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990 Schedule H

990 Schedule H. Rod Hardy, Member Arnett Foster Toothman, PLLC WV HFMA Fall Conference Oglebay / Wheeling, WV October 11, 2013. 501(r) – History of Legislation.

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990 Schedule H

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  1. 990 Schedule H Rod Hardy, Member Arnett Foster Toothman, PLLC WV HFMA Fall Conference Oglebay / Wheeling, WV October 11, 2013

  2. 501(r) – History of Legislation • Affordable Care Act – Enacted on March 23, 2010. Established the following reporting requirements for hospitals in order for the hospitals to maintain their tax exempt status, 501(c)(3). • 501(r)(3) –CHNA (Comm. Health Needs Assessment) • 501(r)(4) – Establish a (FAP) Finc. Assistance Policy and a non-discrimination policy for providing Emergency Care • 501(r)(5) – Limitation on charges to those who qualify for FAP • 501(r)(6) – Determine patients eligibility for FAP before “extraordinary collection efforts” are made • IRS Notice 2010-39 – Issued in May, 2010 • Solicited comments relating to the additional requirements imposed by 501(r). • 125 comments received

  3. 501(r) – History of Legislation • IRS Notice 2011-52 – Issued in July 2011. • This notice addressed only the CHNA requirements in 501(r)(3). • Over 80 comments received • Proposed Legislation Issued June 26, 2012 (77 FR 38148) – Compliance questions added to the 990, Sched. H for 2011 • Guidance on new IRS Sections 501(r)(4),(5) &(6) • Definition of Hospital & Hospital organization • FAP (Finc. Asst Policy) and maximum charges to a patient that qualifies under the hospitals’ FAP • Reasonable collection efforts & Extraordinary collection efforts for FAP-eligible patients • Emergency medical care policy

  4. 501(r) – History of Legislation • Proposed Legislation – April 5, 2013 • This is the LATEST LEGISLATION AVAILABLE • This proposed legislation considers the comments that were received from IRS Notices 2010-39 and 2011-52 • Comments were due to the IRS by July 5, 2013 • To date, there is NO FINAL LEGISLATION on the various 501(r) requirements

  5. 501(r) – History of Legislation • So, what legislation do hospitals rely on when completing CHNA’s and Sched. H of the 990? • For CHNA’s, the IRS says that..”hospital organizations may continue to rely on the interim guidance described in 2011-52 for any CHNA, made widely available to the public, and any implementation strategy adopted, on or before Oct. 5, 2013 (6 months after April , 2013 proposed rules issued. • Implies that Proposed rules issued April 5, 2013 apply to any CHNA’s not issued as of Oct. 5, 2013.

  6. 501(r) – History of Legislation • 990, Sched. H filings – Guidance • NOT MUCH! • June 26, 2012, 77 FR 38148 • Proposed regulations on 501(r)(4) thru (6) • See ref. to June 26, 2012 date on Slide #3 • Instructions to Form 990

  7. Sched. H - Purpose • Section 9007 of the Patient Protection and Affordable Care Act enacted March 23, 2010 created a new Section of the Internal Revenue Code, Section 501 (r), that established additional requirements for tax-exempt hospital organizations. • To track compliance with 501 (r) the IRS added Section B to Pt. V of the Schedule H of the Form 990 for tax year 2010.

  8. Sched. H Changes – Tax Year 2011 • Pt. V, Section B, L. #’s 10 & 11 – Eligibility for Free or Discounted Care • Give explanation in section VI if Federal poverty guidelines are NOT used to determine eligibility • Pt. V, Section B, L. #’s 20 & 22 – Relate to determining the amount to be charged to patients who qualify under the hospitals Financial Assistance Policy and whether any of these patients were charged full rates • Questions previously did not reference FAP-eligible patients.

  9. Sched. H Changes – Tax Year 2011 • Part V, Section B, L. #’s 16 & 17 – Extraordinary Collection Efforts (Liens, Lawsuits, Credit agency) • L. 16 – Relates to the hospital’s policies • L. 17 – Relates to the hospital’s actions • The phrase: “…before making reasonable efforts to determine the patients eligibility under the facilitiy’s FAP” has been added to the questions on lines 16 & 17 • Hospital can make phone calls, send invoices, etc. once the patient has been informed of the FAP process.

  10. Sched. H Changes – Tax Year 2011 • A copy of the hospitals audited financial statements must be attached to the 990 for tax years 2011 and 2012.

  11. Sched. H – Tax Years Beginning After 3/23/12 • Hospitals are required to complete Part V, Section B, question #’s 1 thru 8 c. • Questions relate to the Community Health Needs Assessment (CHNA) • These questions are optional for tax years beginning before 3/23/12 • First CHNA must be completed by the last day of the first tax year beginning after 3/23/12 • 7/1/12 – 6/30/13 – June 30, 2013 • 10/1/12 – 9/30/13 – Sept. 30, 2013 • 1/1/13 – 12/31/13 – Dec. 31, 2013

  12. Sched. H – Tax Years Beginning After 3/23/12 • Excise Tax of $50,000 per hospital imposed if CHNA requirements are not met by the end of the third year (CHNA conducted once every three years). All of these following criteria must be met to avoid the tax: • Conduct a CHNA that is adopted by a hospital’s governing body • Make CHNA widely available to the public • Implementation strategy adopted by the hospital’s governing body • Tax is applied per hospital facility not per hospital organization • Ex: A three hospital system with one non-compliant hospital will be taxed $50,000

  13. Sched. H – Tax Years Beginning After 3/23/12 • Transition Rules for Implementation Strategy – April 5, 2013 Proposed Rules • General Rule: Implementation strategy must be adopted the last day of the taxable year in which the CHNA is conducted • Exception (April 5, 2013 Proposed Rule): Hospitals who conducted a CHNA in any taxable year after March 23, 2010, 2011 or 2012 have until the 15th day of the Fifth month following the close of their first taxable year beginning after March 23, 2013.

