[Federal Register Volume 77, Number 123 (Tuesday, June 26, 2012)]
[Proposed Rules]
[Pages 38148-38169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15537]



[[Page 38147]]

Vol. 77

Tuesday,

No. 123

June 26, 2012

Part II





 Department of the Treasury





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Internal Revenue Service





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26 CFR Part 1





Additional Requirements for Charitable Hospitals; Proposed Rule

  Federal Register / Vol. 77 , No. 123 / Tuesday, June 26, 2012 / 
Proposed Rules  

[[Page 38148]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-130266-11]
RIN 1545-BK57


Additional Requirements for Charitable Hospitals

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations that provide 
guidance regarding the requirements for charitable hospital 
organizations relating to financial assistance and emergency medical 
care policies, charges for certain care provided to individuals 
eligible for financial assistance, and billing and collections. The 
regulations reflect changes to the law made by the Patient Protection 
and Affordable Care Act of 2010. The regulations will affect charitable 
hospital organizations.

DATES: Comments and requests for a public hearing must be received by 
September 24, 2012.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-130266-11), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
130266-11), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (IRS REG-130266-11).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Amber L. Mackenzie or Preston J. Quesenberry at (202) 622-6070; 
concerning submissions of comments and requests for a public hearing, 
Oluwafunmilayo Taylor at (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review and approval under 1545-0047, in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the 
collection of information should be sent to the Office of Management 
and Budget, Attn: Desk Officer for the Department of the Treasury, 
Office of Information and Regulatory Affairs, Washington, DC 20503, 
with copies to the Internal Revenue Service, Attn: IRS Reports 
Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments 
on the collection of information should be received by August 27, 2012. 
Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Internal Revenue Service, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information in the proposed regulations is in 
Sec. Sec.  1.501(r)-4 and 501(r)-6(c). The collection of information 
flows from section 501(r)(4) of the Internal Revenue Code (Code), which 
requires hospital organizations to establish a written financial 
assistance policy and a written policy related to care for emergency 
medical conditions, and section 501(r)(6), which requires a hospital 
organization to make reasonable efforts to determine whether an 
individual is eligible for assistance under a financial assistance 
policy before engaging in extraordinary collection actions against that 
individual. The expected recordkeepers are hospital organizations 
described in sections 501(c)(3) and 501(r)(2).
    Estimated number of recordkeepers: 3,377.
    Estimated average annual burden hours per recordkeeper: 11.5 hours.
    Estimated total annual recordkeeping burden: 38,836.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by 26 U.S.C. 6103.

Background

    The Patient Protection and Affordable Care Act, Public Law 111-148 
(124 Stat. 119 (2010)) (the Affordable Care Act), enacted section 
501(r) of the Code, which adds requirements for hospital organizations 
that are (or seek to be) recognized as described in section 501(c)(3). 
Section 501(r)(1) of the Code states that an organization described in 
section 501(r)(2) (a hospital organization) will not be treated as 
described in section 501(c)(3) unless the organization meets the 
requirements described in section 501(r)(3) through 501(r)(6). The 
Affordable Care Act did not otherwise affect the substantive standards 
for tax exemption that hospital organizations are required to meet 
under section 501(c)(3).
    Section 501(r)(2)(A) defines a hospital organization as: (i) An 
organization that operates a facility required by a state to be 
licensed, registered, or similarly recognized as a hospital; and (ii) 
any other organization that the Secretary determines has the provision 
of hospital care as its principal function or purpose constituting the 
basis for its exemption under section 501(c)(3).
    Section 501(r)(2)(B)(i) requires a hospital organization that 
operates more than one hospital facility to meet the requirements of 
section 501(r) separately with respect to each hospital facility. 
Section 501(r)(2)(B)(ii) provides that a hospital organization will not 
be treated as described in section 501(c)(3) with respect to any 
hospital facility for which the requirements of section 501(r) are not 
separately met.

Community Health Needs Assessments

    Section 501(r)(3) requires a hospital organization to conduct a 
community health needs assessment (CHNA) at least once every three 
years and adopt an implementation strategy to meet the community health 
needs identified through the CHNA. The CHNA must take into account 
input from persons who represent the broad interests of the community 
served by the hospital facility, including those with special knowledge 
of or expertise in public health. In addition, the CHNA must be made 
widely available to the public.

Financial Assistance Policy and Emergency Medical Care Policy

    Section 501(r)(4) requires a hospital organization to establish a 
written financial assistance policy (FAP) and a written policy relating 
to emergency medical care.
    The FAP must include: (1) Eligibility criteria for financial 
assistance, and whether such assistance includes free or

[[Page 38149]]

discounted care; (2) the basis for calculating amounts charged to 
patients; (3) the method for applying for financial assistance; (4) in 
the case of an organization that does not have a separate billing and 
collections policy, the actions the hospital organization may take in 
the event of nonpayment; and (5) measures to widely publicize the FAP 
within the community to be served by the hospital organization.
    The emergency medical care policy must require the hospital 
organization to provide, without discrimination, care for emergency 
medical conditions (within the meaning of the Emergency Medical 
Treatment and Labor Act (EMTALA), section 1867 of the Social Security 
Act (42 U.S.C. 1395dd)) to individuals regardless of their eligibility 
under the organization's FAP.

Limitation on Charges

    Section 501(r)(5)(A) requires a hospital organization to limit 
amounts charged for emergency or other medically necessary care 
provided to individuals eligible for assistance under the 
organization's FAP (FAP-eligible individuals) to not more than the 
amounts generally billed to individuals who have insurance covering 
such care (AGB). Section 501(r)(5)(B) prohibits the use of gross 
charges.

Billing and Collections

    Section 501(r)(6) requires a hospital organization to make 
reasonable efforts to determine whether an individual is FAP-eligible 
before engaging in extraordinary collection actions (ECAs) against the 
individual.

Notice 2010-39

    In June 2010, the Department of Treasury (Treasury Department) and 
the Internal Revenue Service (IRS) issued Notice 2010-39 (2010-24 IRB 
756 (May 27, 2010)), which solicited comments regarding the application 
of the additional requirements imposed by section 501(r). The Treasury 
Department and the IRS received approximately 125 comments in response 
to Notice 2010-39. The principal comments considered in drafting these 
proposed regulations are discussed in this preamble under Explanation 
of Provisions.

Notice 2011-52

    In July 2011, the Treasury Department and the IRS issued Notice 
2011-52 (2011-30 IRB 60 (July 8, 2011)), which addressed the CHNA 
requirements described in section 501(r)(3). Notice 2011-52 described 
specific provisions related to the CHNA requirements that the Treasury 
Department and the IRS anticipate will be included in regulations to be 
proposed under section 501(r) and solicited comments from the public. 
The comment period for Notice 2011-52 closed on September 23, 2011. The 
Treasury Department and the IRS received more than 80 comments in 
response to Notice 2011-52.
    Hospital organizations may rely on the guidance in Notice 2011-52 
with respect to any CHNA made widely available to the public, and any 
implementation strategy adopted, on or before the date that is six 
months after the date further guidance regarding the CHNA requirements 
is issued.

Explanation of Provisions

    These proposed regulations provide guidance on the requirements 
described in section 501(r)(4) through 501(r)(6) of the Code. Sections 
501(r)(4), 501(r)(5), and 501(r)(6) all relate to a hospital facility's 
FAP or to individuals who are, or may be, FAP-eligible. The proposed 
regulations under section 501(r)(4) describe the information that a 
hospital facility must include in its FAP and the methods a hospital 
facility must use to widely publicize its FAP. They also describe what 
a hospital facility must include in its emergency medical care policy. 
The proposed regulations under section 501(r)(5) describe how a 
hospital facility determines the maximum amounts (that is, the amounts 
generally billed to individuals who have insurance coverage, or AGB) it 
can charge FAP-eligible individuals for emergency and other medically 
necessary care. In the case of an individual who is FAP-eligible but 
has not applied for financial assistance at the time charges are made, 
the proposed regulations provide that a hospital facility will not fail 
to satisfy section 501(r)(5) if it charges the individual more than 
AGB, provided the hospital facility is complying with all the 
requirements regarding notifying individuals about the FAP and 
responding to applications submitted, including correcting the amount 
charged and seeking to reverse any ECA previously initiated if an 
individual is later found to be FAP-eligible.
    The proposed regulations under section 501(r)(6) describe the 
actions that are considered ``extraordinary collection actions'' and 
the ``reasonable efforts'' a hospital facility must make to determine 
FAP-eligibility before engaging in such actions. In general, to have 
made reasonable efforts under the proposed regulations, a hospital 
facility must determine whether an individual is FAP-eligible or 
provide required notices during a notification period ending 120 days 
after the date of the first billing statement. Although a hospital 
facility may undertake extraordinary collection actions after this 120-
day notification period, a hospital facility that has not determined 
whether an individual is FAP-eligible must still accept and process a 
FAP application from the individual for an additional 120 days. 
Accordingly, the total period during which a hospital facility must 
accept and process FAP applications is 240 days from the date of the 
first billing statement. If a hospital facility receives a FAP 
application during the application period, it must suspend any ECAs it 
has started until it has processed the application and, if it 
determines the individual is FAP-eligible, must seek to reverse the 
ECAs and promptly refund any overpaid amounts. While debts may be 
referred to third parties to assist with collection actions at any 
time, including during the initial 120-day notification period, they 
may not be sold to third parties during the notification period unless 
and until an eligibility determination has been made.
    These proposed regulations also provide guidance on which entities 
must meet the requirements described in section 501(r)(4) through 
501(r)(6). In particular, the proposed regulations contain a 
definitions section that defines ``hospital organization,'' ``hospital 
facility,'' and other key terms used in the regulations.
    In crafting proposed regulations to implement these interrelated 
statutory provisions, the Treasury Department and the IRS sought to 
ensure that patients who may require financial assistance--and the 
patient advocacy groups that assist them--will have access to the 
information about a hospital facility's FAP that the patients need in 
order to effectively seek financial assistance under the FAP. The 
Treasury Department and the IRS also sought to preserve hospital 
facilities' flexibility to determine the best way to meet the 
particular health needs of the specific communities they serve. Neither 
the statute nor these proposed regulations establish specific 
eligibility criteria that a FAP must contain. Moreover, aside from 
prohibiting hospital facilities from charging FAP-eligible individuals 
more than AGB, neither the statute nor the proposed regulations dictate 
the amounts or kinds of financial assistance that a FAP must provide.
    As discussed further in this Explanation of Provisions, these 
proposed regulations do not provide guidance on the CHNA requirements 
described in section 501(r)(3) or on the consequences described in 
sections

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501(r)(1) and 501(r)(2)(B) for failing to satisfy the section 501(r) 
requirements. The Treasury Department and the IRS intend to issue 
additional proposed regulations addressing the CHNA requirements and 
the consequences for failing to satisfy the section 501(r) requirements 
and responding to the comments received in response to Notice 2011-52.

1. Hospital Facilities and Organizations

a. Hospital Facilities
    Because section 501(r)(2)(B) requires a hospital organization to 
satisfy the requirements of section 501(r) separately with respect to 
each hospital facility it operates, a number of commenters requested a 
definition of ``hospital facility.'' In accordance with section 
501(r)(2)(A)(i), the proposed regulations define a hospital facility as 
a facility that is required by a state to be licensed, registered, or 
similarly recognized as a hospital. Except as otherwise provided in 
future published guidance, a hospital organization may treat multiple 
buildings operated under a single state license as a single hospital 
facility. Future published guidance also will address whether a 
hospital organization's operations in a single building under more than 
one state license are treated as one or multiple hospital facilities.
    The proposed regulations refer to hospital facilities taking 
certain actions. Such references are intended to include instances in 
which the hospital organization operating the hospital facility takes 
action through, or on behalf of, the hospital facility.
b. Hospital Organizations
    In accordance with section 501(r)(2)(A)(i), the proposed 
regulations provide that a hospital organization includes any 
organization recognized (or seeking to be recognized) as described in 
section 501(c)(3) that operates one or more hospital facilities.
    Section 501(r)(2)(A)(ii) provides that a hospital organization also 
includes any other organization that the Secretary determines has the 
provision of hospital care as its principal function or purpose 
constituting the basis for its exemption under section 501(c)(3). These 
proposed regulations do not include a determination that any other 
categories of organizations or facilities have the provision of 
hospital care as their principal function or purpose, but comments are 
requested regarding whether additional organizations should be 
included. Moreover, the Treasury Department and the IRS intend that any 
future regulations regarding any such categories of organizations or 
facilities will apply only prospectively, after an opportunity for 
notice and comment. Prior to the effective date of any such future 
regulations, only organizations operating a facility required by a 
state to be licensed, registered, or similarly recognized as a hospital 
will be considered ``hospital organizations'' that must satisfy the 
requirements under section 501(r).
c. Hospital Facilities Located Outside of the United States
    A number of commenters asked whether section 501(r) will apply to 
an organization as a result of its operating a hospital facility 
located outside of the United States. The proposed regulations provide 
that, for purposes of determining whether a facility is required by a 
state to be licensed, registered, or similarly recognized as a 
hospital, the term ``state'' includes only the 50 states and the 
District of Columbia, and not any U.S. territory or foreign country. As 
a result, a facility located outside of the United States will not be 
considered a hospital facility under these proposed regulations. Thus, 
pending any future guidance regarding other categories of hospital 
organizations or facilities, a hospital organization operating a 
facility located outside of the United States that is not required to 
be licensed by any State will not be required to meet the section 
501(r) requirements with respect to that facility and an organization 
will not be considered a hospital organization as a result of operating 
such a facility.
d. Operating Hospital Facilities Through Partnerships or Disregarded 
Entities
    Notice 2011-52 notes that the Treasury Department and the IRS 
intend to include within the definition of ``hospital organization'' 
any organization described in section 501(c)(3) that operates a 
hospital facility through a disregarded entity, or a joint venture, 
limited liability company, or other entity treated as a partnership for 
federal tax purposes. Notice 2011-52 also requested comments regarding 
whether (or under what circumstances) an organization should not be 
considered to ``operate'' a hospital facility for purposes of section 
501(r) as a result of its owning a small interest (other than a general 
partner or similar interest) in an entity treated as a partnership for 
federal tax purposes that operates the hospital facility.
    The proposed regulations provide that a hospital organization 
includes any organization that operates a hospital facility through a 
disregarded entity. The Treasury Department and the IRS are considering 
the comments received in response to Notice 2011-52 regarding the 
operation of hospital facilities through partnerships and will address 
this issue in separate guidance.
e. Government Hospital Organizations
    A number of commenters requested that the Treasury Department and 
the IRS provide an exception from the requirements imposed by section 
501(r) for certain government hospital organizations. For example, some 
commenters suggested that the requirements of section 501(r) should not 
apply to a hospital organization that excludes its income from gross 
income under section 115 but has nonetheless applied for and received 
recognition as an organization described in section 501(c)(3). Other 
commenters suggested that the section 501(r) requirements should not 
apply to any hospital organization that is a governmental unit or an 
affiliate of a governmental unit as described in Rev. Proc. 95-48 
(1995-2 CB 418) (relieving such organizations from the annual filing 
requirement under section 6033).
    The statutory language of section 501(r) applies to all hospital 
organizations that are (or seek to be) recognized as described in 
section 501(c)(3). Section 501(r) does not explicitly address 
government hospital organizations, nor does it include a specific 
exception for government hospital organizations. Accordingly, as 
indicated in Notice 2011-52, the Treasury Department and the IRS intend 
to apply section 501(r) to every hospital organization that has been 
recognized (or seeks recognition) as an organization described in 
section 501(c)(3). As a result, the proposed regulations do not contain 
any exceptions or special rules for government hospital organizations 
and are intended to apply to any government hospital organization 
recognized as described in section 501(c)(3). However, in recognition 
of the unique position of government hospitals, the Treasury Department 
and the IRS request comments regarding alternative methods a government 
hospital may use to satisfy the requirements of section 501(r)(4) 
through 501(r)(6).

2. Failures To Satisfy the Requirements of Section 501(r)

    Numerous commenters requested guidance on the consequences of 
failing to meet one or more of the requirements of section 501(r). The 
Treasury Department and the IRS are continuing to consider comments 
regarding the consequences of failing to meet the

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requirements of section 501(r) and will address this issue in separate 
guidance.

