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501(r) 4, 5,
6 Pick Up
the Sticks
Shawn Gretz
• VP of Sales for Americollect and AmeriEBO
I am not a lawyer, nor do I play one on TV, and I
did not stay at a Holiday Inn last night. People
seeking legal advice should always consult
with an attorney.
Nursery Rhymes
One, two, buckle my shoe
Be on the Lookout for:
1. (Page #) Location of the information that I am
providing to you from the final release of the
501(r).
2. Suggestions
3. Questions
4. Checklists – Americollect is preparing some
checklists. Stop by after this presentation and
provide me with your information and I can
send you the checklists.
Background – 501(r) 4,5,6
• 501(r) enacted March 23, 2010 part of ACA
• Proposed Regulations on requirements
described in 501(r)(4) – (r)(6) (June 22, 2012)
• Comment period for Proposed Regulations
ended September 24, 2012
• Public hearing conducted December 5, 2012
• Comment period closed July 2, 2013
• Final released December 29, 2014
Effective Date
• Effective Date: Rely on the proposed 2012
and 2013 regulation but regulations are
required to be fully implemented by the
hospital organization's first taxable year
beginning after
December 29, 2015
(Page 13)(Page 178)
501(r)(4) – Financial Assistance Policy (FAP)
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Eligibility criteria
Basis for calculating amounts charged
Plain Language Summary
Billing & collection policy
Measures to widely publicize policy
Policy relating to emergency medical care
501(r)(5) – Limitation on Charges – AGB
• Limits amounts charged for emergency or
other medically necessary care provided to
individuals eligible for assistance (under
Financial Assistance Policy) to not more
than amounts generally billed to individuals
having insurance covering such care
• Prohibits use of gross charges
501(r)(6) – Extraordinary Collection Actions
• May not engage in extraordinary collection actions
before organization has made “reasonable efforts” to
determine whether individual is eligible for assistance
– Provide required notices of financial assistance that ends 120
days after the first discharged billing statement. (Formerly
known as “Notification Period”) Debts may be transferred to
Americollect or collection agency as long as ECAs are not
performed.
– If eligibility has not been determined, entity must accept and
process the FAP application for an additional 120 days called
the “Application Period” (ECA’s may be invoked during this
time).
501(r)(4)
1. Financial Assistance Policy (FAP)
2. Plain Language Summary (FA)
3. “Reasonable Efforts” for notification of
Financial Assistance – Ties to 501(r) (6)
4. Widely Publicize
5. Emergency Medical Care Policy
FAP
1. Can be Used
2. Possible Addition
3. Required Addition
FAP – Can be Used
Does NOT need to be included in FAP but can
be used 1. Attestation
2. Oral Application
FAP – Can be Used
Attestation: Will you allow your financial
counselors to use attestation?
The final regulation allow a hospital facility the
ability to grant financial assistance based on
evidence other than that described in an FAP or
FAP application form or based on an attestation
by the applicant, even if the FAP or FAP
application form does not describe such evidence
or attestations. (Page 80)
Approval – YES
Denial - NO
FAP – Can be Used
Oral Application: Will you allow your financial
counselors to use oral communications to
complete an application?
The final regulations amend the definition of “FAP
application” to clarify that the term is not
intended to refer only to written submissions and
that a hospital facility may obtain information
from an individual in writing or orally (or a
combination of both). (Page 81)
FAP – Possible Additions
Possible Additions to your FAP
1. Prior Applications
2. Presumptive Determinations
3. Patient to Cooperate
4. FAP Discounts to Add to 990
5. Separate Billing and Collection policy
FAP – Possible Additions
Prior Applications: How long will your hospital
still allow a prior eligibility determination to
be used?
Prior FAP Can be used if your FAP describes
whether and under what circumstances they
use prior FAP‐eligibility determinations. (Page
82) The criteria needs to be described in your
FAP.
FAP – Possible Additions
Presumptive Determinations:
FAP – Possible Additions
Presumptive Determinations: Will your hospital facility
use presumptive determinations?
The final regulations require a hospital facility to describe
in its FAP any information obtained from sources other
than individuals seeking assistance that the hospital
facility uses(Page 82 & 216) The criteria needs to be
described in your FAP.
