Today, the IRS and the Treasury Department released Notice 2015-46, which provides clarification with respect to how a charitable hospital organization may comply with the requirement in Treasury Regulations § 1.501(r)-4(b)(1)(iii)(F) that a hospital facility include a provider list in its financial assistance policy (FAP).

The Affordable Care Act imposed additional requirements for charitable hospitals to qualify for tax-exempt status under section 501(c)(3), including a requirement to establish a written FAP.  Treasury regulations require each hospital facility of a charitable hospital to establish a FAP that applies to all emergency or other medically necessary care provided by such hospital facility but only to the extent the care is provided by the hospital facility itself or a “substantially-related entity” as defined in the regulations.  Recognizing that patients are typically unaware of the relationships between a hospital facility and the healthcare providers working in the hospital facility, the IRS and Treasury consider it important for a hospital facility’s FAP to clearly disclose which services provided in the hospital facility are covered by the FAP and which are not. Therefore, the regulations require a hospital facility’s FAP to include a list of providers, other than the hospital facility itself, delivering 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 (the provider list).

Today’s notice clarifies certain aspects of the provider list requirement with respect to a hospital facility’s FAP:

  • The notice generally permits the provider list to make reference to providers by individual name, practice group, department, or type of service so long as either (a) all individual providers within a named group are covered by the FAP or (b) all such providers are not covered by the FAP.
  • The notice requires that if a provider’s emergency or medically necessary care services are only partially covered by the FAP, then the provider list must describe the scope of coverage.
  • The notice provides that a provider list need not indicate whether a provider’s services are covered by any financial aid program other than the FAP.
  • The notice generally permits a hospital facility to maintain the provider list in a document separate from the FAP, such as an appendix.
  • The notice permits a hospital facility to update its provider list without requiring approval by an authorized body of the hospital facility (as generally is required for establishing the FAP itself).
  • The notice provides that minor omissions and errors that are either inadvertent or due to reasonable cause are not considered failures to meet a requirement of section 501(r) (that could result in the loss of a charitable hospital’s tax-exempt status) if they are promptly corrected.