3. Community Health Needs Assessments

    As described in the Background section of this preamble, the 
comment period for Notice 2011-52, which solicited comments on 
anticipated regulatory provisions regarding the CHNA requirements, 
closed on September 23, 2011. The Treasury Department and the IRS are 
considering the comments received in response to Notice 2011-52 and 
will address the CHNA requirements in separate guidance. Accordingly, 
these proposed regulations do not provide further guidance regarding 
the CHNA requirements. Hospital organizations may continue to rely on 
the anticipated regulatory provisions described in Notice 2011-52 with 
respect to any CHNA made widely available to the public, and any 
implementation strategy adopted, until six months after the date 
further guidance regarding the CHNA requirements is issued.

4. Financial Assistance Policies and Emergency Medical Care Policies

    In accordance with the statute, the proposed regulations require 
hospital organizations to establish written FAPs as well as written 
emergency medical care policies.
a. Financial Assistance Policies
    The proposed regulations provide that a hospital organization meets 
the requirements of section 501(r)(4)(A) with respect to a hospital 
facility it operates if the hospital organization establishes for that 
hospital facility a written FAP that applies to, at a minimum, all 
emergency and other medically necessary care provided by the hospital 
facility.
    In general, a hospital facility's FAP must include: (1) Eligibility 
criteria for financial assistance, and whether such assistance includes 
free or discounted care; (2) the basis for calculating amounts charged 
to patients; (3) the method for applying for financial assistance; (4) 
in the case of an organization that does not have a separate billing 
and collections policy, the actions the organization may take in the 
event of nonpayment; and (5) measures to widely publicize the FAP 
within the community served by the hospital facility.
    While the FAP itself must generally include each of these items of 
information and must be made available on a Web site and without charge 
upon request in public locations in the hospital facility and by mail, 
the proposed regulations otherwise permit a hospital facility to widely 
publicize its FAP using summaries that do not contain all of the 
information in the FAP. In addition, the Treasury Department and the 
IRS recognize that certain details related to the FAP are likely to 
change regularly and that it may be inefficient in certain 
circumstances for a hospital facility to have to update its FAP to 
reflect every such change. As a result, the proposed regulations give 
hospital facilities the option of providing certain information 
separately from the FAP, as long as the FAP explains how members of the 
public can readily obtain this information free of charge on a Web site 
and in writing.
i. Eligibility Criteria and Basis for Calculating Amounts Charged to 
Patients
    A few commenters noted that section 501(r)(4) does not appear to 
mandate that FAPs contain any particular eligibility criteria and asked 
that hospital facilities be given the flexibility to develop FAP 
eligibility criteria that respond to local needs. Other commenters 
asked the Treasury Department and the IRS to require all FAPs to 
include certain minimum eligibility criteria.
    Consistent with the statute, the proposed regulations do not 
mandate any particular eligibility criteria and require only that a FAP 
specify the financial assistance, including all discounts and free 
care, available under the FAP and all of the specific eligibility 
criteria that an individual must satisfy to receive each such discount, 
free care, or other level of assistance. If applicable, a FAP must also 
specify the amounts, such as gross charges, to which any discount 
percentages specified in the FAP will be applied.
    At least one commenter recommended that hospital facilities be 
required to consult with members of the community, including 
representatives of vulnerable or disadvantaged community members, as 
they develop or revise their FAPs. Although the proposed regulations do 
not include such a requirement, the Treasury Department and the IRS are 
considering the potential link between the needs of a hospital 
facility's community, as determined through the hospital facility's 
most recent CHNA, and a hospital facility's FAP. Comments are requested 
on this issue.
    In addition, because section 501(r)(5)(A) requires a hospital 
facility to limit amounts charged for emergency or other medically 
necessary care provided to FAP-eligible individuals to not more than 
the amounts generally billed to individuals who have insurance covering 
such care (AGB), the proposed regulations require the FAP to state that 
following a determination of FAP-eligibility, an individual will not be 
charged more than AGB for emergency or other medically necessary care.
    The FAP must also state which of the permitted methods (described 
in the section of this preamble on Limitation on Charges) the hospital 
facility uses to determine AGB. Finally, if applicable, the FAP must 
either state the percentage(s) of gross charges the hospital facility 
applies to determine AGB (the AGB percentage(s)) and how these AGB 
percentage(s) were calculated or explain how members of the public may 
readily obtain this information in writing and free of charge.
ii. Method for Applying for Financial Assistance
    Section 501(r)(4)(A)(iii) requires a hospital facility's FAP to 
include the method for applying for financial assistance under the FAP. 
Accordingly, the proposed regulations require a hospital facility's FAP 
to describe how an individual may apply for financial assistance under 
the FAP. In addition, either the hospital facility's FAP or FAP 
application form (including accompanying instructions) must describe 
the information or documentation the hospital facility may require an 
individual to submit as part of his or her FAP application and provide 
certain contact information that an individual can use to obtain 
assistance with the FAP application process. Financial assistance may 
not be denied based on the omission of information or documentation if 
such information or documentation is not specifically required by the 
FAP or FAP application form.
iii. Actions That May Be Taken in the Event of Nonpayment
    Section 501(r)(4)(A)(iv) requires a hospital facility that does not 
have a separate billing and collections policy to describe in the FAP 
the actions the hospital facility may take in the event of nonpayment. 
The statute does not define what it means for a hospital facility to 
have a separate billing and collections policy. The Treasury Department 
and the IRS propose to define the term ``billing and collections 
policy'' as a separate written policy that describes the actions a 
hospital facility may take in the event of nonpayment in a manner that 
would be sufficient to satisfy section 501(r)(4)(A)(iv) if the hospital 
facility had chosen to include

[[Page 38152]]

the description in its FAP. The Treasury Department and the IRS also 
propose to define the term ``actions a hospital organization may take 
in the event of nonpayment'' to include any extraordinary collection 
actions described in section 501(r)(6) that a hospital organization may 
take only after making reasonable efforts to determine whether an 
individual is FAP-eligible.
    Accordingly, to implement the requirement under section 
501(r)(4)(A)(iv), the proposed regulations require either the FAP, or a 
separate written billing and collections policy, to describe the 
actions that the hospital facility (or other authorized party) may take 
related to obtaining payment of a bill for medical care provided by the 
facility, including, but not limited to, any extraordinary collection 
actions described in section 501(r)(6). Either the FAP or billing and 
collections policy must also describe the process and time frames the 
hospital facility (or other authorized party) will use in taking these 
actions, including any reasonable efforts to determine whether an 
individual is FAP-eligible described in section 501(r)(6). In addition, 
the FAP or billing and collections policy must describe the office, 
department, committee, or other body with the final authority or 
responsibility for determining that the hospital facility has made 
reasonable efforts to determine whether an individual is FAP-eligible 
and may therefore engage in extraordinary collection actions against 
the individual.
    In the case of a hospital facility that fulfills these requirements 
in a separate written billing and collections policy rather than in the 
FAP, the proposed regulations require the hospital facility's FAP to 
state that the actions the hospital facility may take in the event of 
nonpayment are described in a separate billing and collections policy 
and explain how members of the public may readily obtain a free copy of 
this separate policy both on a Web site and upon request.
iv. Widely Publicizing the FAP
    In accordance with section 501(r)(4)(A)(v), the proposed 
regulations require a FAP to include measures to widely publicize the 
FAP. One commenter asked that ``widely publicize'' be defined by 
example but that it not be defined too narrowly or prescriptively 
because hospital facilities need flexibility to address their 
particular circumstances. Other commenters recommended requiring use of 
one or a combination of the following specific measures to widely 
publicize a FAP:
     Posting information on the hospital facility's Web site;
     Distributing information at the hospital facility's 
patient access points;
     Notifying patients upon admission;
     Distributing information with discharge materials;
     Posting information conspicuously in public areas of the 
hospital facility (including admissions areas, emergency rooms, waiting 
rooms, billing offices, outpatient reception areas, etc.);
     Including information with or on billing statements;
     Mentioning the FAP when discussing an individual's bill 
over the telephone;
     Making the FAP available for public inspection and/or 
copying without charge at the hospital facility's principal, regional, 
and district offices during regular business hours;
     Publicizing the FAP to physicians and community health 
centers in the community;
     Including information regarding the FAP in hospital 
newsletters or magazines;
     Including information regarding the FAP in appropriate 
reports filed with state governments;
     Publicizing the FAP through local news media; and/or
     Publicizing the FAP through social service agencies.
    In addition, several commenters asked that hospital facilities be 
allowed to publicize a summary of the FAP instead of the FAP itself. 
According to these commenters, summaries of a FAP are often more easily 
understood by members of the public. Some commenters also asked that 
such summaries of the FAP, or the FAP itself, be translated into 
languages spoken by a significant part of the community served by the 
hospital facility.
    The proposed regulations require a FAP to include four types of 
measures that the hospital facility will take to widely publicize the 
FAP. Hospital facilities have the option of summarizing these measures 
in the FAP itself or explaining in the FAP how members of the public 
may readily obtain a free written summary of these measures.
    First, the FAP must include measures the hospital facility will 
take to make paper copies of the FAP, the FAP application form, and a 
plain language summary of the FAP available upon request and without 
charge, both for distribution in public locations in the hospital 
facility and by mail. Each of these documents must be made available in 
English and in the primary language of any populations with limited 
proficiency in English that constitute more than 10 percent of the 
residents of the community served by the hospital facility. A similar 
10 percent threshold is used in certain state laws requiring 
notification about financial assistance, as well as certain federal 
regulations requiring notices or summaries to be issued in non-English 
languages. See, for example, 26 CFR 54.9815-2719T(e)(3); 29 CFR 
2520.102-2(c)(2); 45 CFR 147.136(e)(3).
    Second, the FAP must include measures the hospital facility will 
take to inform and notify visitors to the hospital facility about the 
FAP through a conspicuous public display or other measure(s) reasonably 
calculated to attract the attention of visitors to the hospital 
facility. Such measures could include, for example, conspicuously 
posting signs and displaying brochures that provide basic information 
about the FAP in public locations in the hospital facility.
    Third, the FAP must include measures the hospital facility will 
take to inform and notify members of the community served by the 
hospital facility about the FAP in a manner reasonably calculated to 
reach those members of the community who are most likely to require 
financial assistance. Such measures could include, for example, the 
distribution of information sheets summarizing the FAP to local public 
agencies and nonprofit organizations that address the health needs of 
the community's low-income populations.
    For purposes of these proposed regulations, ``informing and 
notifying'' hospital visitors and community members about a FAP does 
not require a hospital facility to provide these individuals with the 
FAP or all of the information in the FAP. Rather, provision of a 
summary of the FAP or notification of the FAP's existence, combined 
with instructions on how to obtain more information about the FAP, will 
suffice.
    The proposed regulations also make clear that whether a measure is 
reasonably calculated to attract visitors' attention or reach members 
of the community likely to require financial assistance will depend on 
all of the facts and circumstances, including the primary languages 
spoken by the residents of the community served by the hospital 
facility and other attributes of the community and the hospital 
facility.
    Finally, the FAP must include measures the hospital facility will 
take to make the FAP, FAP application form, and a plain language 
summary of the

[[Page 38153]]

FAP widely available on the hospital facility or hospital 
organization's Web site or on a Web site established and maintained by 
another entity. The hospital facility must conspicuously post complete 
and current versions of these documents, both in English and in the 
primary language of any populations with limited proficiency in English 
that constitute more than 10 percent of the residents of the community 
served by the hospital facility.
    In addition, any individual with access to the Internet must be 
able to access, download, view, and print a hard copy of these 
documents, without requiring special computer hardware or software 
(other than software that is readily available to members of the public 
without payment of any fee) and without payment of a fee to the 
hospital facility, hospital organization, or other entity maintaining 
the Web site. Finally, the hospital facility or hospital organization 
must provide any individual who asks how to access a copy of the FAP, 
FAP application form, or plain language summary of the FAP online with 
the direct Web site address, or URL, where these documents are posted.
b. Emergency Medical Care Policy
    A number of commenters opined that the requirement under section 
501(r)(4)(B) that a hospital facility establish an emergency medical 
care policy is intended to reflect existing federal law under the 
Emergency Medical Treatment and Labor Act (EMTALA) and is not intended 
to create any new requirements other than to set forth pre-existing 
obligations under federal law in a written policy.
    To satisfy the requirements of section 501(r)(4)(B), the proposed 
regulations provide that a hospital facility must establish a written 
policy that requires the hospital facility to provide, without 
discrimination, care for emergency medical conditions (within the 
meaning of EMTALA) to individuals, regardless of whether they are FAP-
eligible. The proposed regulations further provide that an emergency 
medical care policy will generally satisfy this standard if it requires 
the hospital facility to provide the care for any emergency medical 
condition that the hospital facility is required to provide under 
Subchapter G of Chapter IV of Title 42 of the Code of Federal 
Regulations, the chapter regarding the Centers for Medicare and 
Medicaid Services' standards and certification and including the 
regulations under EMTALA.
    Any hospital policy or procedure that discourages individuals from 
seeking emergency medical care, such as demanding that emergency 
department patients pay before receiving treatment or permitting debt 
collection activities in the emergency department, may jeopardize a 
hospital facility's compliance with EMTALA and with the requirement 
under 501(r)(4)(B) to establish a nondiscriminatory emergency medical 
care policy. Accordingly, the proposed regulations provide that unless 
a hospital facility's emergency medical care policy prohibits debt 
collection activities from occurring in the emergency department or in 
other hospital venues where such activities could interfere with the 
treatment of emergency medical conditions without discrimination, the 
hospital's policy will not meet the requirements of section 
501(r)(4)(B).
c. Establishing the FAP and Other Policies
    The proposed regulations provide that a hospital organization will 
have established a FAP, a separate billing and collections policy, or 
an emergency medical care policy for a hospital facility only if an 
authorized body of the hospital organization has adopted the policy for 
the hospital facility and the hospital facility has implemented the 
policy. For these purposes, an authorized body of a hospital 
organization means: (1) The hospital organization's governing body 
(that is, the board of directors, board of trustees, or equivalent 
controlling body); (2) a committee of the governing body that is 
permitted under state law to act on behalf of the governing body; or 
(3) other parties authorized by the governing body of the hospital 
organization to act on its behalf (such as, for example, one or more 
executives of the hospital facility), to the extent permitted under 
state law. In the case of a hospital facility (operated by a hospital 
organization) that is recognized as an entity under state law but is a 
disregarded entity for federal tax purposes, an authorized body of the 
hospital organization may also include the governing body of that 
hospital facility or a committee of, or other parties authorized by, 
that governing body, as permitted under state law.
    A hospital facility has implemented a policy if it has consistently 
carried out the policy.
    One commenter asked whether, for purposes of complying with section 
501(r)(4), a policy established for a system of multiple hospital 
facilities will qualify as a policy for each hospital facility in the 
system. The proposed regulations provide that, while a hospital 
organization operating multiple hospital facilities must separately 
establish a FAP and emergency medical care policy for each hospital 
facility it operates, such policies may contain the same operative 
terms. The proposed regulations do note, however, that different AGB 
percentages and methods of determining AGB and the unique attributes of 
a hospital facility or the community it serves could necessitate that 
hospital facilities include in their FAPs (or otherwise make available) 
different information about AGB or different measures to widely 
publicize the FAP. For example, if a hospital organization operates two 
hospital facilities, only the first of which serves a community that 
includes a population with limited proficiency in English that 
constitutes more than 10 percent of the community's residents, only the 
first hospital facility must include in its FAP (or otherwise make 
available a summary of) measures to widely publicize the FAP in a 
language other than English.