Hospital facilities are not prohibited from using third
party information sources and prior FAP- eligibility
determinations to try to predict which of its patients
are unlikely to be FAP-eligible (Page 165)
FAP – Possible Additions
Presumptive Determinations: Two Kinds
• Demographic Scrub – No hit to the credit bureau
(what kind of vehicle do you drive, size of your
house, fishing or hunting license, and magazines
you subscribe to).
• Credit Check – Soft Hit (only can be seen by the
patient) to the Credit Bureau. Can use this but is
discouraged from requesting information or
documentation that is unreasonable or
unnecessary to establish eligibility. (Page 83)
FAP – Possible Additions
Presumptive – Less than Most Generous:
(Page 163)
The IRS expanded presumptive eligibility guidelines in the Final Regulations. While hospitals
may still provide the most generous assistance to presumptive FAP-eligible individuals,
the Final Regulations let hospitals determine if an individual qualifies for “less than the
most generous assistance” under its FAP based on information other than that provided
by the individual or based on a prior FAP eligibility determination. But hospitals must
give these individuals an opportunity to demonstrate that they qualify for more
generous assistance. Specifically, the following conditions must be met:
1. The hospital must notify these presumed FAP-eligible individuals about how they can
apply for more generous assistance under the FAP.
2. The hospital must give them a reasonable amount of time to apply before initiating ECAs
to obtain any outstanding amounts.
3. The hospital must otherwise comply with the “reasonable efforts” requirements if a
presumed FAP-eligible individual requests more generous assistance by completing a
FAP application. (Page 164)
FAP – Possible Additions
Careful Presumptive Determinations: (Page 163)
• Cannot use presumptive determinations for
ineligibility. (Page 164) Hospitals might consider using
presumptive determinations to assess which patients
are unlikely to be FAP-eligible, as ECAs taken against
such individuals carry less risk of having to be unwound
during the application period.
Suggestion: Your collection agency partner should be able
score and sort accounts and perform ECAs on only
those that are unlikely to turn in an application!
FAP – Possible Additions
Patient to Cooperate: Do you want a statement
in your FAP requiring a patient to cooperate?
While the final rule does not mandate
cooperation it does note that hospitals have
the flexibility to include any additional
information in the FAP that the hospital
chooses to convey or that may be helpful to
the community, including a cooperation
statement. (Page 79)
FAP – Possible Additions
Discounts: Are there any other discounts you would like to claim on
your 990?
The final regulations only require the FAP to describe discounts
“available under the FAP” rather than all discounts offered by the
hospital facility. However, only discounts specified in a hospital
facility’s FAP (therefore subject to the AGB limitation) may be
reported as “financial assistance” on Schedule H of the Form 990.
Discounts provided by a hospital facility that are not specified in a
hospital facility’s FAP will not be considered community benefit
activities for purposes of section 9007(e)(1)(B) of the Affordable
Care Act nor for purposes of the totality of circumstances that are
considered in determining whether a hospital organization is
described in section 501(c)(3). (Page 77)
FAP – Possible Additions
Discounts: Prompt Pay
Suggestion: Hospitals should attempt to shoehorn as many
discounts as possible under the FAP, unless such expansion is
impractical or unworkable.
Example: Patient qualifies for FA and receives a
discount at least at the AGB level. If patient decides
to pay in full to take advantage of the prompt pay
discount, hospital could count the prompt pay
discount on 990.
FAP – Possible Additions
Separate Billing and Collection Policy - Will your
organization create a separate billing and collection
policy? (Page 221) If yes, does the FAP point to the
billing and collection policy and how the public can
obtain one?
More on this in 501(r)(6)
FAP – Required Additions
Required Additions to your FAP
1. FAP Determination
2. AGB
3. Physicians on FAP
4. What isn’t Covered by
Financial Assistance
FAP - Determination
Specify Eligibility: Did you specify the eligibility
criteria (free or discounted care) for receiving
financial assistance under the FAP? (No
requirements on how to check eligibility, but
do need to describe in your FAP)
Documentation: Is your Financial Assistance
Application and Policy requesting any financial
documentation?
If you do not request any documentation you cannot deny based upon
lack of documentation. (Page 80)
FAP - Determination
"Reliable evidence" for FAP includes:
– Federal Tax Return
– Paystubs
– Documents establishing qualification for certain
specified state means-tested programs
– Suggestion: If these are not available, the patient
may call the hospital’s financial assistance office to
discuss other evidence they may provide. (Page
81)
FAP - Determination
Suggestion : Narrow or Broad Time Frame to Access?
