CliftonLarsonAllen: IRS expects tax-exempt hospitals to focus on community health needs

Hospitals and health systems that must identify health care needs for low-income and other patients have opportunities to create comprehensive, long-term strategies to meet these community health needs as part of retaining their tax-exempt status with the Internal Revenue Service.

The federal government requires tax-exempt hospitals, health systems and government hospitals that have tax-exempt status under 501(c)(3) – so-called charitable hospitals – and also organizations that have a stake in such hospitals to identify the health needs in their communities. These entities are also required to have policies regarding financial assistance in order to maintain their charitable status.

Charitable hospitals must perform community health needs assessments with input from the community, report to the community on these assessments, and maintain policies and procedures for providing medical care and financial assistance to people who are medically underserved, low-income, among minority populations, and who have chronic diseases.

The requirements, which fall under Section 501(r) of the Internal Revenue Code, mean that qualifying hospitals must develop and document strategies to implement community health needs assessments and related activities. In the process of developing these strategies, these charitable hospitals must analyze the ways in which they benefit the community and provide financial assistance for health care to those who require support.

Charitable hospitals are subject to the statutory requirements under The Patient Protection and Affordable Care Act of 2010 – even if they also have exemption under another section (such as government hospitals with dual status). They face the loss of tax-exempt status and financial penalties if they fail to comply.

Two key dates relate to the 501(r) requirements:

• For fiscal years beginning after March 23, 2010, charitable hospitals must have written financial assistance policies and written emergency medical care policies, as well as certain policies and practices related to financial assistance.

• For fiscal years beginning after March 23, 2012, charitable hospitals must complete community health needs assessments within that tax year or the two preceding tax years.

 CliftonLarsonAllen LLP has a whitepaper available on this topic at .

Thank you,

Ann Dee Allen
PR Manager
CliftonLarsonAllen LLP

[email protected]

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