5. Limitation on Charges

    The proposed regulations provide that a hospital organization meets 
the requirements of section 501(r)(5) with respect to a hospital 
facility it operates if the hospital facility limits the amount charged 
for any emergency or other medically necessary care it provides to a 
FAP-eligible individual to not more than the amounts generally billed 
to individuals with insurance covering that care (AGB). The proposed 
regulations also require a hospital facility to limit the amount 
charged for any medical care it provides to a FAP-eligible individual 
to less than the gross charges for that care.
a. Amounts Generally Billed
    In discussing methods to determine AGB, numerous commenters pointed 
to the Joint Committee on Taxation's (JCT) statement in the Technical 
Explanation of the Affordable Care Act that ``[i]t is intended that 
amounts billed to those who qualify for financial assistance may be 
based on either the best, or an average of the three best, negotiated 
commercial rates, or Medicare rates.'' Staff of the Joint Committee on 
Taxation, Technical Explanation of the Revenue Provisions of the 
``Reconciliation Act of 2010,'' as Amended, in Combination with the 
``Patient Protection and Affordable Care Act'' (March 21, 2010), at 82 
(Technical Explanation). A few commenters recommended requiring 
hospital facilities to use Medicare rates in determining AGB, while at 
least one commenter requested that hospital facilities not be required 
to use Medicare rates. Numerous commenters asked that hospital 
facilities be

[[Page 38154]]

permitted to determine AGB by applying an average percentage of gross 
charges that commercial insurers and the patients they cover are, 
together, expected to pay.
    A number of commenters recommended that AGB should be determined at 
least annually, and a few commenters asked that AGB be calculated based 
on past claims paid by commercial insurers, such as claims paid over 
the last six months or over the prior year. In addition, several 
commenters asked that hospital facilities be permitted to make separate 
AGB determinations for inpatient and outpatient services.
    The proposed regulations provide two methods for hospital 
facilities to use to determine AGB. The first method is a ``look-back'' 
method based on actual past claims paid to the hospital facility by 
either Medicare fee-for-service only or Medicare fee-for-service 
together with all private health insurers paying claims to the hospital 
facility (including, in each case, any associated portions of these 
claims paid by Medicare beneficiaries or insured individuals).
    The Treasury Department and the IRS believe that the three ``best'' 
commercial rates may be difficult to determine because different 
commercial insurers may negotiate the lowest rates for different items 
and services. Basing AGB on the claims paid by all private health 
insurers and Medicare avoids this difficulty by eliminating the need to 
determine which private health insurers have the lowest rates. Although 
such an approach allows a hospital facility to include the higher rates 
paid by health insurers that are not the lowest (or three lowest), it 
also requires the hospital facility to include the rates paid by 
Medicare. In addition, basing AGB on the claims paid by all private 
health insurers and Medicare is arguably more consistent with the 
statutory phrase ``amounts generally billed to individuals who have 
insurance'' than basing AGB only on claims paid by those private health 
insurers with the lowest, or three lowest, rates. However, the Treasury 
Department and the IRS request comments regarding whether hospital 
facilities should also have the option of basing AGB on claims paid by 
the private health insurer with the lowest rate or by the three private 
health insurers with the three lowest rates, and how the lowest rate(s) 
should be determined. The Treasury Department and the IRS also request 
comments regarding whether hospital facilities should have the option 
of basing AGB on claims paid by all private health insurers paying 
claims to the hospital facility, without also including claims paid by 
Medicare.
    The second method for determining AGB is ``prospective,'' in that 
it requires the hospital facility to estimate the amount it would be 
paid by Medicare and a Medicare beneficiary for the emergency or other 
medically necessary care at issue if the FAP-eligible individual were a 
Medicare fee-for-service beneficiary. This prospective method is based 
only on Medicare because the Treasury Department and the IRS expect 
that such a method is only administrable if based on a single insurer's 
billing and coding processes. The Treasury Department and the IRS 
request comments regarding whether a hospital facility should also have 
the option of determining AGB prospectively by estimating the amount 
the facility would charge the insured individual and the private health 
insurer with the lowest rate (or the insured individuals and three 
private health insurers with the three lowest rates).
    These two methods of determining AGB are mutually exclusive, and a 
hospital facility may use only one method to determine AGB. After 
choosing a particular method, a hospital facility must continue to use 
that method. The Treasury Department and the IRS request comments on 
whether a hospital facility should be allowed to change its method of 
calculating AGB under certain circumstances or following a certain 
period of time and, if so, under what circumstances or how frequently.
    Several commenters asked whether Medicare Advantage should be 
included in the determination of AGB. The proposed regulations clarify 
that for purposes of determining AGB, amounts paid under ``Medicare'' 
only include amounts paid under ``Medicare fee-for-service,'' which is 
defined as including only Medicare Part A and Part B and excluding 
Medicare Advantage (or Medicare Part C). For purposes of the proposed 
regulations, claims paid under Medicare Advantage are treated as claims 
paid by a private health insurer.
    Finally, a number of commenters recommended that in states that 
require specific discounts or otherwise control the amount that may be 
billed to patients with financial need, those requirements should 
establish AGB. Given the wide variation among state laws and the 
advantage of uniformity in applying the federal rules, the Treasury 
Department and the IRS are proposing to adopt a single federal 
regulatory definition of AGB.
i. Look-Back Method
    Under the look-back method for determining AGB, a hospital facility 
must determine AGB for any emergency or other medically necessary care 
provided to a FAP-eligible individual by multiplying the gross charges 
for that care by one or more percentages of gross charges, called AGB 
percentages. The hospital facility must calculate its AGB percentage(s) 
no less frequently than annually by dividing the sum of certain claims 
paid to the hospital facility by the sum of the associated gross 
charges for those claims. More specifically, these AGB percentages must 
be based on all claims that have been paid in full to the hospital 
facility for emergency and other medically necessary care by either 
Medicare fee-for-service alone or by Medicare fee-for-service and all 
private health insurers together as the primary payer(s) of these 
claims during a prior 12-month period. For these purposes, a hospital 
facility may include in ``all claims that have been paid in full'' both 
the portions of the claims paid by Medicare or the private insurer and 
the associated portions of the claims paid by Medicare beneficiaries or 
insured individuals in the form of co-insurance, copayments, or 
deductibles. A hospital facility must begin applying its AGB 
percentage(s) by the 45th day after the end of the 12-month period the 
hospital facility used in calculating the AGB percentage(s).
    The Treasury Department and the IRS request comments regarding this 
look-back method generally, and regarding three aspects of this method 
in particular. First, comments are requested regarding whether a 
hospital facility using the look-back method should have the option to 
base its AGB percentage(s) on a representative sample of claims (rather 
than all claims) that have been paid in full over a prior 12-month 
period. Specifically, comments should address how a hospital facility 
would ensure that such samples are representative and reliable. Second, 
comments are requested regarding whether a hospital facility needs more 
than 45 days between the end of the 12-month period used in calculating 
the AGB percentage(s) and the date it must begin applying the AGB 
percentage(s). Third, comments are requested regarding whether hospital 
facilities might significantly increase their gross charges after 
calculating one or more AGB percentages and whether such an increase 
could mean that determining AGB by multiplying current gross charges by 
an AGB percentage will result in charges that exceed the amounts that 
are in fact generally billed

[[Page 38155]]

to those with insurance at the time of the charges. If so, comments are 
requested regarding whether safeguards should be implemented to offset 
increases in gross charges after the calculation of the AGB 
percentage(s), including, for example, requiring AGB to be determined 
by applying an AGB percentage not to current gross charges but rather 
to current gross charges reduced by any percentage increases in gross 
charges since the AGB percentage was last calculated.
    As previously noted, numerous commenters asked that hospital 
facilities be permitted to determine AGB by applying one average 
percentage of gross charges. The proposed regulations provide that a 
hospital facility using the look-back method may calculate one average 
AGB percentage for all emergency and other medically necessary care 
provided by the hospital facility. Alternatively, a hospital facility 
may calculate multiple AGB percentages for separate categories of care 
(such as inpatient and outpatient care or care provided by different 
departments) or for separate items or services, as long as the hospital 
facility calculates AGB percentages for all emergency and other 
medically necessary care provided by the hospital facility.
ii. Prospective Medicare Method
    Under the prospective Medicare method, a hospital facility may 
determine AGB for any emergency or other medically necessary care that 
the hospital facility provides to a FAP-eligible individual by using 
the same billing and coding process the hospital facility would use if 
the individual were a Medicare fee-for-service beneficiary. The 
hospital facility may then set AGB for that care at the amount the 
hospital facility determines would be the amount Medicare and the 
Medicare beneficiary together would be expected to pay for the care.
b. Gross Charges
    Section 501(r)(5)(B) prohibits the use of gross charges. The 
proposed regulations define a gross charge (also known as the 
``chargemaster rate'') as a hospital facility's full, established price 
for medical care that the hospital facility consistently and uniformly 
charges all patients before applying any contractual allowances, 
discounts, or deductions.
    A number of commenters recommended that section 501(r)(5)(B)'s 
prohibition on gross charges should apply only to FAP-eligible 
individuals, noting that such an interpretation is consistent with the 
JCT's statement in the Technical Explanation that ``[a] hospital 
facility may not use gross charges * * * when billing individuals who 
qualify for financial assistance.'' Technical Explanation, at 82. The 
proposed regulations adopt this recommendation. The proposed 
regulations also clarify that the prohibition on the use of gross 
charges applies to any medical care, not just emergency and medically 
necessary care, provided to a FAP-eligible individual.
    Numerous commenters requested that hospital facilities not be 
prohibited from including the amount of gross charges on a hospital 
bill as an explanatory item or a starting point for itemizing certain 
discounts. Commenters stated that this practice is standard in the 
healthcare industry and should not be affected by section 501(r)(5)(B). 
The proposed regulations make clear that including the gross charges on 
hospital bills as the starting point to which various contractual 
allowances, discounts, or deductions are applied is permissible, as 
long as the gross charges are not the actual amount a FAP-eligible 
individual is expected to pay.
c. Safe Harbor for Certain Charges in Excess of AGB
    A number of commenters noted that if an individual has yet to 
submit a FAP application, a hospital facility will not know at the time 
of initial and subsequent billing whether the individual is FAP-
eligible. The proposed regulations provide that whether an individual 
is FAP-eligible is determined without regard to whether the individual 
has applied for assistance under a hospital facility's FAP. However, 
the proposed regulations also provide a safe harbor under which a 
hospital facility will not violate section 501(r)(5) if it charges more 
than AGB for emergency or other medically necessary care, or charges 
gross charges for any medical care, to a FAP-eligible individual who 
has not submitted a complete FAP application as of the time of the 
charge, as long as the hospital facility made and continues to make 
reasonable efforts to determine whether the individual is FAP-eligible 
(within the meaning of and during the periods required under section 
501(r)(6), including by correcting the amount charged if the individual 
is subsequently found to be FAP-eligible). The Treasury Department and 
IRS request comments regarding the proposed safe harbor and whether the 
patient protections provided in section 1.501(r)-6, including the 
requirements that a hospital facility refund amounts overcharged and 
seek to reverse previously taken ECAs (except sales of debts) once an 
individual has been determined to be FAP-eligible, are sufficient.

6. Billing and Collection

    The proposed regulations provide that a hospital organization meets 
the requirements of section 501(r)(6) with respect to a hospital 
facility it operates if the hospital facility does not engage in ECAs 
against an individual before making reasonable efforts to determine 
whether the individual is FAP-eligible. For these purposes, a hospital 
facility will be considered to have engaged in ECAs against an 
individual if the hospital facility engages in ECAs against any other 
individual who has accepted or is required to accept responsibility for 
the first individual's hospital bills. In addition, a hospital facility 
will be considered to have engaged in an ECA against an individual if 
any purchaser of the individual's debt or any debt collection agency or 
other party to which the hospital facility has referred the 
individual's debt has engaged in an ECA against the individual.
a. Extraordinary Collection Actions
    In discussing the scope of the term ``extraordinary collection 
actions'' (ECAs), many commenters pointed to the JCT's statement in the 
Technical Explanation that ``extraordinary collections include 
lawsuits, liens on residences, arrests, body attachments, or other 
similar collection processes.'' Technical Explanation, at 82. A number 
of these commenters argued that ECAs should be limited to the examples 
listed in the Technical Explanation, with the term ``other similar 
collection processes'' being limited to actions that must be initiated 
through a legal or judicial process.
    Other commenters recommended that additional actions related to 
collections should constitute ECAs or even be prohibited altogether, 
including such actions as deferring or denying care based on a pattern 
of nonpayment, selling patient debts to third parties, referring debts 
to debt collection agencies, charging interest on patient debts, and 
any other action beyond sending a patient a bill. A number of 
commenters also recommended that reporting to credit agencies should 
constitute ECAs and pointed to the statement in the Technical 
Explanation that reasonable efforts include certain actions before 
``reporting to credit rating agencies is initiated.'' Technical 
Explanation, at 82. In addition, several commenters suggested that the 
express approval of a hospital organization's governing body should be 
required before a hospital facility it operates is permitted to engage 
in such actions as

[[Page 38156]]

wage garnishment, freezing bank accounts, or placing liens on patients' 
homes or cars.
    The proposed regulations state that ECAs include any actions taken 
by a hospital facility against an individual related to obtaining 
payment of a bill for care covered under the hospital facility's FAP 
that require a legal or judicial process. ECAs that require a legal or 
judicial process include, but are not limited to, actions to--
     Place a lien on an individual's property;
     Foreclose on an individual's real property;
     Attach or seize an individual's bank account or any other 
personal property;
     Commence a civil action against an individual;
     Cause an individual's arrest;
     Cause an individual to be subject to a writ of body 
attachment; and
     Garnish an individual's wages.
    In addition, the Treasury Department and the IRS understand that 
the reporting of adverse information about an individual to consumer 
credit reporting agencies or credit bureaus is a part of the process of 
obtaining payment of a hospital bill that can cause significant 
financial harm to an individual for many years. Reporting to credit 
agencies is also an activity that is restricted in some state laws 
governing debt collection by hospitals. The proposed regulations 
provide that ECAs include reporting to credit agencies.
    The final action listed in the proposed regulations as an ECA is 
the sale of an individual's debt to another party. A number of 
commenters suggested that the proposed regulations prohibit the sale of 
debt altogether. Such a prohibition is contained in at least one state 
law governing debt collection by hospitals. The proposed regulations 
provide that the sale of debt is an ECA because the Treasury Department 
and the IRS understand that after a hospital facility has sold a debt, 
it may have a more limited ability to control the purchaser's actions 
to collect the debt. By contrast, when a hospital facility refers an 
individual's debt to a debt collection agent or other party without 
selling the debt (for example, by entering into a contract under which 
the other party conducts all of the facility's billing and collections 
activities pursuant to the hospital facility's billing and collections 
policy), a hospital facility can presumably maintain greater control 
over its third party agent. As a result, the proposed regulations do 
not define ECAs to include referring an individual's debt without 
selling it. The Treasury Department and the IRS request comments 
regarding whether a hospital facility can maintain sufficient control 
over the collection actions of parties to which it refers or sells debt 
and whether either referring debt or selling debt (or both) should 
constitute ECAs.
    The proposed regulations do not define ECAs to include deferring or 
denying care based on a pattern of nonpayment, requiring deposits 
before providing care, or charging interest, although policies allowing 
certain of these actions may not satisfy the emergency medical care 
policy provision noted in section 4.b of this preamble. In addition, 
the Treasury Department and the IRS understand that some state laws 
restrict the degree to which hospitals can engage in these activities 
and request additional comments on whether such activities should 
constitute ECAs.
    The proposed regulations also do not require a hospital facility to 
obtain governing body approval before engaging in ECAs. Comments are 
requested regarding what additional procedural protections, if any, may 
be appropriate as a part of the reasonable efforts to determine FAP-
eligibility that a hospital facility must make before engaging in ECAs, 
discussed in the immediately following section 6.b of this preamble.
b. Reasonable Efforts
    In discussing the scope of the term ``reasonable efforts,'' many 
commenters pointed to the JCT's statement in the Technical Explanation 
that reasonable efforts were intended to include ``notification by the 
hospital of its FAP upon admission and in written and oral 
communications with the patient regarding the patient's bill, including 
invoices and telephone calls.'' Technical Explanation, at 82. A few 
commenters recommended that providing one written summary of a FAP in 
at least one invoice mailed or otherwise provided to an individual 
following the provision of hospital services and prior to referring the 
account to a collection agency should be deemed to constitute 
``reasonable efforts'' to determine the individual's FAP-eligibility. 
Other commenters recommended that a hospital facility be required to 
provide at least three notices about the FAP (as well as contact 
information to request additional information) and wait at least 120 
days from the first notice or billing statement before engaging in 
ECAs. One commenter noted that hospitals have traditionally handled 
their receivables internally and then turned them over to collections 
agencies after 120 days. Several commenters suggested that individuals 
be given more than 120 days, such as one year, to apply for financial 
assistance.
    The proposed regulations provide that, with respect to any care 
provided by a hospital facility to an individual, the hospital facility 
will have made reasonable efforts to determine whether the individual 
is FAP-eligible if the hospital facility: (1) Notifies the individual 
about the FAP; (2) in the case of an individual who submits an 
incomplete FAP application, provides the individual with information 
relevant to completing the FAP application; and (3) in the case of an 
individual who submits a complete FAP application, makes and documents 
a determination as to whether the individual is FAP-eligible (and meets 
certain other specified requirements described later in this preamble).
    For purposes of meeting these requirements, the proposed 
regulations describe both a ``notification period'' and an 
``application period.'' The notification period is the period during 
which the hospital facility must notify an individual about the FAP. 
Under the proposed regulations, this period begins on the date care is 
provided to the individual and ends on the 120th day after the hospital 
facility provides the individual with the first billing statement for 
the care. If a hospital facility has met all of the notification 
requirements and the individual has failed to submit a FAP application 
by the end of the notification period, the hospital facility may engage 
in ECAs against the individual. However, a hospital facility must 
accept and process FAP applications submitted by an individual during a 
longer ``application period'' that ends on the 240th day after the 
hospital facility provides the individual with the first billing 
statement for the care. The Treasury Department and the IRS have 
proposed including both a shorter notification period and a longer 
application period as a way of balancing the individual's need for 
sufficient time to seek financial assistance with the hospital 
facility's interest in efficiently carrying out its billing processes. 
The Treasury Department and the IRS request comments regarding other 
possible ways to achieve this balance.
    The Treasury Department and the IRS are proposing a notification 
period of 120 days from the first billing statement because a few 
commenters suggested that hospital billing cycles are typically 45 days 
and the Treasury Department and the IRS intend that individuals will 
receive notice about the FAP with at least three billing statements and 
then have at least 30 days after the third

