden of 4,914 hrs. Which is approximately 2 hours per recordkeeper. The IRS has a sense of humor

37. Impact and Burden of 501(r) How has Charity Care Changed? 1.More Medicaid eligible patients 2.Increased BAI (balances after insurance) –Deductibles –Co-payments –Co-insurance 3.Discounts not included on hospital’s FAP will not be considered community benefit

38. Impact and Burden of 501(r) How could “widely publicizing” your Charity Care policies affect your relationship with insurers and employers? Charges next year will be limited to AGB. Could be an impact to the high deductible plans in early 2016.

39. Impact and Burden of 501(r) How will the AGBs be determined and applied to patient billing? Will your system do this or will this have to be manual? Should the Hospital expand or contract income categories? Should there be different category qualification for insured and uninsured?

40. Returning to Port Best Practices: 1.Develop FAP and application –Post on Website, promote in community and around hospital 2.Keep application process SIMPLE SILLY! 3.Develop presumptive eligibility model with reasonable efforts safeguards. 4.Implement HFMAs Patient Financial Communications Best Practices

41. Thank You!! Contact Information: J. Ryan Lindsay, Director Gray Griffith & Mays a.c. ryan@ggmcpa.net 304-389-4195