Study: Nonprofit hospitals need to improve charity care policies to meet ACA rules

To keep their tax-free nonprofit status, hospitals are required to let patients know if they qualify for free or reduced-price care under the Affordable Care Act's Section 501(r) rules, which take full effect next year. However, many nonprofit hospitals have room for improvement concerning their charity care polices and complying with the ACA rules, according to a study from the University of Michigan Institute for Healthcare Policy and Innovation.

For the study, researchers reviewed IRS forms submitted by more than 1,800 nonprofit hospitals across the nation. They looked at records for 2012, the first year hospitals had to comply with the ACA's requirements and the most recent year for which data was available.

Here are five findings from the study, which the researchers reported in the Oct. 29 edition of the New England Journal of Medicine.

1. The ACA says nonprofit hospitals must have charity care policies and make them known. Nearly all (94 percent) of the hospitals reported having written charity care and emergency care policies.

2. Hospitals in states that have not expanded Medicaid reported having less generous charity care polices than those in expansion states. Hospitals in non-expansion states were also less likely to have a policy in place about notifying patients of charity care options before they left the facility.

3. The ACA requires nonprofit hospitals to notify patients about their potential eligibility for charity care before attempting to collect unpaid medical bills. Less than half (42 percent) of hospitals reported they had begun doing this.

4. If a patient is uninsured or under-insured, tax-exempt hospitals are supposed to charge the patient a fair amount even when the individual doesn't qualify for charity care. Only 29 percent of hospitals reported they had begun charging uninsured and under-insured patients the same rate they charged private insurers or Medicare.

5. 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.

Although tax-exempt hospitals have been required to make a good faith effort to comply with the statutory requirements since 2012, the federal government did not issue final language about exactly how to comply and penalties for noncompliance until 2014.

"Hospitals are generally complying with the part of the rules that require they establish charity care policies and publicize them, but this may not impact the amount of charity care they provide," said Sayeh Nikpah, PhD, one of the authors of the study. "So far, it appears many aren't complying with the part of the rules that could increase their charity care."

Dr. Nikpay and the study's co-author, John Z. Ayanian, MD, will continue to study the issue as new IRS data becomes available. They are already working on 2013 data.

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