• Hospitals may use the service date, the application
date, or some other date to assess eligibility. Whatever
period the hospital chooses should inform how the
hospital designs its FAP application. For example, will
the hospital accept as evidence of household income
last month’s paystub? If so, this suggests a narrower
period for assessing eligibility. Will the hospital accept
last year’s tax return? This suggests a broader period
for assessing FAP-eligibility.
• An Individual Financial Situation can change quickly!
FAP – Required Additions
AGB: Does your organization’s FAP disclose your
AGB? (Page 217)
Does your organization’s FAP state that:
FAP-eligible individual may not be charged more than
the AGB for emergency or other medically necessary
care? (Page 217)
Specify the Amount(s): Did you specify the amount(s) (example - gross
charges) to which any discount percentages will be applied.
Suggestion: Create an appendix for the AGB
to make it easy to change each year.
FAP – Required Additions
Physicians on FAP: Did you create a list of all physicians
(separate practices) that provide emergency or other
medically necessary care in the hospital facility and specify
which providers are covered by the hospital facility's FAP
and which are not? (Page 23,76, & 216)
Preston Quesenberry mentioned, in the 501(r) webinar on
2/19/2015 for HFMA, that it just needs to be a reasonable
list the providers - as in listing the names of the
practices rather than provider names.
Suggestion: Create the provider list in an appendix to the FAP
so that it could be revised easily without having to redraft
the entire FAP every time a provider
is added or deleted.
FAP – Physicians Does it Apply
Physician Groups: The final 501(r) includes physician
organizations in certain instances. How is your physician group
is classified for tax purposes(page 24):
• Separate Taxable Organization: 501(r) will not apply.
• 501(r) would apply to "substantially-related entity" a. 501(r) applies if
your physician group a disregarded entity? - if a hospital organization is
the sole member or owner of an entity providing care in one of its hospital
facilities and that entity is disregarded as separate from the hospital
organization for federal tax purposes, the care provided by the entity
would be considered to be care provided by the hospital organization
through its hospital facility.
• 501(r) applies if the hospital owns a capital or profit interest in an entity
providing care in a hospital facility that is treated as a partnership for
federal tax purposes. (Grandfather rule for 501(r) NOT to apply this was
included in the 2013 proposed regulation and adopted in the final - if you
meet certain conditions since March 23, 2010)
FAP – Required Additions
What isn’t Covered by Financial Assistance:
Does your FAP clearly state that non-emergency and nonmedically necessary care will not be covered under your
FA? (Page 122) If not, then 501(r) (5) applies and the use of
gross charges cannot be used for elective procedures.
Medicaid Definition?
Plain Language Summary
What is a Plain Language Summary:
A document containing a simple explanation of financial
assistance. This document will be used in three ways:
1. Mailed with the Final Notice: Required In only one post-discharge
bill and only to those subset of patients whom the hospital facility
actually intends to engage in extraordinary collection actions.
(Page 5)
2. Conspicuous Public Displays
3. Available at Admissions and Emergency Department - FREE
Plain Language Summary
What is required on the Plain Language
Summary?
(1) The direct Web site address and physical location(s) where the individual
can obtain copies of the FAP and FAP application form; and
(2) physical location of hospital facility staff who can provide the individual
assistance about the FAP and the FAP application process, or of the
nonprofit organizations or government agencies, if any, that the hospital
facility has identified as available sources of assistance with FAP
application. (Page 94)
(3) how to apply for financial assistance (page 96)
What other items would you like to add in your plain language
summary (example: a statement regarding patient
responsibilities)?
Plain Language Summary
Physical Location – For Assistance
• IRS does provide flexibility to describe the physical location in the manner
that makes the most sense for the hospital facility.
• IRS did change the final to identify the actual room number and phone
number of the appropriate office or department to contact. (Page 96)
Do you have listed who can provide assistance with the FAP application? Will
the hospital provide assistance with the FAP application? (Page 96
• If Yes: List the physical location (Page 95)
• If No: List at least one nonprofit organization or government agency, if any,
that the hospital facility has identify as available sources of assistance with
FAP application. (Page 95)
Widely Publicize - FAP
1:Paper Copies Available at "Public Locations"
(Page 89):
Do you have paper copies of the FAP and application
available to the public for free at:
 emergency department (Page 89)
 admissions areas (Page 89)
 as part of the intake (outpatient) or discharge (inpatient)
process are you offering patients about FAP? (Page 92)
Suggestion: Train access to understand that hospital
facilities only have to "offer" a plain
language summary.