[[Page 38157]]

billing statement to apply for financial assistance before ECAs are 
initiated. In addition, a 120-day notification period was selected 
because hospitals are used to dealing with a 120-day period in the 
context of deeming debts to be bad debts under the Medicare program and 
because such a period is consistent with some state requirements or 
recommendations to wait 120 days before taking such collection actions 
as commencing lawsuits, reporting to credit agencies, or referring to 
collection agencies. Similarly, a 240-day period to apply for financial 
assistance is roughly in the middle of the range of application periods 
required under various state laws and recommended by some commenters. 
The Treasury Department and the IRS request comments regarding the 
proposed lengths of the notification period and the application period 
and/or whether it would be preferable to have only one concurrent 
period.
    Finally, the Treasury Department and the IRS recognize that some 
inpatients staying at a hospital facility for a prolonged period of 
time may start receiving billing statements in the mail before being 
discharged. Comments are requested regarding whether the notification 
and application periods for such inpatients should start on a date 
later than the date of the first billing statement (such as the date of 
discharge) and on the feasibility of this and other approaches to 
addressing this issue.
i. Notification About the FAP
    To satisfy the notification component of ``reasonable efforts'' 
with respect to any care provided to an individual, the proposed 
regulations require a hospital facility to distribute a plain language 
summary of the FAP, and offer a FAP application form, to the individual 
before discharge from the hospital facility. A hospital facility must 
also include a plain language summary of the FAP with all (and at least 
three) billing statements for the care and all other written 
communications regarding the bill provided to the individual during the 
notification period. In addition, the hospital facility must inform the 
individual about the FAP in all oral communications regarding the 
amount due for the care that occur during the notification period. 
Finally, the hospital facility must provide the individual with at 
least one written notice that informs the individual about the ECAs the 
hospital facility (or other authorized party) may take if the 
individual does not submit a FAP application or pay the amount due by a 
date (specified in the notice) that is no earlier than the last day of 
the notification period. The hospital facility must provide this 
written notice at least 30 days before the deadline specified in the 
notice.
    The proposed regulations define a ``plain language summary'' of the 
FAP as a written statement that notifies an individual that the 
hospital facility offers financial assistance under a FAP and also 
includes the following items of information in language that is clear, 
concise, and easy to understand:
     A brief description of the eligibility requirements and 
assistance offered under the FAP;
     The direct Web site address, or URL, and physical 
location(s) where the individual can obtain copies of the FAP and FAP 
application form;
     Instructions on how the individual can obtain a free copy 
of the FAP and FAP application form by mail;
     The contact information of hospital facility staff who can 
provide the individual with information about the FAP and the FAP 
application process, as well as of any nonprofit organizations or 
government agencies the hospital facility has identified as capable and 
available sources of assistance with FAP applications;
     A statement of the availability of translations of the 
FAP, FAP application form, and plain language summary in other 
languages, if applicable; and
     A statement that no FAP-eligible individual will be 
charged more for emergency or other medically necessary care than AGB.
    The proposed regulations provide that if an individual submits a 
complete or incomplete FAP application to a hospital facility during 
the application period, the hospital facility will be deemed to have 
met the notification requirements with respect to the individual as of 
the time the FAP application is submitted. Thus, once a hospital 
facility receives a FAP application from an individual, the hospital 
facility no longer needs to continue notifying that individual about 
the FAP. However, the submission of a FAP application form during the 
application period triggers other requirements that the hospital 
facility must satisfy to have made reasonable efforts to determine 
whether the individual is FAP-eligible, which are discussed in the 
immediately following sections 6.b.ii and 6.b.iii of this preamble.
    Many commenters noted that even when a hospital facility makes 
reasonable efforts to notify an individual about its FAP and FAP 
application process, some individuals will decline to apply for 
financial assistance under the FAP, leaving the hospital facility 
without the information it needs to determine FAP-eligibility. These 
commenters asked that a hospital facility not be foreclosed from 
initiating ECAs when it makes reasonable efforts to notify an 
individual about its FAP and the individual does not respond.
    The Treasury Department and the IRS recognize that some FAP-
eligible individuals will not submit a FAP application, notwithstanding 
a hospital facility's efforts to notify individuals about its FAP. As a 
result, the proposed regulations provide that, with respect to any care 
provided to an individual, a hospital facility has made reasonable 
efforts to determine whether the individual is FAP-eligible if the 
hospital facility meets, and documents that it met, the notification 
component of reasonable efforts and the individual does not submit a 
FAP application by the end of the notification period (or, if later, 
the deadline specified by the hospital facility). Once the hospital 
facility has made reasonable efforts to determine whether an individual 
is FAP-eligible as a result of notifying the individual during the 120-
day notification period, it may engage in one or more ECAs against the 
individual. However, even after a hospital facility is permitted to 
engage in ECAs against an individual, it must still process FAP 
applications submitted before the end of the application period in 
order to have made reasonable efforts to determine whether the 
individual is FAP-eligible, as described in the immediately following 
sections 6.b.ii and 6.b.iii of this preamble.
ii. Incomplete FAP Applications
    The proposed regulations provide that if an individual submits an 
incomplete FAP application during the application period, a hospital 
facility will have made reasonable efforts to determine whether the 
individual is FAP-eligible only if it takes three steps. First, if 
applicable, the hospital facility must suspend any ECAs against the 
individual (meaning it does not initiate any new ECAs or take further 
action with respect to previously-initiated ECAs). Second, the hospital 
facility must provide the individual with a written notice that 
describes the additional information and/or documentation the 
individual must submit to complete his or her FAP application and 
include a plain language summary of the FAP with the written notice. 
Third, the hospital facility must provide the individual with at least 
one written notice that informs the individual about the ECAs that the 
hospital facility or other authorized party may initiate or resume if 
the individual does not complete the

[[Page 38158]]

application or pay the amount due by a completion deadline (specified 
in the notice) that is no earlier than the later of 30 days from the 
date of the written notice or the last day of the application period. 
The hospital facility must provide this written notice regarding ECAs 
at least 30 days before the completion deadline.
    If a hospital facility provides this required information and 
suspends any ECAs against the individual, and the individual fails to 
complete the FAP application by the completion deadline, the hospital 
facility will have made reasonable efforts to determine whether the 
individual is FAP-eligible and thus may initiate or resume ECAs against 
the individual.
    If the individual completes the FAP application by the completion 
deadline, the proposed regulations provide that the individual will be 
considered to have submitted a complete FAP application during the 
application period, and thus the requirements for complete FAP 
applications, discussed in the immediately following section 6.b.iii of 
this preamble, apply.
    The Treasury Department and IRS request comments on ways to 
encourage timely completion of incomplete applications so that hospital 
facilities may determine whether individuals are FAP-eligible while 
still providing individuals with sufficient time to apply for financial 
assistance.
iii. Complete FAP Applications
    The proposed regulations provide that if a hospital facility 
receives a complete FAP application from an individual during the 
application period, the hospital facility will have made reasonable 
efforts to determine whether the individual is FAP-eligible only if it 
suspends any ECAs against the individual, makes and documents an 
eligibility determination in a timely manner, and notifies the 
individual in writing of the determination and the basis for the 
determination. In addition, if the hospital facility has determined 
that the individual is FAP-eligible, the hospital facility must take 
three additional steps in a timely manner. First, it must provide the 
individual with a billing statement that indicates the amount the 
individual owes as a FAP-eligible individual. This billing statement 
must also show--or describe how the individual can get information 
regarding--the AGB for the care provided and how the hospital facility 
determined the amount the individual owes as a FAP-eligible individual. 
Second, the hospital facility must refund any excess payments made by 
the individual. Third, the hospital facility must take all reasonably 
available measures to reverse any ECA (with the exception of a sale of 
debt) taken against the individual to collect the debt at issue. 
Accordingly, the hospital facility generally must take measures to 
vacate any judgment against the individual, lift any liens or levies on 
the individual's property, and remove from the individual's credit 
report any adverse information reported to a consumer reporting agency 
or credit bureau.
    The Treasury Department and the IRS request comments regarding the 
feasibility of reversing various ECAs when the hospital facility 
determines that an individual is FAP-eligible, including in 
circumstances in which an individual's debt has been referred or sold 
to another party.
    As a general matter, once a hospital facility has taken all of the 
required steps after receiving a complete FAP application, it has made 
reasonable efforts to determine whether the individual is FAP-eligible 
and thus may initiate or resume ECAs against the individual. However, 
the proposed regulations also contain an anti-abuse rule that provides 
that a hospital facility will not have made reasonable efforts to 
determine whether an individual is FAP-eligible if the hospital 
facility bases a determination that the individual is not FAP-eligible 
on information the hospital facility has reason to believe is 
unreliable or incorrect or on information obtained from the individual 
under duress or through the use of coercive practices.
    In addition, the proposed regulations provide that a hospital 
facility has made reasonable efforts to determine whether an individual 
is FAP-eligible if it determines that the individual is eligible for 
the most generous assistance available under its FAP based on 
information other than that provided by the individual as part of a 
complete FAP application. For example, a hospital facility could make 
reasonable efforts by determining that an individual is eligible for 
the most generous assistance offered under its FAP based on information 
establishing that the individual is eligible for assistance under one 
or more means-tested public programs.
    The Treasury Department and the IRS seek comments on how to provide 
additional flexibility under the regulations to hospital facilities 
seeking to determine whether an individual is FAP-eligible so that the 
procedural protections provided under section 501(r)(6) are respected 
but do not unnecessarily interfere with a hospital facility's 
reasonable financial management. Comments are requested on how a 
hospital facility might reasonably determine whether an individual is 
FAP-eligible in ways other than soliciting and processing FAP 
applications.
    Specifically, the Treasury Department and the IRS understand that 
many individuals who are not FAP-eligible (for example, because they 
are relatively affluent and/or have adequate insurance coverage) will 
never submit a complete FAP application. A hospital facility may wish 
to make a FAP-eligibility determination based on reliable information 
early in the billing cycle in order to avoid unwarranted interference 
with its routine billing practices and to avoid the administrative 
burdens of notifying these non-FAP-eligible individuals about the FAP 
and tracking each individual's notification and application periods. 
The Treasury Department and the IRS request comments regarding whether, 
and under what circumstances, a hospital facility should be permitted 
to use reliable information, other than that provided by an individual 
with a complete FAP application, to make a determination that the 
individual is not FAP-eligible or is eligible for assistance that is 
less than the most generous assistance offered under the FAP. Comments 
are also requested regarding whether a hospital facility might be able 
to rely on prior FAP-eligibility determinations for a period of time to 
avoid having to re-determine whether an individual is FAP-eligible 
every time he or she receives care. The Treasury Department and the IRS 
request comments regarding what sources of information can reliably and 
accurately be used to determine FAP-eligibility and whether hospital 
facilities should therefore have the flexibility to use such sources of 
information rather than being limited to making determinations based 
only on complete FAP applications.
iv. Agreements With Other Parties
    The proposed regulations provide that if a hospital facility refers 
or sells an individual's debt to another party during the application 
period, the hospital facility will have made reasonable efforts to 
determine whether the individual is FAP-eligible only if it first 
obtains (and, to the extent applicable, enforces) a legally binding 
written agreement from the other party to abide by certain 
requirements. First, a party to which the individual's debt is referred 
during the notification period must agree to refrain from engaging in 
ECAs against the individual until the hospital facility has made 
reasonable

[[Page 38159]]

efforts to determine whether the individual is FAP-eligible.
    Second, if the individual submits a FAP application during the 
application period, the party must suspend any ECAs against the 
individual until the hospital facility has made reasonable efforts to 
determine whether the individual is FAP-eligible.
    Third, if the individual submits a FAP application during the 
application period and the hospital facility determines that the 
individual is FAP-eligible, the party must adhere to procedures 
specified in the agreement that ensure that the FAP-eligible individual 
does not pay, and will have no obligation to pay, the party and 
hospital facility together more than he or she is required to pay as a 
FAP-eligible individual. If the party, rather than the hospital 
facility, has the authority to do so, the party must also take all 
reasonably available measures to reverse any ECA (with the exception of 
a sale of debt) taken against the individual to collect the debt at 
issue.
    Fourth, if the party refers or sells the debt to yet another party 
during the application period, the party must obtain a written 
agreement from the other party to abide by the three previously-
mentioned requirements.
    The Treasury Department and the IRS request comments regarding the 
feasibility of a hospital facility imposing these requirements on the 
parties to which it sells or refers debt by means of a written 
agreement. In particular, comments are requested regarding how the 
regulations should balance the need to ensure that hospital facilities 
satisfy the requirements of section 501(r)(6) with the goal of avoiding 
unnecessary disruptions and inefficiencies in their billing processes.
v. Miscellaneous Issues
    In order to ensure that individuals have sufficient opportunity to 
consider whether they might be eligible for assistance under the 
hospital facility's FAP, the proposed regulations also provide that a 
hospital facility will not have made reasonable efforts to determine 
whether an individual is FAP-eligible simply because it obtains a 
signed waiver from the individual. Thus, a signed statement that the 
individual does not wish to apply for assistance under the FAP or to 
receive certain notifications about the FAP will not constitute a 
determination of FAP-eligibility or satisfy the requirement to make 
reasonable efforts to determine FAP-eligibility before engaging in ECAs 
against the individual.
    Finally, the proposed regulations provide that a hospital facility 
may print any written notice or communication described in this section 
6 of the preamble, including any plain language summary of the FAP, on 
a billing statement or along with other descriptive or explanatory 
matter, as long as the required information is conspicuously placed and 
of sufficient size to be clearly readable.

Effective/Applicability Dates

    Consistent with the statutory effective date, the proposed 
regulations provide that, except for the requirements of section 
501(r)(3), section 501(r) applies to taxable years beginning after 
March 23, 2010. The requirements of section 501(r)(3) apply to taxable 
years beginning after March 23, 2012.
    The regulations under section 501(r)(4) through 501(r)(6) are 
proposed to apply for taxable years beginning on or after the date 
these rules are published in the Federal Register as final or temporary 
regulations. Taxpayers may rely on these proposed regulations until 
final or temporary regulations are issued. The Treasury Department and 
the IRS invite comments on whether, and what type of, transitional 
relief may be necessary.

