Section 9007 of the Patient Protection and Affordable Care Act (“PPACA”) imposes new requirements on hospitals which are exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. Section 9007 of the PPACA imposes the following new requirements on tax exempt hospitals:

  1. Each tax exempt hospital must conduct a community health needs assessment at least once every three years and adopt an implementation strategy to meet the community health needs identified in such assessment. The community needs assessment must take into account input from persons who represent the broad interests of the community (including special knowledge or expertise in public health) and must be made widely available to the public.
  2. Each tax exempt hospital must adopt a written financial assistance policy which includes (a) eligibility criteria for financial assistance and whether such assistance includes free or discounted care, (b) the basis for calculating amounts charged to patients, (c) the method for applying for financial assistance, (d) in the event the hospital does not have a separate billing and collection policy, the actions the hospital may take in the event of non-payment, including collections action and reporting to credit agencies, and (e) measures to widely publicize the policy within the community. In addition, each tax exempt hospital is required to have a written policy stating that the hospital will provide, without discrimination, care for emergency medical conditions to individuals regardless of their eligibility for assistance under the financial assistance policy.
  3. Each tax exempt hospital must limit the amount it charges for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy to not more than the lowest amounts charged to individuals who have insurance covering such care. In addition, tax exempt hospitals are prohibited from using gross charges as a means of charging individuals for their services.
  4. Each tax exempt hospital is prohibited from engaging in extraordinary collection actions against a patient before the hospital has made reasonable efforts to determine whether the patient is eligible for assistance under the hospital’s financial assistance policy.1

In addition to the requirements set forth above, each tax exempt hospital is required to provide on its Form 990 a description of how the hospital is addressing the needs identified in its community health needs assessment and a description of any needs that are not being addressed together with the reasons such needs are not being addressed. Each tax exempt hospital is also required to provided a copy of its audited financial statements.

In the event a tax exempt hospital fails to meet the requirements imposed by Section 9007 in any tax year, the tax exempt hospital will be subject to an excise tax in the amount of $50,000.2

Congress has assigned to the Secretary of the Treasury the authority to promulgate regulations and provide additional guidance clarifying and interpreting the obligations imposed by Section 9007. Congress has not provided a specific timeline, time table or deadline by which such regulations and guidance must be provided. Despite the fact that clarifying guidance on Section 9007 has yet to be provided, the requirements of Section 9007 (other than the requirements with respect to community health needs assessments) apply to all tax years beginning after the enactment of the PPACA. (For most tax exempt hospitals, this means that these requirements of Section 9007 will become effective January 1, 2011.) The requirements of Section 9007 with respect to community health needs assessments apply to all tax years beginning after the second anniversary of the enactment of the PPACA. (For most tax exempt hospitals that means that these requirements will become effective January 1, 2013.)

Clearly, the enactment of Section 9007 of the PPACA will impose significant additional obligations on tax exempt hospitals. Although some of these obligation do not go into effect until 2013, tax exempt hospitals will be well-advised to begin taking steps to comply with these requirements immediately.