Executive Summary
Patient access departments need to revamp financial counseling processes to comply with updated 501(r) rules, but many nonprofit hospitals have room for improvement, according to a recent study. Key findings on nonprofit hospitals:
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Nearly all have written charity care and emergency care policies.
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Hospitals in non-expansion states had less generous charity care policies.
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Less than half notify patients about their potential eligibility for charity care before attempting to collect unpaid medical bills.
Many nonprofit hospitals have room for improvement regarding charity care policies under the Affordable Care Act’s (ACA’s) Section 501(r) rules, according to a recent study.1 Researchers reviewed Internal Revenue Service forms submitted by more than 1,800 nonprofit hospitals in 2012. Here are key findings:
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Nearly all hospitals (94%) reported having written charity care and emergency care policies.
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Hospitals in states that have not expanded Medicaid had less generous charity care polices than those in expansion states.
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Hospitals in non-expansion states were less likely to have a policy in place about notifying patients of charity care options before they leave the facility.
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Less than half (42%) of nonprofit hospitals notify patients about their potential eligibility for charity care before attempting to collect unpaid medical bills, as is required by the ACA.
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Only 29% of hospitals reported that they had begun charging uninsured and underinsured patients the same rate they charged private insurers or Medicare.
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Four in five hospitals reported they had stopped using extraordinary debt collection steps, such as reporting patients to credit agencies, when patients failed to pay their medical bills.
Sayeh Nikpay, PhD, MPH, the study’s lead author, was surprised that there were substantial differences in financial assistance available to low-income patients between the states that have expanded Medicaid and those that have not. “Patient access professionals and financial counselors are the frontlines of this policy, so it’s important that they understand the requirements of Section 501(r),” says Nikpay, a postdoctoral fellow at the University of Michigan’s Institute for Healthcare Policy and Innovation in Ann Arbor.
Although the study suggests that almost all hospitals have established written financial assistance policies, the law states that these policies must be widely available. “People who work with patients to determine payment play a crucial role in dissemination of information on financial assistance policies in order to meet this requirement,” Nikpay emphasizes. This role means patient access staff members who have a role in determining patient eligibility for financial assistance must ensure that patients know the financial assistance policy, how to apply, and actions that might be taken if they should fail to apply.
“One of the chief goals of Section 501(r) is to ensure that those who are eligible for financial assistance under the hospital’s policy receive it,” says Nikpay. For this reason, Section 501(r) spells out the specific steps the hospital should take to inform and reach out to patients, such as contacting them through the billing process, allowing them 240 days to apply, and contacting patients 30 days before any “extraordinary” efforts are made to collect unpaid balances.
“We found that in 2012, 20% of hospitals included ‘extraordinary’ collection actions in their billing and collection policies,” says Nikpay. If they want to continue to use “extraordinary” collection actions, she warns, these hospitals risk their nonprofit status if they fail to take all the required steps to inform patients of their eligibility before using such actions.
“If all the steps have been taken, and patients are sufficiently informed, such ‘extraordinary’ collection actions should, hopefully, be required infrequently,” says Nikpay.
New processes needed
Patient access departments need to revamp their financial counseling processes to comply with the updated 501(r) rules, advises Stacy Calvaruso, CHAM, system director of patient access at LCMC Health in New Orleans.
“In many instances, charity write-offs are deductible and benefit the organization, versus allowing the account to roll over to bad debt,” Calvaruso adds.
Here are some clarifications and changes in the updated 501(r) rules, which became effective as of December 2014, and how they affect patient access:
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Financial assistance and emergency care policies must be approved by an authorized body of the hospital.
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The hospital must maintain a list of providers that deliver emergency or other medically necessary care at the hospital, and identify whether the provider is covered by the hospital’s financial assistance policy.
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If this list is maintained outside the financial assistance policy, the hospital must document in the financial assistance policy how the public can access the list. “A hospital’s tax-exempt status may be in jeopardy if they outsource their ED and it is not covered under the financial assistance policy,” notes Calvaruso.
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Financial assistance policies must be translated into other languages if 5% of community members, or 1,000 people, have limited English proficiency.
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Financial assistance policies are no longer required to list each specific measure taken by the hospital to widely publicize the policy.
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“However, financial assistance policies must still be widely publicized,” says Calvaruso. LCMC’s financial assistance policy was revised in response to the updated guidelines. It now includes:
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the qualification guidelines;
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approval and denial notification methods;
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utilization of allowable amount, even if not collected;
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clarification of the organization’s collection activities, such as referral to collection agencies.
“All of these changes lead to increased training requirements,” notes Calvaruso. The expected qualifications and experience level of patient access representatives has increased as well.
“We look for individuals who have a higher level of technical experience, as well as financial negotiation skills,” says Calvaruso. (See related story on how patient access departments changed financial counseling processes, in this issue.)
1. Nikpay SS, Ayanian JZ. Hospital charity care — Effects of new community-benefit requirements. N Engl J Med 2015; 373:1687-1690.
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Laura King, Access Manager, Valley View Hospital, Glenwood Springs, CO. Phone: (970) 384-6854. Email: [email protected].
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Stacy Calvaruso, CHAM, System Director, Patient Access, LCMC Health, New Orleans. Email: [email protected].
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Sayeh Nikpay, PhD, MPH, Institute for Healthcare Policy and Innovation, University of Michigan, Ann Arbor. Email: [email protected].