Availability of IRS Documents

    IRS notices, revenue rulings, and revenue procedures cited in this 
preamble are made available by the Superintendent of Documents, U.S. 
Government Printing Office, Washington, DC 20402.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to this proposed regulation. It is hereby certified that 
these regulations will not have a significant economic impact on a 
substantial number of small entities. This certification is based on 
the fact that the regulations are consistent with the requirements 
imposed by statute and that the collection of information in the 
regulation that is subject to the Regulatory Flexibility Act will 
impose a minimal burden upon the affected organizations. Consistent 
with the statute, the regulations require hospital facilities to 
establish two written policies--a financial assistance policy (FAP) and 
an emergency medical care policy--but much of the work involved in 
putting such policies into writing need only be performed once. 
Moreover, while hospital facilities may need to periodically modify 
these policies to reflect changed circumstances, the proposed 
regulations attempt to minimize that ongoing burden by giving hospital 
facilities the option of providing certain information separately from 
the policy, as long as the policy explains how members of the public 
can readily obtain this information free of charge. In addition, as a 
general matter, the regulations describing how a hospital facility 
makes reasonable efforts to determine eligibility for assistance under 
its FAP and widely publicizes its FAP are designed to ensure that a 
hospital facility can meet these requirements by providing basic 
information about its FAP using pre-existing processes (such as the 
issuance of billing statements) and resources (such as its Web site and 
physician networks) in providing this information. Thus, the collection 
of information in this regulation that is subject to the Regulatory 
Flexibility Act will not impose a significant economic burden upon the 
affected organizations. Accordingly, a Regulatory Flexibility Analysis 
under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not 
required. Pursuant to section 7805(f) of the Code, this regulation has 
been submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small entities.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ``Addresses'' 
heading. The Treasury Department and the IRS request comments on all 
aspects of the proposed rules. All comments will be available at 
www.regulations.gov or upon request.
    A public hearing will be scheduled if requested in writing by any 
person that timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

    The principal authors of these proposed regulations are Preston J. 
Quesenberry and Amber L. Mackenzie, Office of the Chief Counsel (Tax-
Exempt and Government Entities). However, other personnel from the 
Treasury Department and the IRS participated in their development.

[[Page 38160]]

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.501(r)-0 is added to read as follows:

Sec.  1.501(r)-0  Outline of regulations.

    This section lists the table of contents for Sec. Sec.  1.501(r)-1 
through 1.501(r)-7.

Sec.  1.501(r)-1 Definitions

    (a) Application.
    (b) Definitions.
    (1) Amounts generally billed (AGB).
    (2) AGB percentage.
    (3) Application period.
    (4) Billing and collections policy.
    (5) Completion deadline.
    (6) Disregarded entity.
    (7) Emergency medical care.
    (8) Emergency medical conditions.
    (9) Extraordinary collection action (ECA).
    (10) Financial assistance policy (FAP).
    (11) FAP application.
    (12) FAP application form.
    (13) FAP-eligible individual.
    (14) Gross charges.
    (15) Hospital facility.
    (16) Hospital organization.
    (17) Medicare fee-for-service.
    (18) Notification period.
    (19) Plain language summary.
    (20) Primary payer.
    (21) Private health insurer.
    (22) Referring.

Sec.  1.501(r)-2 Failures to satisfy section 501(r) requirements. 
[Reserved]

Sec.  1.501(r)-3 Community health needs assessments. [Reserved]

Sec.  1.501(r)-4 Financial assistance policy and emergency medical 
care policy.

    (a) In general.
    (b) Financial assistance policy.
    (1) In general.
    (2) Eligibility criteria and basis for calculating amounts 
charged to patients.
    (3) Method for applying for financial assistance.
    (4) Actions that may be taken in the event of nonpayment.
    (5) Widely publicizing the FAP.
    (6) Readily obtainable information.
    (c) Emergency medical care policy.
    (1) In general.
    (2) Interference with provision of emergency medical care.
    (3) Relation to federal law governing emergency care.
    (4) Examples.
    (d) Establishing the FAP and other policies.
    (1) In general.
    (2) Authorized body.
    (3) Implementing a policy.
    (4) Establishing a policy for more than one hospital facility.

Sec.  1.501(r)-5 Limitation on charges.

    (a) In general.
    (b) Amounts generally billed.
    (1) Look-back method.
    (2) Prospective Medicare method.
    (3) Examples.
    (c) Gross charges.
    (d) Safe harbor for certain charges in excess of AGB.

Sec.  1.501(r)-6 Billing and collection.

    (a) In general.
    (b) Extraordinary collection actions.
    (c) Reasonable efforts.
    (1) In general.
    (2) Notification.
    (3) Incomplete FAP applications.
    (4) Complete FAP applications.
    (5) Suspending ECAs while a FAP application is pending.
    (6) Waiver does not constitute reasonable efforts.
    (7) Agreements with other parties.
    (8) Clear and conspicuous placement.

Sec.  1.501(r)-7 Effective/applicability dates.

    (a) Statutory effective/applicability date.
    (1) In general.
    (2) Community health needs assessment.
    (b) Effective/applicability date of regulations.

    Par. 3. Section 1.501(r)-1 is added to read as follows:


Sec.  1.501(r)-1  Definitions.

    (a) Application. The definitions set forth in this section apply to 
Sec. Sec.  1.501(r)-2 through 1.501(r)-7.
    (b) Definitions--(1) Amounts generally billed (AGB) means the 
amounts generally billed for emergency or other medically necessary 
care to individuals who have insurance covering such care, determined 
in accordance with Sec.  1.501(r)-5(b).
    (2) AGB percentage means a percentage of gross charges that a 
hospital facility uses under Sec.  1.501(r)-5(b)(1) to determine the 
AGB for any emergency or other medically necessary care it provides to 
a FAP-eligible individual.
    (3) Application period means the period during which a hospital 
facility must accept and process an application for assistance under 
its financial assistance policy (FAP) submitted by an individual in 
order to have made reasonable efforts to determine whether the 
individual is FAP-eligible. With respect to any care provided by a 
hospital facility to an individual, the application period begins on 
the date the care is provided to the individual and ends on the 240th 
day after the hospital facility provides the individual with the first 
billing statement for the care.
    (4) Billing and collections policy means a written policy that 
includes all of the elements described in Sec.  1.501(r)-4(b)(4).
    (5) Completion deadline means the date after which a hospital 
facility may initiate or resume extraordinary collection actions 
against an individual who has submitted an incomplete FAP application 
if that individual has not provided the hospital facility with the 
missing information and/or documentation necessary to complete the 
application. The completion deadline must be specified in a written 
notice (as described in Sec.  1.501(r)-6(c)(3)(i)(C)) and must be no 
earlier than the later of--
    (i) 30 days after the hospital facility provides the individual 
with this written notice; or
    (ii) The last day of the application period described in paragraph 
(b)(3) of this section.
    (6) Disregarded entity means an entity that is generally 
disregarded as separate from its owner for federal tax purposes under 
Sec.  301.7701-3 of this chapter. One example of a disregarded entity 
is a domestic single member limited liability company that does not 
elect to be classified as an association taxable as a corporation for 
federal tax purposes.
    (7) Emergency medical care means care provided by a hospital 
facility for emergency medical conditions.
    (8) Emergency medical conditions means emergency medical conditions 
as defined in section 1867 of the Social Security Act (42 U.S.C. 
1395dd).
    (9) Extraordinary collection action (ECA) means an action described 
in Sec.  1.501(r)-6(b).
    (10) Financial assistance policy (FAP) means a written policy that 
meets the requirements described in Sec.  1.501(r)-4(b).
    (11) FAP application means the information and accompanying 
documentation that a hospital facility requires an individual to submit 
to apply for financial assistance under the facility's FAP. A FAP 
application is considered complete if it contains information and 
documentation sufficient for the hospital facility to determine whether 
the applicant is FAP-eligible and incomplete if it does not contain 
such information and documentation.
    (12) FAP application form means the application form (and any 
accompanying instructions) that a hospital facility requires an 
individual to submit as part of his or her FAP application.
    (13) FAP-eligible individual means an individual eligible for 
financial assistance under a hospital facility's

[[Page 38161]]

FAP, without regard to whether the individual has applied for 
assistance under the FAP.
    (14) Gross charges, or the chargemaster rate, means a hospital 
facility's full, established price for medical care that the hospital 
facility consistently and uniformly charges all patients before 
applying any contractual allowances, discounts, or deductions.
    (15) Hospital facility means a facility that is required by a state 
to be licensed, registered, or similarly recognized as a hospital. 
Except as otherwise provided in published guidance, a hospital 
organization may treat multiple buildings operated under a single state 
license as a single hospital facility. For purposes of this paragraph 
(b)(15), the term ``state'' includes only the 50 states and the 
District of Columbia and not any U.S. territory or foreign country. 
References to a hospital facility taking actions include instances in 
which the hospital organization operating the hospital facility takes 
action through or on behalf of the hospital facility.
    (16) Hospital organization means an organization recognized (or 
seeking to be recognized) as described in section 501(c)(3) that 
operates one or more hospital facilities, including a hospital facility 
operated through a disregarded entity.
    (17) Medicare fee-for-service means health insurance available 
under Medicare Part A and Part B of Title XVIII of the Social Security 
Act.
    (18) Notification period means the period during which a hospital 
facility must notify an individual about its FAP in accordance with 
Sec.  1.501(r)-6(c)(2) in order to have made reasonable efforts to 
determine whether the individual is FAP-eligible. With respect to any 
care provided by a hospital facility to an individual, the notification 
period begins on the first date care is provided to the individual and 
ends on the 120th day after the hospital facility provides the 
individual with the first billing statement for the care.
    (19) Plain language summary means a written statement that notifies 
an individual that the hospital facility offers financial assistance 
under a FAP and provides the following additional information in 
language that is clear, concise, and easy to understand--
    (i) A brief description of the eligibility requirements and 
assistance offered under the FAP;
    (ii) The direct Web site address (or URL) and physical location(s) 
(including a room number, if applicable) where the individual can 
obtain copies of the FAP and FAP application form;
    (iii) Instructions on how the individual can obtain a free copy of 
the FAP and FAP application form by mail;
    (iv) The contact information, including the telephone number(s) and 
physical location (including a room number, if applicable), of hospital 
facility staff who can provide an individual with information about the 
FAP and the FAP application process, as well as of the nonprofit 
organizations or government agencies, if any, that the hospital 
facility has identified as available sources of assistance with FAP 
applications;
    (v) A statement of the availability of translations of the FAP, FAP 
application form, and plain language summary in other languages, if 
applicable; and
    (vi) A statement that no FAP-eligible individual will be charged 
more for emergency or other medically necessary care than AGB.
    (20) Primary payer means a health insurer (whether a private health 
insurer or a public payer such as Medicare) that pays first on a claim 
for medical care (usually after a deductible has been paid by the 
insured) up to the limits of the policy or program, regardless of other 
insurance coverage the insured may have. Primary payers are 
distinguished from secondary payers that pay second on a claim for 
medical care to the extent payment has not been made by the primary 
payer.
    (21) Private health insurer means any organization that offers 
insurance for medical care that is not a governmental unit described in 
section 170(c)(1). For purposes of Sec.  1.501(r)-5(b), claims paid 
under Medicare Advantage (Part C of Title XVIII of the Social Security 
Act) are treated as claims paid by a private health insurer.
    (22) Referring an individual's debt to a debt collection agency or 
other party includes contracting with, delegating, or otherwise using 
the debt collection agency or other party to collect amounts owed by 
the individual to the hospital facility while still maintaining 
ownership of the debt.
    Par. 4. Sections 1.501(r)-2 and 1.501(r)-3 are added and reserved 
to read as follows:


Sec.  1.501(r)-2  Failures to satisfy section 501(r) requirements. 
[Reserved].


Sec.  1.501(r)-3  Community health needs assessments. [Reserved].

    Par. 5. Sections 1.501(r)-4, 1.501(r)-5, 1.501(r)-6, and 1.501(r)-7 
are added to read as follows:


Sec.  1.501(r)-4  Financial assistance policy and emergency medical 
care policy.

    (a) In general. A hospital organization meets the requirements of 
section 501(r)(4) with respect to a hospital facility it operates if 
the hospital organization establishes for that hospital facility--
    (1) A written financial assistance policy (FAP) that meets the 
requirements described in paragraph (b) of this section; and
    (2) A written emergency medical care policy that meets the 
requirements described in paragraph (c) of this section.
    (b) Financial assistance policy--(1) In general. To satisfy 
paragraph (a)(1) of this section, a hospital facility's FAP must apply 
to all emergency and other medically necessary care provided by the 
hospital facility and include--
    (i) Eligibility criteria for financial assistance and whether such 
assistance includes free or discounted care;
    (ii) The basis for calculating amounts charged to patients;
    (iii) The method for applying for financial assistance;
    (iv) In the case of a hospital facility that does not have a 
separate billing and collections policy, the actions that may be taken 
in the event of nonpayment; and
    (v) Measures to widely publicize the FAP within the community 
served by the hospital facility.
    (2) Eligibility criteria and basis for calculating amounts charged 
to patients--(i) In general. To satisfy paragraphs (b)(1)(i) and 
(b)(1)(ii) of this section, the FAP must--
    (A) Specify all financial assistance available under the FAP, 
including all discount(s) and free care and, if applicable, the 
amount(s) (for example, gross charges) to which any discount 
percentages will be applied;
    (B) Specify all of the eligibility criteria that an individual must 
satisfy to receive each such discount, free care, or other level of 
assistance;
    (C) State that following a determination of FAP-eligibility, a FAP-
eligible individual will not be charged more for emergency or other 
medically necessary care than the amounts generally billed to 
individuals who have insurance covering such care (AGB);
    (D) Describe which method under Sec.  1.501(r)-5(b) the hospital 
facility uses to determine AGB; and
    (E) If the hospital facility uses the look-back method described in 
Sec.  1.501(r)-5(b)(1) to determine AGB, either state the hospital 
facility's AGB percentage(s) and describe how the hospital facility 
calculated such percentage(s) or explain how members of the public may 
readily obtain this information in writing and free of charge.

[[Page 38162]]

    (ii) Examples. The following examples illustrate this paragraph 
(b)(2):

    Example 1. Q is a hospital facility that establishes a FAP that 
provides assistance to all uninsured and underinsured individuals 
whose family income is less than or equal to x% of the Federal 
Poverty Level (FPL), with the level of discount for which an 
individual is eligible under Q's FAP determined based upon the 
individual's family income as a percentage of FPL. Q's FAP defines 
the meaning of ``uninsured,'' ``underinsured,'' ``family income,'' 
and ``Federal Poverty Level'' and specifies that all emergency and 
other medically necessary care provided by Q is covered under the 
FAP. Q's FAP also states that Q determines AGB by multiplying the 
gross charges for any emergency or other medically necessary care it 
provides to a FAP-eligible individual by 50 percent. The FAP states, 
further, that Q calculated the AGB percentage of 50 percent based on 
all claims paid in full to Q by Medicare and private health insurers 
and the individuals they insured over a specified 12-month period, 
divided by the associated gross charges for those claims. Q's FAP 
contains the following chart, specifying each discount available 
under the FAP, the amounts (gross charges) to which these discounts 
will be applied, and the specific eligibility criteria for each such 
discount:

------------------------------------------------------------------------
        Family income as % of FPL          Discount off of gross charges
------------------------------------------------------------------------
>y%-x%...................................  50%.
>z%-y%...................................  75%.
<=z%.....................................  Free.
------------------------------------------------------------------------

    Q's FAP also contains a statement that no FAP-eligible 
individual will be charged more for emergency or other medically 
necessary care than AGB because Q's AGB percentage is 50 percent of 
gross charges and the most a FAP-eligible individual will be charged 
is 50 percent of gross charges. Q's FAP satisfies the requirements 
of this paragraph (b)(2).
    Example 2. R is a hospital facility that establishes a FAP that 
provides assistance based on household income. R's FAP defines the 
meaning of ``household income'' and specifies that all emergency and 
other medically necessary care provided by R is covered under the 
FAP. R's FAP contains the following chart, specifying the assistance 
available under the FAP and the specific eligibility criteria for 
each level of assistance offered, which R updates occasionally to 
account for inflation:

------------------------------------------------------------------------
                                      Maximum amount individual will be
         Household income                  responsible for paying
------------------------------------------------------------------------
>$b-$a............................  40% of gross charges, up to the
                                     lesser of AGB or x% of annual
                                     household income.
>$c-$b............................  20% of gross charges, up to the
                                     lesser of AGB or y% of annual
                                     household income.
<=$c..............................  $0 (free).
------------------------------------------------------------------------

    R's FAP contains a statement that no FAP-eligible individual 
will be charged more for emergency or other medically necessary care 
than AGB. R's FAP also states that R determines AGB by multiplying 
the gross charges for any emergency or other medically necessary 
care it provides by AGB percentages, which are based on claims paid 
under Medicare. In addition, the FAP provides a web address 
individuals can visit, and a telephone number they can call, if they 
would like to obtain an information sheet stating R's AGB 
percentages and explaining how these AGB percentages were 
calculated. This information sheet, which R makes available on its 
Web site and provides to any individual who requests it, states that 
R's AGB percentages are 35 percent of gross charges for inpatient 
care and 60 percent of gross charges for outpatient care. It also 
states that these percentages were based on all claims paid to R for 
emergency or other medically necessary inpatient and outpatient care 
by Medicare and Medicare beneficiaries over a specified 12-month 
period, divided by the associated gross charges for those claims. 
R's FAP satisfies the requirements of this paragraph (b)(2).