Widely Publicize - FAP
What do you need to have at these locations?
1.
2.
3.
4.
FA Application Itself
Plain Language Summary
FAP (Page 88)
Billing and Collection Policy
Are they translated (if applicable) and also available?
Translations
• Translation of Plain Language Summary and Financial
Assistance Application to threshold of 5% of the population or
1,000 individuals, whichever is less, likely to be affected or
encountered by the hospital facility. (Page 6) (Page 98) May
use "any reasonable method to determine such populations"
and can use either U.S. Census Bureau or American
Community Survey data.
• If there are fewer than 50 persons in a language group that
reaches the 5-percent trigger, the recipient of federal financial
assistance does not have to translate vital written materials to
satisfy the safe harbor but rather may provide written notice
in the primary language of the LEP language group of the right
to receive competent oral interpretation of those written
materials, free of cost. (Page 98)
Widely Publicize - FAP
2. Available on Website (Page 88):
Is your FAP, Application, Billing and Collection Policy,
and Plain Language Summary available on your
website?
Suggestion: Each hospital should consider embedding a
link on its home page leading viewers to a dedicated
FAP webpage. This was one of the examples the
Treasury provided.
Don’t HIDE it in the Patients Section!
Widely Publicize - FAP
3. Conspicuous Written Notice (Statements)
Does your billing statement include a conspicuous written notice
that notifies and informs the recipient about the availability of
FA under the hospital FAP including the telephone number of
the hospital department or facility and direct web site address
where copies of documents may be obtained? (Page 5 & 91)
This is also required to be of sufficient size to be clearly readable.
Widely Publicize - FAP
4. Conspicuous Public Display(Page 86):
Do you have Conspicuous Public Displays (signs) that attract visitors'
attention (in the emergency room and admissions area?) The final
regulation requires these to be in "noticeable size" and in minimum
"public locations" meaning emergency rooms and admissions
areas.(Page 90)
Suggestion: The Treasury provided the following example for
verbiage: "Uninsured? Having trouble paying your hospital bill?
You may be eligible for financial assistance." Also include the
website and telephone number for assistance. Finally, it is
suggested the signs have brochures that are basically the plain
language summary.
Widely Publicize - FAP
5. Notify and Inform the Community
How are you notifying and informing members of the community
about the FAP? (Page 86) (Page 93)
Widely Publicize - FAP
Suggestion:
Will you create scripting to email FA documents:
"Great what is your email and I will send you
the FA information?" (Page 89).
The final regulations clarify that hospital
facilities may inform individuals requesting
copies are available electronically.
Emergency Medical Care Policy
Must establish a written policy that requires the hospital
facility to provide, without discrimination, care for
emergency medical conditions to individuals regardless of
whether they are FAP-eligible. The policy must prohibit
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. (Page 102)
Will you create another policy for Emergency Medical Care or
include it in a previous written policy? IRS allows it to be
included in the FAP or EMTALA policy? (Page 103)
In the final regulations the IRS did note that if you are
following EMTALA, you should already be following
501(r)(4) – (4)(c)(2)
Emergency Medical Care Policy
FAILURE TO REQUIRE INDEPENDENT CONTRACTOR EMERGENCY
ROOM PHYSICIANS TO ADOPT FAP IS PROBLEMATIC
If you outsource the operation of its emergency room to a third party
and the care provided by that third party is not covered under the
hospital facility's FAP, the hospital facility may not be considered to
operate an emergency room for the purposes of the factors
considered in Rev. Rul. 69-544 (1969-2 CB 117) which states the
requirement of a 501(c)(3) Community Benefit Standard is:
1. Community Board
2. Open Medical Staff
3. Have an Emergency Room
4. Non-Emergency Care to All Patients
5. Use Surplus funds improve quality of patient care, facilities, and
advance medical training. (Page 77) Another way is to require your
those who operate your Emergency room
to implement your FAP.
How do you Establish these Policies?
