Topic List Topic: Discounts
(June 2011; Updated November 2015) Topic: Financial Assistance Policies
(Updated March 2013) Topic: Foundation Payments for Charity Care Patients
(August 2009) Topic: Free Care for Priests in the Diocese
(January 2011) Topic: Free Care Vouchers to Low-Income School Districts
(August 2009) Topic: International Patients
Please Take Note: The information provided below does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.
Question: We provide a 30 percent discount to all patients with no insurance. We include the cost associated with this discount on our unaudited community benefit footnote as a separate line item. Should we include this community benefit activity on Schedule H of the 990?
Recommendation: This discount appears to be a contractual adjustment and does not meet the IRS definition of financial assistance/charity care and should not be reported on Schedule H.
IRS definition of financial assistance: Financial assistance means free or discounted health care services provided to persons who meet the organization’s criteria for financial assistance and are unable to pay for all or a portion of such services. Financial assistance does not include (1) debt or uncollectible charges that the hospital recorded as revenue but wrote off due to failure to pay by patients who did not qualify for charity care, or the cost of providing such care; (ii) the difference between the cost of care provided under Medicaid or other means-tested government programs or under Medicare and the revenue derived therefrom or (ii) contractual adjustments with any third party.
Question: Section 501(r)(5) requires tax-exempt hospitals to limit the amounts they charge for emergency and other medically necessary care provided to individuals eligible for assistance under the hospital's financial assistance policy to not more than amounts generally billed to individuals who have insurance covering such care. Hospitals can further discount, if warranted. The question is: Even though the new law mandates a limit on charges, can additional discounts be counted as financial assistance (assuming the discount drops the net bill below the cost of care)?
Recommendation: Yes, discounts for a person who qualifies for financial assistance should be reported as community benefit on Schedule H if the bill is below the cost of care.
Topic: Financial Assistance Policies
Question: Can we count as charity care the financial assistance we provide to persons who exceed income requirements of our state's financial assistance/charity care policies? The state says we must give charity care to persons up to 200 percent of the poverty line, but we offer charity care to persons up to 300 percent of poverty.
Recommendation: We recommend reporting the cost of care given to these patients as financial assistance/charity care. Your organization must offset the total cost of financial assistance by the amount contributed by the foundation since your foundation is a separate corporation.
(Updated November 2015)
Question: Does financial assistance for retired religious (who are sponsors of the health care organization) count as charity care?
Recommendation: Financial assistance may count as charity care when the member of the religious congregation meets the organization's financial assistance policy criteria.
Question: How should we handle community care (financial assistance/charity care) applications for our patients who are 18 AND are still living at home with their parents? Is there an industry standard that says we should or should not take the parents' income into account? We are not able to share medical information with parents, does the same hold true for financial eligibility?
Recommendation: The proposed rules on financial assistance are silent on this issue and we are unaware of an industry standard. We recommend that each organization's financial assistance policy address this. Identifying health insurance programs for which the individual may be eligible is usually the first step in the financial assistance process. As you develop your hospital financial assistance policies, be sure to align with state Medicaid policies and be aware that Federal Poverty Guidelines, used by most hospitals to set eligibility, are based on number of people in the household.
(Updated November 2015)
Topic: Foundation Payments for Charity Care Patients
Question: We have a foundation that is organized as a separate corporation. They have designated funds to be used to pay for health care services for patients who cannot afford to pay. The hospital makes requests to the foundation if they have a patient who cannot pay and then the foundation writes a check to the hospital to pay for those services. Does any of this qualify as a community benefit?
Recommendation: We recommend reporting the cost of care given to these patients as charity care. Your organization does not have to offset the total cost of charity care by the amount contributed by the foundation.
Topic: Free Care for Priests in the Diocese Question:
We have been asked to provide free health care to priests in our diocese. Should we report this program as community benefit?
Recommendation: We recommend not reporting the overall program and its costs as community benefit. However, any priest meeting your hospital's financial assistance policy could get free or discounted care, as do others who qualify for charity care/financial assistance.
Another approach could be to write your financial assistance policy to include all priests in the diocese. However, this may raise questions in the community if you did not offer the same coverage to nuns and clergy of other faiths.
Topic: Free Care Vouchers to Low-Income School Districts
Question: We have two school districts in the community we serve, both in low income areas with high populations of uninsured persons, including migrant workers. We grant each of the districts an unlimited number of free vouchers per month so that when they have a student with a serious illness, injury and whose family has no insurance, they can send them to our Immediate Care Clinic and we treat them for free. This solves the school's need for getting students the immediate health care they need and otherwise wouldn't receive without our help. Should this be reported as charity care, community based clinical services or subsidized care?
Recommendation: We recommend you write your financial assistance policy to include the students using the free vouchers and then report the expenses for each individual as financial assistance/charity care.
(Updated November 2015)
Topic: International Patients Question:
A physician asked our hospital to waive all fees for caring for a child from another country. The physician will waive the professional fees and all other physicians involved in the child's care will not charge. Can this be included as charity care?
Recommendation: Free or discounted care could be reported as financial assistance/charity care if the care was provided consistent with your financial assistance policies. For example:
(Updated November 2015)
- Your policies define the community as extending beyond your geographic area in some situations. (Centers of excellence for services such as transplantation or oncology often include such provisions.)
- The patient meets the financial criteria (income or income and assets) of your financial assistance policy. We do not recommend a blanket policy that when physicians donate services, the facility will as well, since this could open the facility to providing financial assistance to persons not in financial need.