    (3) Method for applying for financial assistance--(i) In general. 
To satisfy paragraph (b)(1)(iii) of this section, a hospital facility's 
FAP must describe how an individual applies for financial assistance 
under the FAP. In addition, either the hospital facility's FAP or FAP 
application form (including accompanying instructions) must describe 
the information and documentation the hospital facility may require an 
individual to submit as part of his or her FAP application and provide 
the contact information described in Sec.  1.501(r)-1(b)(19)(iv). The 
hospital facility may not deny financial assistance under the FAP based 
on an applicant's failure to provide information or documentation that 
the hospital facility's FAP or FAP application form does not require an 
individual to submit as part of a FAP application.
    (ii) Example. The following example illustrates this paragraph 
(b)(3):

    Example. S is a hospital facility with a FAP that bases 
eligibility solely on an individual's household income. S's FAP 
provides that an individual may apply for financial assistance by 
completing and submitting S's FAP application form. S's FAP also 
describes how individuals can obtain copies of the FAP application 
form. S's FAP application form contains lines on which the applicant 
lists all items of household income received by the applicant's 
household over the last three months and the names of the 
applicant's household members. The instructions to S's FAP 
application form tell applicants where to submit the application and 
provide that an applicant must attach to his or her FAP application 
form proof of household income in the form of the applicant's most 
recent federal tax return, payroll check stubs from the last three 
months, documentation of the applicant's qualification for certain 
specified state means-tested programs, or other reliable evidence of 
the applicant's earned and unearned household income. S does not 
require FAP applicants to submit any information or documentation 
not mentioned in the FAP application form instructions. S's FAP 
application form instructions also provide the contact information 
of hospital facility staff who can provide an applicant with 
information about the FAP and FAP application process. S's FAP 
satisfies the requirements of this paragraph (b)(3).

    (4) Actions that may be taken in the event of nonpayment--(i) In 
general. To satisfy paragraph (b)(1)(iv) of this section, either a 
hospital facility's FAP or a separate written billing and collections 
policy established by the hospital facility must describe--
    (A) Any actions that the hospital facility (or other authorized 
party) may take relating to obtaining payment of a bill for medical 
care, including, but not limited to, any extraordinary collection 
actions described in Sec.  1.501(r)-6(b);
    (B) The process and time frames the hospital facility (or other 
authorized party) uses in taking the actions described in paragraph 
(b)(4)(i)(A) of this section, including, but not limited to, the 
reasonable efforts it will make to determine whether an individual is 
FAP-eligible before engaging in any extraordinary collection actions, 
as described in Sec.  1.501(r)-6(c); and
    (C) The office, department, committee, or other body with the final 
authority or responsibility for determining that the hospital facility 
has made reasonable efforts to determine whether an individual is FAP-
eligible and may therefore engage in extraordinary collection actions 
against the individual.
    (ii) Separate billing and collections policy. In the case of a 
hospital facility that satisfies paragraph (b)(1)(iv) of this section 
by establishing a separate written billing and collections policy, the 
hospital facility's FAP must state that the actions the hospital 
facility may take in the event of nonpayment are described in a 
separate billing and collections policy and explain how members of the 
public may readily obtain a free copy of this separate policy.

[[Page 38163]]

    (5) Widely publicizing the FAP--(i) In general. To satisfy 
paragraph (b)(1)(v) of this section, a FAP must include, or explain how 
members of the public may readily obtain a free written description of, 
measures taken by the hospital facility to--
    (A) Make the FAP, FAP application form, and a plain language 
summary of the FAP (as defined in Sec.  1.501(r)-1(b)(19)) widely 
available on a Web site, as described in paragraph (b)(5)(iv) of this 
section;
    (B) Make paper copies of the FAP, FAP application form, and plain 
language summary of the FAP available upon request and without charge, 
both in public locations in the hospital facility and by mail, in 
English and in the primary language of any populations with limited 
proficiency in English that constitute more than 10 percent of the 
residents of the community served by the hospital facility;
    (C) Inform and notify visitors to the hospital facility about the 
FAP through conspicuous public displays or other measures reasonably 
calculated to attract visitors' attention; and
    (D) Inform and notify residents of the community served by the 
hospital facility about the FAP in a manner reasonably calculated to 
reach those members of the community who are most likely to require 
financial assistance.
    (ii) Meaning of inform and notify. For purposes of paragraphs 
(b)(5)(i)(C) and (b)(5)(i)(D) of this section, a measure will inform 
and notify visitors to a hospital facility or residents of a community 
about the hospital facility's FAP if the measure, at a minimum, 
notifies the reader or listener that the hospital facility offers 
financial assistance under a FAP and informs him or her about how or 
where to obtain more information about the FAP.
    (iii) Meaning of reasonably calculated. Whether one or more 
measures to widely publicize a hospital facility's FAP are reasonably 
calculated to inform and notify visitors to a hospital facility or 
residents of a community about the hospital facility's FAP in the 
manner described in paragraphs (b)(5)(i)(C) and (b)(5)(i)(D) of this 
section will depend on all of the facts and circumstances, including 
the primary language(s) spoken by the residents of the community served 
by the hospital facility and other attributes of the community and the 
hospital facility.
    (iv) Widely available on a Web site. For purposes of paragraph 
(b)(5)(i)(A) of this section, a hospital facility makes its FAP, FAP 
application form, and plain language summary of the FAP widely 
available on a Web site only if--
    (A) The hospital facility conspicuously posts complete and current 
versions of these documents in English and in the primary language of 
any populations with limited proficiency in English that constitute 
more than 10 percent of the residents of the community served by the 
hospital facility on--
    (1) The hospital facility's Web site;
    (2) If the hospital facility does not have its own Web site 
separate from the hospital organization that operates it, the hospital 
organization's Web site; or
    (3) A Web site established and maintained by another entity, but 
only if the Web site of the hospital facility or hospital organization 
(if the facility or organization has a Web site) provides a 
conspicuously-displayed link to the web page on which the document is 
posted, along with clear instructions for accessing the document on 
that Web site;
    (B) Any individual with access to the Internet can access, 
download, view, and print a hard copy of these documents without 
requiring special computer hardware or software (other than software 
that is readily available to members of the public without payment of 
any fee) and without payment of a fee to the hospital facility, 
hospital organization, or other entity maintaining the Web site; and
    (C) The hospital facility provides any individual who asks how to 
access a copy of the FAP, FAP application form, or plain language 
summary of the FAP online with the direct Web site address, or URL, of 
the web page on which these documents are posted.
    (v) Limited English proficient populations. For purposes of 
paragraphs (b)(5)(i)(B) and (b)(5)(iv)(A) of this section, a hospital 
facility may determine whether any language minority with limited 
proficiency in English constitutes more than 10 percent of the 
residents of the community served by the hospital facility based on the 
latest data available from the U.S. Census Bureau or other similarly 
reliable data.
    (vi) Examples. The following examples illustrate this paragraph 
(b)(5):

    Example 1. (i) Z is a hospital facility whose FAP states that Z 
will make its FAP, FAP application form, and a plain language 
summary of its FAP widely available through its Web site. In 
accordance with its FAP, the home page and main billing page of Z's 
Web site conspicuously display the following message: ``Need help 
paying your bill? You may be eligible for financial assistance. 
Click here for more information.'' When readers click on the link, 
they are taken to a web page that explains the various discounts 
available under Z's FAP and the specific eligibility criteria for 
each such discount. This web page also provides a telephone number 
and room number of Z that individuals can call or visit for more 
information about the FAP, as well as the name and contact 
information of a few nonprofit organizations and government agencies 
that Z has identified as capable and available sources of assistance 
with FAP applications. In addition, the web page contains 
prominently-displayed links that allow readers to download PDF files 
of the FAP and the FAP application form, free of charge. Z provides 
any individual who asks how to access a copy of the FAP, FAP 
application form, or plain language summary of the FAP online with 
the URL of this web page. Z's FAP includes measures to make the FAP 
widely available on a Web site within the meaning of paragraph 
(b)(5)(i)(A) of this section.
    (ii) Z's FAP also states that Z will make paper copies of the 
FAP, FAP application form, and plain language summary of the FAP 
available upon request and without charge, both by mail and in its 
billing office, admissions and registrations areas, and emergency 
room, and will inform and notify visitors to the hospital facility 
about the FAP in these same locations using signs and brochures. In 
accordance with its FAP, Z conspicuously displays a sign in large 
font regarding the FAP in its billing office, admissions and 
registrations areas, and emergency room. The sign says: ``Uninsured? 
Having trouble paying your hospital bill? You may be eligible for 
financial assistance.'' The sign also provides the URL of the Web 
page where Z's FAP and FAP application form can be accessed. In 
addition, the sign provides a telephone number and room number of Z 
that individuals can call or visit with questions about the FAP or 
the FAP application process. Underneath each sign, Z conspicuously 
displays copies of a brochure that contains all of the information 
required to be included in a plain language summary of the FAP (as 
defined in Sec.  1.501(r)-1(b)(19)). Z makes these brochures 
available in quantities sufficient to meet visitor demand. Z also 
makes paper copies of its FAP and FAP application form available 
upon request and without charge in these same locations and by mail. 
Z's FAP includes measures to widely publicize the FAP within the 
meaning of paragraphs (b)(5)(i)(B) and (b)(5)(i)(C) of this section.
    (iii) In addition, Z's FAP states that Z will inform and notify 
members of the community served by the hospital facility about the 
FAP through its quarterly newsletter and by distributing copies of 
its FAP brochures to physicians and local nonprofit organizations 
and public agencies that address the health needs of low-income 
people. In accordance with its FAP, Z distributes copies of the 
brochure and its FAP application form to all of its referring staff 
physicians and to the community health centers serving its 
community. Z also distributes copies of these documents to the local 
health department and to numerous public agencies and nonprofit 
organizations in its community that address the health issues and 
other needs of low-income populations, in quantities

[[Page 38164]]

sufficient to meet demand. In addition, every issue of the quarterly 
newsletter that Z mails to the individuals in its customer database 
contains a prominently-displayed advertisement informing readers 
that Z offers financial assistance and that people having trouble 
paying their hospital bills may be eligible for financial 
assistance. The advertisement also provides readers with the URL of 
the Web page where Z's FAP and FAP application form can be accessed 
and a telephone number and room number of Z that individuals can 
call or visit with questions about the FAP or the FAP application 
process. Z's FAP includes measures to widely publicize its FAP 
within the meaning of paragraph (b)(5)(i)(D) of this section.
    (iv) Because Z's FAP includes measures to widely publicize the 
FAP described in paragraphs (b)(5)(i)(A), (b)(5)(i)(B), 
(b)(5)(i)(C), and (b)(5)(i)(D) of this section, Z's FAP meets the 
requirements of this paragraph (b)(5).
    Example 2.  Assume the same facts as Example 1, except that Z 
serves a community in which 11 percent of the residents speak 
Spanish and have limited proficiency in English. Z's FAP states that 
Z will provide all of the information described in Example 1, 
including the FAP itself, in both Spanish and English. In accordance 
with its FAP, Z translates its FAP, FAP application form, and FAP 
brochure (which constitutes a plain language summary of the FAP) 
into Spanish, and displays and distributes Spanish versions of these 
documents in its hospital facility and in the Spanish-speaking 
portions of the community it serves, using all of the measures 
described in Example 1. Moreover, the home page and main billing 
page of Z's Web site conspicuously display an ``[iquest]Habla 
Espa[ntilde]ol?'' link that takes readers to a Web page that 
summarizes the FAP in Spanish and contains links that allow readers 
to download PDF files of the Spanish versions of the FAP and FAP 
application form, free of charge. Z's FAP meets the requirements of 
this paragraph (b)(5) by including measures to widely publicize the 
FAP within the community served by Z.
    Example 3. Assume the same facts as Example 1, except that 
instead of including generalized summaries of the measures Z will 
take to widely publicize its FAP in the FAP itself, Z's FAP states 
that a task force established by Z with control over a set budget 
will meet at least annually to develop and adopt a plan to widely 
publicize Z's FAP. The FAP further states that the task force will 
summarize this plan in a one-page information sheet that will be 
made available upon request in Z's billing office and posted on the 
Web page through which Z makes its FAP and FAP application form 
widely available. In year 1, the task force considers the needs of 
Z's patients and the surrounding community and adopts and implements 
a plan to take all of the measures described in Example 1. The task 
force prepares a one-page information sheet summarizing this plan 
that is made available as described in the FAP. Z's FAP meets the 
requirements of this paragraph (b)(5) in year 1 by including 
measures to widely publicize the FAP within the community served by 
Z.

    (6) Readily obtainable information. For purposes of this paragraph 
(b), members of the public may readily obtain information if a hospital 
facility makes the information available free of charge both on a Web 
site and in writing upon request in a manner similar to that described 
in paragraphs (b)(5)(i)(A) and (b)(5)(i)(B) of this section.
    (c) Emergency medical care policy--(1) In general. To satisfy 
paragraph (a)(2) of this section, a hospital facility must establish a 
written policy that requires the hospital facility to provide, without 
discrimination, care for emergency medical conditions to individuals 
regardless of whether they are FAP-eligible.
    (2) Interference with provision of emergency medical care. A 
hospital facility's emergency medical care policy will not be described 
in paragraph (c)(1) of this section unless it prohibits the hospital 
facility from engaging in actions that discourage individuals from 
seeking emergency medical care, such as by demanding that emergency 
department patients pay before receiving treatment for emergency 
medical conditions or by permitting debt collection activities in the 
emergency department or in other areas of the hospital facility where 
such activities could interfere with the provision, without 
discrimination, of emergency medical care.
    (3) Relation to federal law governing emergency medical care. 
Subject to paragraph (c)(2) of this section, a hospital facility's 
emergency medical care policy will be described in paragraph (c)(1) of 
this section if it requires the hospital facility to provide the care 
for emergency medical conditions that the hospital facility is required 
to provide under Subchapter G of Chapter IV of Title 42 of the Code of 
Federal Regulations (or any successor regulations).
    (4) Examples. The following examples illustrate this paragraph (c):

    Example 1.  F is a hospital facility with a dedicated emergency 
department that is subject to the Emergency Medical Treatment and 
Labor Act (EMTALA) and is not a critical access hospital. F 
establishes a written emergency medical care policy requiring F to 
comply with EMTALA by providing medical screening examinations and 
stabilizing treatment and referring or transferring an individual to 
another facility, when appropriate, and to provide emergency 
services in accordance with 42 CFR 482.55 (or any successor 
regulation). F's emergency medical care policy also states that F 
prohibits any actions that would discourage individuals from seeking 
emergency medical care, such as by demanding that emergency 
department patients pay before receiving treatment for emergency 
medical conditions or permitting debt collection activities in the 
emergency department or in other areas of the hospital facility 
where such activities could interfere with the provision, without 
discrimination, of emergency medical care. F's emergency medical 
care policy is described in paragraph (c)(1) of this section.
    Example 2.  G is a rehabilitation hospital facility. G does not 
have a dedicated emergency department, nor does it have specialized 
capabilities that would make it appropriate to accept transfers of 
individuals who need stabilizing treatment for an emergency medical 
condition. G establishes a written emergency medical care policy 
that addresses how it appraises emergencies, provides initial 
treatment, and refers or transfers an individual to another 
facility, when appropriate, in a manner that complies with 42 CFR 
482.12(f)(2) (or any successor regulation). G's emergency medical 
care policy also states that G prohibits any actions that would 
discourage individuals from seeking emergency medical care, such as 
by permitting debt collection activities in any areas of the 
hospital facility where such activities could interfere with the 
provision, without discrimination, of emergency medical care. G's 
emergency medical care policy is described in paragraph (c)(1) of 
this section.