How to Establishing FAP, Emergency Medical Care Policy and
Collection Policy
• Has all of these policies been approved by the authorized
body or committee approved the authorized body? All
policies are only “established” if it is adopted by an
authorized body of the hospital facility. (Page 103)
Authorized body can be a governing board or the
committee or person authorized by the governing board.
• How will you monitor that the policy is "consistently carried
out"? (Page 103) A policy will only be considered
implemented if it is "consistently carried out"
Joint Policies?
Will you have a joint FAP, Emergency Medical Care
Policy or Collection Policy? (Page 104)
The final regulations clarify that multiple hospital
facilities may have identical FAPs, billing and
collections policies, and/or emergency medical
care policies established for them (or even share
one joint policy document), provided that the
information in the policy or policies is accurate
for all such facilities and any joint policy clearly
states that it is applicable to each facility.
501(r)(5) AGB
Amount Generally Billed (Page 10):
Requires hospital organization not to use gross
charges and to limit amounts charged for
emergency or other medically necessary care
provided to individuals eligible for assistance
under the organization's FAP to not more than
the amounts generally billed to individuals
who have insurance covering such care (AGB)
501(r)(5) AGB
All those who will qualify for FA under your policy
will need to receive the AGB discount. The IRS
does give you the right to determine who will
qualify (with or without insurance). So will those
with insurance qualify for FA? (Page 105)(Page
109) Also AGB only qualifies on the amount
charged or the amount that the individual is
"personally responsible for paying" for those with
insurance after all deductions and discounts
(including discounts available under the FAP)
have been applied and less any amounts
reimbursed by insurers.
AGB – 2 Methods
1. Look-back
2. Prospective
IRS does NOT allow for commercial insurers only
(Page 107)
AGB – Look-back
Uses Medicare fee-for-service alone or Medicare
fee-for-service together with all private health
insurers playing claims to the hospital facility.
• In the look-back method will you use
Medicare alone or Medicare with all private
health insurers?
• If you use all private health insurers,
did you include Medicare
Advantage plans?
AGB – Look-back
Look-back method requirements:
1. Calculate AGB percentages at least annually. (Page 111)
2. Will your hospital facility use one AGB percentage for all
care? (Page 112) May calculate using all care not just
emergency or medically necessary care for the previous 12
months. (Page 114) Cannot use a sample of claims. (Page 119)
3. Will your hospital facility use multiple AGB percentages for
separate categories (such as inpatient and outpatient care or
care provided by different departments). (Page 112) If
calculating multiple AGB percentages your hospital facility
must calculate AGB percentages for all emergency and other
medically necessary care it provides.
AGB – Look-back
Look-back method requirements:
4. To calculate AGB use the amount that is "allowed"
(excluding those claims that has not been adjudicated
Page 114) by health insurers during the prior 12 month
period.
5. Final regulation allows a hospital facility to take up to
120 days after the end of the 12 month period used in
calculating the AGB percentages to begin applying its
new AGB percentages. (Page 118) Did you update your
FAP (or separate document/appendix) with the new
AGB? (Page 119).
AGB – Prospective
Will you use the prospective method? (Page 105)
This method requires the hospital facility to estimate the
amount it would be paid by Medicare, Medicaid,
Medicare and Medicaid together, and a Medicare
beneficiary for the emergency or other medically
necessary care at issue if the FAP-eligible individual
were a Medicare fee-for-service beneficiary.
AGB
Suggestion: Will you claim AGB as FA to increase your
financial assistance numbers? (Page 109). In response
to the comments, however, the final regulations clarify
that, for purposes of the section 501(r)(5) limitation on
charges, a FAP-eligible individual is considered to be
“charged” only the amount he or she is personally
responsible for paying, after all deductions and
discounts (including discounts available under the FAP)
have been applied less any amounts reimbursed by
insurers. The key words are “charged” only the amount
he or she is personally responsible for paying, after all
deductions and discounts (including discounts available
under the FAP)"
AGB
Suggestion: Will you charge less than AGB? (Page
110) AGB represents the maximum amount a
hospital facility can charge, but the final
regulations allow a facility to charge less than the
AGB.
Final regulations do not permit system wide
calculations unless your hospital facility can be
covered under one Medicare provider number.
(Page 117) Hospital facilities that are a part of a
system can choose different methods (Page 118).
AGB
How often will you review and possibly change
your AGB? (Page 110)
AGB is allowed to be changed at any time but
doing so also requires a hospital facility to
update the FAP (or separate
document/appendix) to describe the method
used to determine AGB.