  14. Sched. H, Section V, Pt. B – CHNA Questions • Implementation Strategy & 990 Reporting – per April 5, 2013 Proposed Rules: • The most recently adopted CHNA implementation strategy can be attached to the 990, or: • The URL of the website where the implementation strategy is posted on the web can be provided on the 990

  15. Sched. H, Section V, Pt. B – CHNA Questions • Question 1. a. – Definition of Community Served • Community can be defined based on (April 5, 2013 Proposed rule) • Geography – Metro. Statistical area, zip code data, etc • Target population – Aged, women, children, etc. • Principal function – Specialty area or targeted disease • Question 1. g. – prioritizing identified health needs • Per the April 5, 2013 proposed rule, only the significant health needs must be identified and addressed in the CHNA. Earlier guidance suggested that all identified health needs had to be addressed.

  16. Sched. H, Section V, Pt. B – CHNA Questions • Question 1. h. – process for consulting persons representing the communities interests • Must take into account, at a minimum: • At least one State, local, tribal or regional governmental health department (or equivalent dept) with knowledge, information or expertise relevant to the health needs of the community • Members of the medically underserved, minority and low-income community or organizations representing these individuals • Any written comments received on most recently published CHNA and implementation strategy

  17. Sched. H, Section V, Pt. B – CHNA Questions • Questions 5 a. & b. – Was the CHNA made widely available to the public? • 5.a. relates to including the CHNA on the hospitals website • 5.b. relates to making a copy available to the public, at the hospital, free of charge • Note: CHNA needs to stay available until the next two subsequent CHNA’s are made available to the public. (April 5, 2013 Proposed Rule)

  18. Sched. H, Part I, L. #7 – Community Benefits at Cost • Line 7. b. – Medicaid at Cost • IRS allows Medicaid charges to be multiplied by an overall hospital cost/charge ratio to estimate the cost of charity • Make sure the Medicaid charges include all units of the hospital such as acute, skilled nursing, psychiatric unit, home health, Hospital-based RHC’s, etc. • Don’t forget physician charges

  19. Sched. H, Part I, L. #7 – Community Benefits at Cost • Line 7. a. – Financial Asst. at Cost (Charity) • IRS allows charity charges to be multiplied by an overall hospital cost/charge ratio to estimate the cost of charity • Make sure the charity charges include all units of the hospital such as acute, skilled nursing, psychiatric unit, home health, Hospital-based RHC’s, etc. • Don’t forget physician charges that were written off to charity

  20. Sched. H, Part I, L. #7 – Community Benefits at Cost • L. 7. g. - “Medicaid at Cost” and “Finc. Asst. at Cost” / Provider tax handling • Provider taxes PAID are added to cost • WV DSH RECEIPTS are a reduction to cost • Do not subtract 100% of the DSH receipts because a portion of the receipts are based on self pay revenues (bad debt) and these self pay revenues do not relate to Medicaid or Charity (FAP) patients.

  21. Sched. H, Part I, L. #7 – Community Benefits at Cost • L. 7. g. – Addition of Provider Taxes • An argument could probably be made for adding all, or most, of the provider taxes paid to the Medicaid or Finc. Asst. at cost calculation since the taxes are based on gross hospital receipts LESS bad debts.

  22. Sched. H, Part I, L. #7 – Community Benefits at Cost • Line 7. e. – Community Health Improvement Services and Community Benefit Operations / what’s the difference? • Community Health Improvement Services – Line 7. e. • Activities or programs, subsidized by the health care organization, for the express purpose of improving community health. • These services do not generate an inpt. Or outpt. bill • Might be a nominal fee for these services • Ex: Well-baby clinics, smoking cessation, flu shots

  23. Sched. H, Part I, L. #7 – Community Benefits at Cost • Community Benefit Operations – Line 7. e. • Activities associated with the CHNA • Fundraising or grant-writing for community benefit programs • To be reported, community need for the activity or program must be established • Ex: improving access to health services (transportation services), advancing health knowledge (class offerings & research)

  24. Sched. H, Part I, L. #7 – Community Benefits at Cost • Line 7. g. / Subsidized Health Services – What services should you consider? • Defined – clinical services provided despite a financial loss to the organization • Service must meet an identified community need defined as: if the organization no longer offered the service: • Service would be unavailable in the community • Community’s capacity to provide the service would be below the community need • Service would become the responsibility of the government or some other tax-exempt organization

  25. Sched. H, Part I, L. #7 – Community Benefits at Cost • Examples of departments that generally meet the “subsidized services” (L. 7. g.) definition: • Inpt. Neonatal Intensive Care • Inpt. Psychiatric units • ER & Trauma services • Skilled Nursing services • Home Health Services • Note: Exclude the cost & payments related to ancillary support services such as lab, radiology , anesthesia, etc.

  26. Questions? Contact Information: Rod Hardy, Member Arnett Foster Toothman, PLLC Rod.Hardy@aftcpas.com (304) 346-0441

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