    (d) Establishing the FAP and other policies--(1) In general. A 
hospital organization has established a FAP, a billing and collections 
policy, or an emergency medical care policy for a hospital facility 
only if an authorized body of the hospital organization has adopted the 
policy for the hospital facility and the hospital facility has 
implemented the policy.
    (2) Authorized body. For purposes of this paragraph (d), an 
authorized body of a hospital organization means--
    (i) The governing body (that is, the board of directors, board of 
trustees, or equivalent controlling body) of the hospital organization;
    (ii) A committee of the governing body, which may be composed of 
any individuals permitted under state law to serve on such a committee, 
to the extent that the committee is permitted by state law to act on 
behalf of the governing body;
    (iii) To the extent permitted under state law, other parties 
authorized by the governing body of the hospital organization to act on 
its behalf; or
    (iv) In the case of a hospital facility (operated by the hospital 
organization) that has its own governing body and is recognized as an 
entity under state law but is a disregarded entity for federal tax 
purposes, the governing body of that disregarded entity (or a committee 
of or other parties authorized by that governing body as described in 
paragraphs (d)(2)(ii) or (d)(2)(iii) of this section).
    (3) Implementing a policy. For purposes of this paragraph (d), a

[[Page 38165]]

hospital facility has implemented a policy if the hospital facility has 
consistently carried out the policy.
    (4) Establishing a policy for more than one hospital facility. 
Although a hospital organization operating more than one hospital 
facility must separately establish a FAP and emergency medical care 
policy for each hospital facility it operates, such policies may 
contain the same operative terms. However, different AGB percentages 
and methods of determining AGB and the unique attributes of the 
communities that different hospital facilities serve may require the 
hospital facilities to include in their FAPs (or otherwise make 
available) different information regarding AGB and different measures 
to widely publicize the FAP in order to meet the requirements of 
paragraphs (b)(2) and/or (b)(5) of this section.


Sec.  1.501(r)-5  Limitation on charges.

    (a) In general. A hospital organization meets the requirements of 
section 501(r)(5) with respect to a hospital facility it operates if 
the hospital facility limits the amount charged for care it provides to 
any individual who is eligible for assistance under its financial 
assistance policy (FAP) to--
    (1) In the case of emergency or other medically necessary care, not 
more than the amounts generally billed to individuals who have 
insurance covering such care (AGB), as determined under paragraph (b) 
of this section; and
    (2) In the case of all other medical care, less than the gross 
charges for such care, as described in paragraph (c) of this section.
    (b) Amounts generally billed. In order to meet the requirements of 
paragraph (b)(1) of this section, a hospital facility must determine 
AGB for emergency or other medically necessary care using a method 
described in either paragraph (b)(1) or (b)(2) of this section. A 
hospital facility may use only one of these methods to determine AGB. 
After choosing a particular method, a hospital facility must continue 
to use that method.
    (1) Look-back method--(i) In general. A hospital facility may 
determine AGB for any emergency or other medically necessary care it 
provides to a FAP-eligible individual by multiplying the hospital 
facility's gross charges for the care provided to the individual by one 
or more percentages of gross charges (AGB percentages). The hospital 
facility must calculate its AGB percentage(s) at least annually by 
dividing the sum of all claims for emergency and other medically 
necessary care described in either paragraph (b)(1)(i)(A) or 
(b)(1)(i)(B) of this section that have been paid in full to the 
hospital facility during a prior 12-month period by the sum of the 
associated gross charges for those claims:
    (A) Claims paid by Medicare fee-for-service as the primary payer, 
including any associated portions of the claims paid by Medicare 
beneficiaries in the form of co-insurance or deductibles; or
    (B) Claims paid by both Medicare fee-for-service and all private 
health insurers as primary payers, together with any associated 
portions of these claims paid by Medicare beneficiaries or insured 
individuals in the form of co-payments, co-insurance, or deductibles.
    (ii) One or multiple AGB percentages. A hospital facility's AGB 
percentage that is calculated using the method described in this 
paragraph (b)(1) may be one average percentage of gross charges for all 
emergency and other medically necessary care provided by the hospital 
facility. Alternatively, a hospital facility may calculate multiple AGB 
percentages for separate categories of care (such as inpatient and 
outpatient care or care provided by different departments) or for 
separate items or services, as long as the hospital facility calculates 
AGB percentages for all emergency and other medically necessary care 
provided by the hospital facility.
    (iii) Start date for applying AGB percentages. For purposes of 
determining AGB under this paragraph (b)(1), with respect to any AGB 
percentage that a hospital facility has calculated, the hospital 
facility must begin applying the AGB percentage by the 45th day after 
the end of the 12-month period the hospital facility used in 
calculating the AGB percentage.
    (2) Prospective Medicare method. As an alternative to the method 
described in paragraph (b)(1) of this section, a hospital facility may 
determine AGB for any emergency or other medically necessary care 
provided to a FAP-eligible individual by using the billing and coding 
process the hospital facility would use if the FAP-eligible individual 
were a Medicare fee-for-service beneficiary and setting AGB for the 
care at the amount the hospital facility determines would be the amount 
Medicare and the Medicare beneficiary together would be expected to pay 
for the care.
    (3) Examples. The following examples illustrate this paragraph (b):

    Example 1. On January 15 of year 1, Y, a hospital facility, 
generates data on all claims paid to it in full for emergency or 
other medically necessary care by all private health insurers and 
Medicare fee-for-service as primary payers over the immediately 
preceding calendar year. Y determines that it received a total of 
$360 million on these claims from the private health insurers and 
Medicare and another $40 million from their insured patients and 
Medicare beneficiaries in the form of deductibles, co-insurance, and 
co-payments. Y's gross charges for these claims totaled $800 
million. Y calculates that its AGB percentage is 50 percent of gross 
charges ($400 million/$800 million x 100). Y determines AGB for any 
emergency or other medically necessary care it provides to a FAP-
eligible individual between February 1 of year 1 (less than 45 days 
after the end of the 12-month claim period) and January 31 of year 2 
by multiplying the gross charges for the care provided to the 
individual by 50%. Y has determined AGB in accordance with this 
paragraph (b).
    Example 2. On September 20 of year 1, X, a hospital facility, 
generates data on all claims paid to it in full for emergency or 
other medically necessary care by Medicare fee-for-service as the 
primary payer over the 12 months ending on August 31 of year 1. X 
determines that, of these claims for inpatient services, it received 
a total of $80 million from Medicare and another $20 million from 
Medicare beneficiaries in the form of co-insurance or deductibles. 
X's gross charges for these inpatient claims totaled $250 million. 
Of the claims for outpatient services, X received a total of $100 
million from Medicare and another $25 million from Medicare 
beneficiaries. X's gross charges for these outpatient claims totaled 
$200 million. X calculates that its AGB percentage for inpatient 
services is 40 percent of gross charges ($100 million/$250 million x 
100) and its AGB percentage for outpatient services is 62.5 percent 
of gross charges ($125 million/$200 million x 100). Between October 
15 of year 1 (45 days after the end of the 12-month claim period) 
and October 14 of year 2, X determines AGB for any emergency or 
other medically necessary inpatient care it provides to a FAP-
eligible individual by multiplying the gross charges for the 
inpatient care it provides to the individual by 40% and AGB for any 
emergency or other medically necessary outpatient care it provides 
to a FAP-eligible individual by multiplying the gross charges for 
the outpatient care it provides to the individual by 62.5%. X has 
determined AGB in accordance with this paragraph (b).
    Example 3. Z is a hospital facility. Whenever Z provides 
emergency or other medically necessary care to a FAP-eligible 
individual, Z determines the AGB for the care by using the billing 
and coding process it would use if the individual were a Medicare 
fee-for-service beneficiary and setting AGB for the care at the 
amount it determines Medicare and the Medicare beneficiary together 
would be expected to pay for the care. Z determines AGB in 
accordance with this paragraph (b).

    (c) Gross charges. A hospital facility must charge a FAP-eligible 
individual less than the gross charges for any medical care provided to 
that individual. However, a billing statement issued to a FAP-eligible 
individual for

[[Page 38166]]

medical care provided by a hospital facility may state the gross 
charges for such care as the starting point to which various 
contractual allowances, discounts, or deductions are applied, as long 
as the actual amount the individual is expected to pay is less than the 
gross charges for such care.
    (d) Safe harbor for certain charges in excess of AGB. A hospital 
facility will be deemed to meet the requirements of paragraph (a) of 
this section, even if it charges more than AGB for emergency or other 
medically necessary care (or gross charges for any medical care) 
provided to a FAP-eligible individual if--
    (1) The FAP-eligible individual has not submitted a complete FAP 
application to the hospital facility as of the time of the charge; and
    (2) The hospital facility has made and continues to make reasonable 
efforts to determine whether the individual is FAP-eligible, as 
described in Sec.  1.501(r)-6(c), during the applicable time periods 
described in that section (including by correcting the amount charged 
if the individual is subsequently found to be FAP-eligible).


Sec.  1.501(r)-6  Billing and collection.

    (a) In general. A hospital organization meets the requirements of 
section 501(r)(6) with respect to a hospital facility it operates if 
the hospital facility does not engage in extraordinary collection 
actions (ECAs), as defined in paragraph (b) of this section, against an 
individual before the hospital facility has, consistent with paragraph 
(c) of this section, made reasonable efforts to determine whether the 
individual is eligible for assistance under its financial assistance 
policy (FAP). For purposes of this section, with respect to any debt 
owed by an individual for care provided by a hospital facility--
    (1) ECAs against the individual include ECAs against any other 
individual who has accepted or is required to accept responsibility for 
the individual's hospital bills; and
    (2) The hospital facility will be deemed to have engaged in an ECA 
against the individual if any purchaser of the individual's debt or any 
debt collection agency or other party to which the hospital facility 
has referred the individual's debt has engaged in an ECA against the 
individual.
    (b) Extraordinary collection actions. ECAs are actions taken by a 
hospital facility against an individual related to obtaining payment of 
a bill for care covered under the hospital facility's FAP that require 
a legal or judicial process or involve selling an individuals' debt to 
another party or reporting adverse information about the individual to 
consumer credit reporting agencies or credit bureaus. For purposes of 
this paragraph (b), actions that require a legal or judicial process 
include, but are not limited to, actions to--
    (1) Place a lien on an individual's property;
    (2) Foreclose on an individual's real property;
    (3) Attach or seize an individual's bank account or any other 
personal property;
    (4) Commence a civil action against an individual;
    (5) Cause an individual's arrest;
    (6) Cause an individual to be subject to a writ of body attachment; 
and
    (7) Garnish an individual's wages.
    (c) Reasonable efforts--(1) In general. With respect to any care 
provided by a hospital facility to an individual, the hospital facility 
will have made reasonable efforts to determine whether the individual 
is FAP-eligible only if the hospital facility--
    (i) Notifies the individual about its FAP during the notification 
period (as defined in Sec.  1.501(r)-1(b)(18)), as described in 
paragraph (c)(2) of this section;
    (ii) In the case of an individual who submits an incomplete FAP 
application during the application period (as defined in Sec.  
1.501(r)-1(b)(3)), meets the requirements described in paragraph (c)(3) 
of this section; and
    (iii) In the case of an individual who submits a complete FAP 
application during the application period, meets the requirements 
described in paragraph (c)(4) of this section.
    (2) Notification--(i) In general. Except as provided in paragraph 
(c)(2)(ii) of this section, with respect to any care provided by a 
hospital facility to an individual, a hospital facility will have 
notified the individual about its FAP for purposes of paragraph 
(c)(1)(i) of this section only if the hospital facility--
    (A) Distributes a plain language summary of the FAP (as defined in 
Sec.  1.501(r)-1(b)(19)) and offers a FAP application form to the 
individual before discharge from the hospital facility;
    (B) Includes a plain language summary of the FAP with all (and at 
least three) billing statements for the care and all other written 
communications regarding the bill provided to the individual during the 
notification period;
    (C) Informs the individual about the FAP in all oral communications 
with the individual regarding the amount due for the care that occur 
during the notification period; and
    (D) Provides the individual with at least one written notice that--
    (1) Informs the individual about the ECAs the hospital facility or 
other authorized party may take if the individual does not submit a FAP 
application or pay the amount due by a deadline (specified in the 
notice) that is no earlier than the last day of the notification 
period; and
    (2) Is provided to the individual at least 30 days before the 
deadline specified in the written notice.
    (ii) Notification when FAP application is submitted. If an 
individual submits a complete or incomplete FAP application to a 
hospital facility during the application period, the hospital facility 
will be deemed to have notified the individual about its FAP for 
purposes of paragraph (c)(1)(i) of this section as of the day the 
application is submitted. However, to have made reasonable efforts to 
determine whether such an individual is FAP-eligible, the hospital 
facility must meet the requirements of paragraphs (c)(3) and (c)(4) of 
this section, as applicable.
    (iii) When no FAP application is submitted. If an individual fails 
to submit a FAP application during the notification period (or, if 
later, by the deadline specified in the written notice described in 
paragraph (c)(2)(i)(D) of this section) and the hospital facility has 
notified (and documented that it has notified) the individual as 
described in paragraph (c)(2)(i) of this section, the hospital facility 
will have satisfied paragraph (c)(1)(i) of this section. Until and 
unless the individual subsequently submits a FAP application during the 
remainder of the application period, paragraphs (c)(1)(ii) and 
(c)(1)(iii) do not apply. As a result, the hospital facility will have 
made reasonable efforts to determine whether the individual is FAP-
eligible and may engage in one or more ECAs against the individual.
    (iv) Example. The following example illustrates this paragraph 
(c)(2):

    Example. Individual A receives care from hospital facility T on 
February 1 and February 2. When A is discharged from T on February 
2, T gives A its FAP application form and a plain language summary 
of its FAP. On March 1, April 15, and May 30, T sends A billing 
statements that include a one-page insert that provides a plain 
language summary of the FAP. With the May 30 billing statement, T 
also includes a letter that informs A that if she does not pay the 
amount owed or submit a FAP application form by June 29 (120 days 
after the first billing statement was provided on March 1), T may 
report A's delinquency to credit reporting agencies, seek to obtain 
a judgment against A, and, if such a judgment is obtained, seek to 
attach and seize A's bank account or other personal property, which

[[Page 38167]]

are the only ECAs that T (or any party to which T refers A's debt) 
may take in accordance with T's billing and collections policy. T 
does not have any other written or oral communications with A about 
her bill before June 29. T keeps electronic records showing that it 
provided a plain language summary and FAP application to A on 
discharge and included the letter regarding ECAs and the plain 
language summaries with the billing statements sent to A. A does not 
submit a FAP application form by June 29. T has made reasonable 
efforts to determine whether A is FAP-eligible, and thus may engage 
in ECAs against A, as of June 30.