AGB
• Will you use the Medicaid definition used in the hospital facility
state, other definition provided by state law, or a definition that
refers to the generally accepted standards of medicine in the
community or an examining physician's determination to define
"medically necessary care"? (Page 111)
Suggestion: FAPs may—but often do not—cover elective or nonmedically necessary care. Hospitals should review their FAPs to
determine whether they should explicitly exclude care that is
neither emergency nor medically necessary. Further, the FAP should
define what constitutes “medically necessary care.” The Final
Regulations allow hospitals to import definitions based on state law,
including a Medicaid definition, on generally accepted standards of
medicine in the community or on an examining physician’s
determination.
AGB
As healthcare delivery system continues to
migrate away from a few for service to other
methods of payments used by both public and
private payers including value-based, account
care and shared savings payments, the
treasury department will look for other
alternative methods for AGB. (Page 115)
501(r) (6) - ECA
The final regulations provide that a hospital
organization meets the requirements of
section 501(r)(6) with respect to a hospital
facility it operates only if the hospital facility
does not engage in extraordinary collection
actions (ECAs) against an individual to obtain
payment for care before making reasonable
efforts to determine whether the individual is
FAP-eligible for the care.
501(r)(6) - ECA
What are ECAs? (Page 128)
(1) Reporting adverse information about the individual to consumer
credit reporting agencies or credit bureaus. (Page 130)
(2) Actions that require a legal or judicial process, including but not
limited to(a) Commencing a civil action against an individual ;
(b) Garnish an individual's wages;
(c) Place a lien on an individual's property;
(d) Foreclose on an individual's real property;
(e) Attach or seize an individual's bank account or any other
personal property;
(f) Cause an individual's arrest; and
(i) Cause an individual to be subject to a writ of body attachment;
501(r)(6) – ECA continued
What are ECAs? (Page 128)
(3) Upfront collections before medically necessary or emergency care. (Page 134)
Upfront collections on a prior medical bill unless the hospital facility can
demonstrate that it required the payment from the individual based on factors
other than and without regard to nonpayment of past bills. (Page 135)
(4) Deferral or Denial of Care based upon nonpayment of one or more bills for
previously provided care (120 rule does not count in this instance) provided
however that the responsible individual be able to apply for FA immediately. (Page
168) The specific notification requirement for denying or deferring care can be
satisfied if the hospital provides a copy of its FAP application form to the
individual, notifies him or her that financial assistance is available, and provides
the deadline after which it will not accept a FAP application for the previously
provided care. The individual must have at least 30 days to submit a FAP
application for the previously provided care after receiving this notice. If a FAP
application is timely submitted, then the hospital must process it on an expedited
basis.
(5) Listing with a debt buyer (because you have less control over the debt according to
the Treasury Department) (Page 132).
501(r)(6) – ECA continued
What are NOT ECAs? (Page 128)
(1) Listing with a collection agency.
(2) Calling a patient by telephone.
(3) Writing off the account to Bad Debt.
(4) Sending a patient a bill.
(5) Upfront Collections (whether partial or full) unless it
is related to an attempt to collect a prior medical bill
(Page 134)
501(r) (6) – ECA continued
What are NOT ECAs? (Page 128)
(6) Charging interest on a medical debt. (Page 133) This is
considered an extension of credit.
(7) Filing a claim in a bankruptcy proceeding (Page 154)
(8) The proceeds of settlements, judgments, or compromises
arising from a patient’s suit against a third party who caused
the patient’s injuries come from the third party, not from the
injured patient, and thus hospital liens to obtain such
proceeds should not be treated as collection actions against
the patient. In addition, the portion of the proceeds of a
judgment, settlement, or compromise attributable under
state law to care that a hospital facility has provided may
appropriately be viewed as compensation for that care. (Page
130)
(9) Many other items that cannot be listed because
the list would be too large
501(r)(6) – ECA continued
ECA For and Not For.
In the case of a minor (or states where marital
property laws are 50/50), where both parents are
responsible for the bill, you cannot engage in
ECAs until reasonable effort has been
determined. (Page 125)
Individual does not include trust, estate,
partnership, association, company, corporation,
or governmental entity, thus, does not include
any private or public insurers. (Page 126)
501(r) (6) – ECA continued
For Care Covered Under FAP: Section §1.501(r)(6)(b) of these final regulations define ECAs as
actions related to obtaining payment of bills
“for care covered under the hospital facilities
FAP. (Page 128)
Did you remove elective, non-medically
necessary, and non-emergency care from your
FAP?
