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Prepare for the New Year: Ensure your Hospital is 501(r) Compliant

As year-end approaches, it’s important for non-profit hospitals to ensure they remain in compliance with Section 501(r) requirements of the tax code. The IRS continues to monitor and enforce this regulation. In fact, earlier this year, they revoked a hospital’s tax-exempt status as a result of noncompliance.

Approximately 40% of hospitals reviewed by the IRS for 501(r) compliance have received a follow-up request for information.1

Here are four quick ways to help ensure your hospital is taking the necessary steps toward 501(r) compliance:

  1. Utilize tools to determine presumptive eligibility
    Properly identify patients eligible for financial assistance through the use of third-party data before moving forward with collections efforts. With this data available, your team can reliably — and in an unbiased manner — segment self-pay accounts for payment, charity care and bad debt.

  2. Screen patients early for financial assistance
    Determining financial aid eligibility is a win-win for you and the patient. You’ll save time and effort — and ultimately increase your cash flow by classifying appropriate accounts as charity instead of bad debt. Patients benefit from an improved financial experience and potential miscommunications around billing are avoided.

  3. Review your financial assistance policy (FAP)
    Your patient mix can change year over year, making it important to review your FAP and adjust it accordingly to best serve your patients’ needs. A review can indicate if all patients eligible for financial aid are receiving it.

  4. Establish measurable goals to meet compliance
    Set goals to make sure your organization’s FPA reporting processes meet 501(r) requirements and that you’re properly identifying your hospital’s patient population mix. Keeping a close eye on goals can keep you focused on priorities.

To learn more about how to prepare for 501(r) requirements, download our comprehensive insight guide.

1 Christianson, Heidi, and Fred Struve. “501(r) Audits Are Here: What You Need to Know.” Nilan Johnson Lewis. May 31, 2017.


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