    (3) Incomplete FAP applications--(i) In general. With respect to 
any care provided by a hospital facility to an individual, if the 
individual submits an incomplete FAP application during the application 
period, the hospital facility will have made reasonable efforts to 
determine whether the individual is FAP-eligible only if the hospital 
facility--
    (A) Suspends any ECAs against the individual as described in 
paragraph (c)(5) of this section;
    (B) Provides the individual with a written notice that describes 
the additional information and/or documentation required under the FAP 
or FAP application form that the individual must submit to the hospital 
facility to complete his or her FAP application and includes a plain 
language summary of the FAP with this notice; and
    (C) Provides the individual with at least one written notice that--
    (1) Informs the individual about the ECAs the hospital facility or 
other authorized party may initiate or resume if the individual does 
not complete the FAP application or pay the amount due by a completion 
deadline (specified in the notice) that is no earlier than the later of 
the last day of the application period or 30 days after the hospital 
facility provides the individual with the written notice; and
    (2) Is provided to the individual at least 30 days before the 
completion deadline.
    (ii) FAP application completed by the completion deadline. If an 
individual who has submitted an incomplete FAP application during the 
application period completes the FAP application by the completion 
deadline, the individual will be considered to have submitted a 
complete FAP application during the application period, and the 
hospital facility will therefore only have made reasonable efforts to 
determine whether the individual is FAP-eligible if it meets the 
requirements for complete FAP applications described in paragraph 
(c)(4) of this section.
    (iii) FAP application not completed by the completion deadline. If 
an individual who submits an incomplete FAP application to a hospital 
facility during the application period fails to complete the FAP 
application by the completion deadline and the hospital facility has 
met the requirements described in paragraph (c)(3)(i) of this section, 
the hospital facility will have made reasonable efforts to determine 
whether the individual is FAP-eligible and may initiate or resume ECAs 
against the individual after the completion deadline.
    (iv) Examples. The following examples illustrate this paragraph 
(c)(3):

    Example 1. (i) Assume the same facts as the example in paragraph 
(c)(2)(iv) of this section and the following additional facts: A 
submits an incomplete FAP application to T on October 13, two weeks 
before the last day of the application period on October 27 (240 
days after the first billing statement was provided on March 1). 
Eligibility for assistance under T's FAP is based solely on an 
individual's family income and the instructions to T's FAP 
application form require applicants to attach certain documentation 
verifying family income to their application forms. The FAP 
application form that A submits to T on October 13 includes all of 
the required income information, but A fails to attach the required 
documentation verifying her family income. After receiving A's 
incomplete FAP application on October 13, T does not initiate any 
new ECAs against A and does not take any further action on the ECAs 
T previously initiated against A. On October 15, a member of T's 
staff calls A to inform her that she failed to attach any of the 
required documentation of her family income and explain what kind of 
documentation A needs to submit and how she can submit it. On 
October 16, T sends a letter to A explaining the kind of 
documentation of family income that A must provide to T to complete 
her application and informing A about the ECAs that T (or any other 
authorized party) may initiate or resume against A if A does not 
submit the missing documentation or pay the amount due by November 
15 (30 days after October 16). T includes a plain language summary 
of the FAP with the letter. T has met the requirements of this 
paragraph (c)(3).
    (ii) On November 15, A provides T with the missing 
documentation. Because A provides the missing documentation by the 
completion deadline, she has submitted a complete FAP application 
during the application period. As a result, to have made reasonable 
efforts to determine whether A is FAP-eligible, T must assess the 
documentation to determine whether A is FAP-eligible and otherwise 
meet the requirements for complete FAP applications described in 
paragraph (c)(4) of this section.
    Example 2. Individual B receives care from hospital facility U 
on January 10. U has established a FAP that provides assistance to 
all individuals whose household income is less than $y, and the 
instructions to U's FAP application form specify the documentation 
that applicants must provide to verify their household income. Upon 
discharge, U's staff gives B a plain language summary of the FAP and 
a copy of its FAP application form. On January 20, B submits a FAP 
application form to U indicating that he has household income of 
less than $y. The FAP application form includes all of the required 
income information, but B fails to attach the required documentation 
verifying household income. On February 1, U sends B the first 
billing statement for the care and includes with the statement 
another plain language summary of the FAP. U also includes with the 
billing statement a letter informing B that the income information 
he provided on his FAP application form indicates that he may be 
eligible to pay only x% of the amount stated on the billing 
statement if he can provide documentation that verifies his 
household income. In addition, this letter describes the type of 
documentation (also described in the instructions to U's FAP 
application form) that B needs to provide to complete his FAP 
application. By August 30, B has not provided the missing 
documentation. U sends B a written notice on August 30 informing him 
about the ECAs U (or any other authorized party) may initiate 
against B if B does not submit the missing documentation or pay the 
amount due by September 29 (240 days after the first billing 
statement was provided on February 1 and the last day of the 
application period). B fails to provide the missing documentation by 
September 29. U has made reasonable efforts to determine whether B 
is FAP-eligible, and thus many engage in ECAs against B, as of 
September 30.

    (4) Complete FAP applications--(i) In general. With respect to any 
care provided by a hospital facility to an individual, if the 
individual submits a complete FAP application during the application 
period, the hospital facility will have made reasonable efforts to 
determine whether the individual is FAP-eligible only if the hospital 
facility does the following in a timely manner--
    (A) Suspends any ECAs against the individual as described in 
paragraph (c)(5) of this section;
    (B) Makes and documents a determination as to whether the 
individual is FAP-eligible;
    (C) Notifies the individual in writing of the eligibility 
determination (including, if applicable, the assistance for which the 
individual is eligible) and the basis for this determination;
    (D) If the hospital facility determines the individual is FAP-
eligible, does the following--
    (1) Provides the individual with a billing statement that indicates 
the amount the individual owes as a FAP-eligible individual and shows, 
or describes how the individual can get information regarding, the AGB 
for the care and how the hospital facility determined the amount the 
individual owes as a FAP-eligible individual;

[[Page 38168]]

    (2) If the individual has made payments to the hospital facility 
(or any other party) for the care in excess of the amount he or she is 
determined to owe as a FAP-eligible individual, refunds those excess 
payments; and
    (3) Takes all reasonably available measures to reverse any ECA 
(with the exception of a sale of debt) taken against the individual to 
collect the debt at issue; such reasonably available measures generally 
include, but are not limited to, measures to vacate any judgment 
against the individual, lift any lien or levy on the individual's 
property, and remove from the individual's credit report any adverse 
information that was reported to a consumer reporting agency or credit 
bureau.
    (ii) Determination based on complete FAP applications. If a 
hospital facility has met the requirements described in paragraph 
(c)(4)(i) of this section and not violated the anti-abuse rule 
described in paragraph (c)(4)(iii) of this section, the hospital 
facility has made reasonable efforts to determine whether the 
individual is FAP-eligible and may initiate or resume ECAs against the 
individual. To have made reasonable efforts to determine the FAP-
eligibility of an individual who has submitted a complete FAP 
application during the application period, the hospital facility must 
meet the requirements described in this paragraph (c)(4) regardless of 
whether the hospital facility has previously made such reasonable 
efforts under paragraphs (c)(2)(iii) or (c)(3)(iii) of this section.
    (iii) Anti-abuse rule for complete FAP applications. A hospital 
facility will not have made reasonable efforts to determine whether an 
individual is FAP-eligible if the hospital facility bases its 
determination that the individual is not FAP-eligible on information 
that the hospital facility has reason to believe is unreliable or 
incorrect or on information obtained from the individual under duress 
or through the use of coercive practices. For purposes of this 
paragraph (c)(4)(iii), a coercive practice includes delaying or denying 
emergency medical care to an individual until the individual has 
provided the requested information.
    (iv) Presumptive eligibility permitted. A hospital facility will 
have made reasonable efforts to determine whether an individual is FAP-
eligible if the hospital facility determines that the individual is 
eligible for the most generous assistance (including free care) 
available under the FAP based on information other than that provided 
by the individual as part of a complete FAP application and the 
hospital facility meets the requirements described in paragraph 
(c)(4)(i) of this section.
    (v) Examples. The following examples illustrate this paragraph 
(c)(4):

    Example 1. V is a hospital facility with a FAP under which the 
specific assistance for which an individual is eligible depends 
exclusively upon that individual's household income. The most 
generous assistance offered for care under V's FAP is 90 percent off 
of gross charges up to a maximum amount due of $1,000. On March 3, 
D, an individual, receives care from V, the gross charges for which 
are $500. Although D does not submit a FAP application to V, V 
learns that D is eligible for certain benefits under a state program 
that bases eligibility on household income. Based on this knowledge, 
V determines that D is eligible under V's FAP to receive the most 
generous assistance under the FAP, resulting in D owing $50 (90 
percent off of the $500 in gross charges) for the March 3 care. V 
documents this determination, and, on March 21, sends D a billing 
statement that informs him that V determined he was eligible for the 
90% discount based on his eligibility for the benefits under the 
state program and the fact that his bill, after the discount, was 
not more than $1,000. This billing statement indicates an amount 
owed of $50, shows that V arrived at $50 by applying a 90 percent 
discount to the gross charges for the care, and provides a telephone 
number D can call to obtain the AGB for the care he received. V has 
made reasonable efforts to determine whether D is FAP-eligible as of 
March 21.
    Example 2. Individual C receives care from hospital facility W 
on September 1. W has established a FAP that provides assistance 
only to individuals whose family income is less than or equal to x% 
of the Federal Poverty Level (FPL), which, in the case of C's family 
size, is $y. Upon discharge, W's staff gives C a plain language 
summary of the FAP and a FAP application form and informs C that if 
she needs assistance in filling out the form, W has a social worker 
on staff who can assist her. C expresses interest in getting 
assistance with a FAP application while she is still on site and is 
directed to K, one of W's social workers. K explains the eligibility 
criteria in W's FAP to C, and C realizes that to determine her 
family income as a percentage of FPL she needs to look at her prior 
year's tax returns. On September 20, after returning home and 
obtaining the necessary information, C submits a FAP application to 
W that contains all of the information and documentation required in 
the FAP application form instructions. W's staff promptly examines 
C's FAP application and, based on the information and documentation 
therein, determines that C's family income is well in excess of $y. 
On October 1, W sends C her first billing statement for the care she 
received on September 1. With the billing statement, W includes a 
letter informing C that she is not eligible for financial assistance 
because her FAP application indicates that she has family income in 
excess of x% of FPL ($y for a family the size of C's family) and W 
only provides financial assistance to individuals with family income 
that is less than x% of FPL. W has made reasonable efforts to 
determine whether C is FAP-eligible as of October 1.
    Example 3. E, an individual, receives care from P, a hospital 
facility, in February. P provides E with the first billing statement 
for the care on March 1. P notifies E about its FAP as described in 
paragraph (c)(2)(i) of this section, but E fails to submit a FAP 
application by P's specified deadline of June 30 (120 days after the 
initial March 1 billing statement and the last day of the 
notification period). In September, P seeks and obtains a judgment 
against E, in which the court determines that E owes P $1,200 for 
the care P provided and states that E has 30 days to pay this 
amount. E does not pay any of the $1,200 in 30 days. By October 20, 
P has seized E's bank account and obtained a total of $450 in funds 
from the account. E submits a complete FAP application to P on 
October 20, before the last day of the application period on October 
27 (240 days after the initial March 1 billing statement). Upon 
receiving this application, P does not seize any additional funds 
from E's bank account and also does not initiate any additional ECAs 
against E. P promptly examines the application and determines that E 
is eligible under P's FAP to receive a discount that results in E 
only owing $150 for the care she received. P also determines that 
the AGB for the care is $500. P documents this determination, seeks 
to vacate the judgment against E, lifts the levy on E's bank 
account, and sends E a letter that informs her about the FAP 
discount for which she is eligible and explains the basis for this 
eligibility determination. P includes with this letter a check for 
$300 (the $450 that P seized from E's bank account minus the $150 
that E owes as a FAP-eligible individual) and a billing statement 
that indicates a $300 refund, shows how P applied the FAP discount 
for which E is eligible to arrive at an amount owed of $150, and 
states that the AGB for the care is $500. P has made reasonable 
efforts to determine whether E is FAP-eligible.
    Example 4. R, a hospital facility, has established a FAP that 
provides financial assistance only to individuals whose family 
income is less than or equal to x% of the Federal Poverty Level 
(FPL), as based on their prior year's federal tax return. Individual 
L receives care from R. While L is being discharged from R, she is 
approached by M, an employee of a debt collection company that has a 
contract with R to handle all of R's patient billing. M asks L for 
her family income information, telling L that this information is 
needed to determine whether L is eligible for financial assistance. 
L tells M that she does not know what her family income is and would 
need to consult her tax returns to determine it. M tells L that she 
can just provide a ``rough estimate'' of her family income. L states 
that her family income may be around $y, an amount slightly above 
the amount that would allow her to qualify for financial assistance. 
M enters $y on the income line of a FAP application form with L's 
name on it and marks L as not FAP-eligible. Based on M's information 
collection, R determines that L is not FAP-eligible and notifies L 
of this determination with her first billing

[[Page 38169]]

statement. Because M had reason to believe that the income estimate 
provided by L was unreliable, R has violated the anti-abuse rule 
described in paragraph (c)(4)(iii) of this section. Thus, R has not 
made reasonable efforts to determine whether L is FAP-eligible.

    (5) Suspending ECAs while a FAP application is pending. If an 
individual submits a complete or incomplete FAP application during the 
application period, the hospital facility will have made reasonable 
efforts to determine whether the individual is FAP-eligible only if the 
hospital facility does not initiate any ECAs, or take further action on 
any previously-initiated ECAs, against the individual after receiving 
the application and until either--
    (i) The hospital facility has met the requirements described in 
paragraph (c)(4) of this section; or
    (ii) In the case of an incomplete FAP application, the completion 
deadline has passed without the individual having completed the FAP 
application.
    (6) Waiver does not constitute reasonable efforts. For purposes of 
this paragraph (c), obtaining a signed waiver from an individual, such 
as a signed statement that the individual does not wish to apply for 
assistance under the FAP or receive the information described in 
paragraphs (c)(2) or (c)(3) of this section, will not constitute a 
determination of FAP-eligibility and will not satisfy the requirement 
to make reasonable efforts to determine whether the individual is FAP-
eligible before engaging in ECAs against the individual.
    (7) Agreements with other parties. If a hospital facility refers or 
sells an individual's debt to another party during the application 
period, the hospital facility will have made reasonable efforts to 
determine whether the individual is FAP-eligible only if it first 
obtains (and, to the extent applicable, enforces) a legally binding 
written agreement from the party that--
    (i) In the case of any debt referred to the party during the 
notification period, the party will refrain from engaging in ECAs 
against the individual until the hospital facility has met (and 
documented that it has met) the requirements necessary to have made 
reasonable efforts under paragraph (c)(2)(iii), (c)(3)(iii), or 
(c)(4)(ii) of this section;
    (ii) If the individual submits a FAP application during the 
application period, the party will suspend any ECAs against the 
individual as described in paragraph (c)(5) of this section;
    (iii) If the individual submits a FAP application during the 
application period and the hospital facility determines the individual 
to be FAP-eligible, the party will do the following in a timely 
manner--
    (A) Adhere to procedures specified in the agreement that ensure 
that the individual does not pay, and has no obligation to pay, the 
party and the hospital facility together more than he or she is 
required to pay as a FAP-eligible individual; and
    (B) If applicable and if the party (rather than the hospital 
facility) has the authority to do so, takes all reasonably available 
measures to reverse any ECA (other than the sale of a debt) taken 
against the individual as described in paragraph (c)(4)(i)(D)(3) of 
this section; and
    (iv) If the party refers or sells the debt to yet another party 
during the application period, the party will obtain a written 
agreement from that other party including all of the elements described 
in this paragraph (c)(7).
    (8) Clear and conspicuous placement. A hospital facility may print 
any written notice or communication described in this paragraph (c), 
including any plain language summary of the FAP, on a billing statement 
or along with other descriptive or explanatory matter, as long as the 
required information is conspicuously placed and of sufficient size to 
be clearly readable.


Sec.  1.501(r)-7  Effective/applicability dates.

    (a) Statutory effective/applicability date--(1) In general. Except 
as provided in paragraph (a)(2) of this section, section 501(r) applies 
to taxable years beginning after March 23, 2010.
    (2) Community health needs assessment. The requirements of section 
501(r)(3) apply to taxable years beginning after March 23, 2012.
    (b) Effective/applicability date of regulations. The rules of Sec.  
1.501(r)-1 and Sec. Sec.  1.501(r)-4 through 1.501(r)-6 apply to 
taxable years beginning on or after the date these regulations are 
published as final regulations in the Federal Register.

Sarah Hall Ingram,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-15537 Filed 6-22-12; 11:15 am]
BILLING CODE 4830-01-P