501(r)(6) – ECA continued
501(r)(6) does not bar ECAs against individuals that
have been determined to be FAP eligible. (Page
135) Example of this is a responsible
individual/patient given a 75% financial
assistance write-off based upon income below a
federal poverty guideline. Responsible individual
is supposed to pay the remaining 25%. If
responsible individual does not pay the remaining
25% and it is after 120 days from the first post
discharge statement and a notice was sent to
responsible individual 30 days prior about the
intended ECAs, then ECAS can be pursued.
501(r)(6) – Formerly Known as
No longer is the first 120 days called the
notification period.
It is now considered to be the time you need to
make the determination of financial eligibility. If a
responsible individual FAP eligibility is
undetermined, then you will have to wait 120
days before pursuing ECAs. (Page 139)
501(r)(6) – Formerly Known as
Are you notifying only those patients whom you
plan on taking extraordinary collection
actions? (Page 91)
Notification component of the "reasonable effort"
is focused primarily on those patents against
whom a hospital facility actually intends to
engage in extraordinary collection actions.
Another example is an individual that is meantested in a public program or receiving subsidies
and have not completed the necessary forms for
financial assistance. (Page 135)
501(r)(6) – How to Notify
Have you provided the required 30 day
notification in a statement that the intended
ECAs will be initiated? (Page 141)
30 days in the minimum number of days the
deadline may be from the date the written notice
is provided. (Page 143)
"Provided" is considered to be the date it was
mailed, emailed, or delivered by hand. (Page 152)
501(r)(6) – How to Notify
Final Notice- Did you update your final notice with
the intended ECAs also mentioning that financial
assistance is available (Page 150) and send along
a plain language summary of the FAP? (Page 146).
The deadline may be no earlier than 30 days after
the ECA Initiation Notice sent by mail or
electronic mail.
Suggestion: Small Balance Accounts: Combine the
third statement and the ECA notification & FAP
Plain Language Summary into one statement to
save cost.
501(r)(6) – How to Notify
Oral Communication:
• Did the hospital facility make a reasonable effort to
orally notify those patients against whom the hospital
facility intends to engage in ECAs at least 30 days
before they intend to initiate? (Page 146 & 149) Oral
communication isn't required to all patients, but for
simplification it may be best to simply state "For those
who are in need of and qualified for, financial
assistance is available" Also remember that the
hospital does not have to actually speak with the
individual; it just must make reasonable efforts.
501(r)(6) – How to Notify
Episodes of Care:
Will you satisfy the notification requirements
simultaneously for multiple episodes of care
for the purpose of notifying the individual
about its FAP and potential ECAs? (Page 144)
This can only be the case if the most recent
episode of care is past the 120 day period.
(Page 145). The application period does start
with each episode of care. (Page 145)
501(r)(6) – How to Notify
Email Statements:
Will you initiate a program to convert many of
your mailed statements to electronic (for
example by email) to any individual who
indicates he or she prefers to receive the
written notice or communication
electronically? (Page 151)
501(r)(6) – How to Notify
Documentation:
Unlike Medicare Bad Debt, documentation is not
required on each responsible party. 
But you do have to update your 990 to include
whether and how reasonable efforts were
made to determine FAP eligibility before
engaging in ECAs? (Page 151)
501(r)(6) – Application Period
Application Period:
Must accept & process FAP applications during
longer period that end on 240th day after
hospital provides an individual with first billing
statement post discharge.
501(r)(6) – Application Period
Received Application: What happens next?
• How will you notify your collection agencies that
you received a financial assistance application
during the application period and ECAs need to
be suspended? (Page 153)(Page 155)
• How will you make eligibility determination in a
timely manner? (Page 155)
• Document the determination?
• How will you notify the responsible individual in
writing of your determination? (Page 155)
501(r)(6) – Application Period
Approved:
• How will your organization notify the responsible
individual that they were eligible for free care
under the FAP? (Page 158)
• How will your organization issue refunds for
payments made for a responsible individual that
is eligible for financial assistance? (Page 158) $5 is
the threshold that is required to be refunded.
• How will your organization notify your collection
agency if you approved an application and ECAs
have to be reversed? (Page 153)
501(r)(6) – Application Period
Approved for less than full amount:
• How will your organization notify the responsible individual
that they were eligible for discounted care under the FAP?
(Page 158)
• How will your organization issue refunds for payments
made for a responsible individual that is eligible financial
assistance? (Page 158) $5 is the threshold that is required
to be refunded.
• How will your organization notify your collection agency if
you approved an application and ECAs have to be reversed
and a notice was sent to the responsible individual about
resuming ECAs in 30 days and an accompanying plain
language summary of the FAP? (Page 153)
501(r)(6) – Application Period
Not Approved:
• How will your organization make sure a notice that is
sent to the responsible individual is not approved and
to resume ECAs in 30 days and an accompanying plain
language summary of the FAP has been mailed?(Page
153)
• How will your organization notify your collection
agency to resume ECAs if it has been 30 days since you
provided the notice of intended ECAs and an
accompanying plain language summary of the FAP if
the application was not approved? (Page 153) This is
only for the care at issue.
501(r)(6) – Application Period
Incomplete:
• How will your organization make sure a notice is sent to the
responsible individual of the missing requirements to make
financial eligibility determination and to resume ECAs in 30
days and that an accompanying plain language summary of
the FAP has been mailed?(Page 153)
• How will your organization notify your collection agency to
resume ECAs if it has been 30 days since you provided the
notice of intended ECAs and an accompanying plain
language summary of the FAP) if the application is not
completed? (Page 153) This is only for the care at issue.
501(r)(6) – Application Period
Timely Manner:
Will your organization require a Medicaid application be filed
before approval or denial of financial assistance? (Page 156)
What is considered a "timely manner" to approve a financial
assistance application? (Page 156)
Suggestion: In my experience, “timely manner” is not a friendly
language for hospitals because it can be decided by a single
individual. Some could be friendly and use the upper limit of
45 days that was listed in the examples and others may say
reasonable is 30 days. I would suggest trying to make the
determination for financial assistance within 30 days unless
the individual is applying for Medicaid coverage.
501(r)(6) – Liable for Collection Agency
Collection Agency
• Hospital facilities must be held accountable for the
ECAs of the debt collection agency or debt buyers.
(Page 127)
• Do you have a contract in place with your collection
agency that requires them to follow 501(r) regarding
ECAs and also FAP applications? Included in the
contract should be language that if the collection
agency mistakenly violates 501(r)(6), they will
notify/disclose to the hospital facility and correct the
failure immediately. (Page 127)
501(r)(6) – Liable for Collection Agency
Collection Agency Contract
1. Disclose all failures: A hospital’s 501(r)(6) failure,
based on a third party’s actions, may be excused
if the failure is minor (e.g., not willful or
egregious) and the hospital corrects and discloses
the failure. (Page 27)
2. Will your organization’s collection agency take
any of the necessary steps to make reasonable
efforts determination? (Page 169)
Treasury has clarified that the hospital facility will
take those steps.
501(r)(6) – Liable for Collection Agency
Collection Agency Contract
3. Wait on ECAs
4. Who will refund Patients if Approved for FA?
5. Suspend ECAs in Application Period
6. Send FA to Patient
Collection Policy
Two options on how to create a “Billing and
Collection Policy”
1. Update your FAP
2. Or Create a separate “Billing and Collection
Policy”
Collection Policy Requirements
1.
2.
Describe the Actions the Hospital will take
Describe the Actions a collection partner may take
1.
2.
3.
4.
5.
6.
Including extraordinary collection actions (ECA)
But not limited to the ECAs
Must also describe the process and time frames the hospital
facility (or other authorized party) will use in taking these actions
Include any reasonable efforts to determine whether an individual
is FAP-eligible as described in section 501(r)(6).
In addition, the FAP or billing and collections policy must describe
the office, department, committee, or other body with the final
authority or responsibility for determining that the hospital facility
has made reasonable efforts to determine whether an individual
is FAP-eligible and may therefore engage in extraordinary
collection actions against the individual.
How can individuals obtain a free copy?
Q&A
Shawn Gretz
[email protected]
920-420-3420
https://www.federalregister.gov/articles/2012/06/26/201215537/additional-requirements-for-charitable-hospitals