Feds Crack Down on Nonprofit Hospitals that Collect Bills Too Aggressively

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Collecting Money

December 29, 2014; The Hill

Big nonprofit medical centers in the U.S. are facing new regulations from the Affordable Care Act in 2015, as the focus on making healthcare more affordable and coverage more transparent continues in Year Two.

The federal government is going after nonprofit hospitals that are guilty of harsh collection practices and steep charges for the uninsured, according to The Hill, which covers Washington politics.

The Internal Revenue Service announced last Monday that it would require nonprofit hospitals to “take an active role in improving the health of the communities” by making payment methods more fair and costs more transparent, according to the report.

“For hospitals to be tax-exempt, they should be held to a higher standard,” the Department of the Treasury explained in a blog post announcing the rules, which resulted from complaints that some hospitals sought payments aggressively—even, on occasion, in emergency rooms. The IRS told The Hill that the practice “highlighted the need for clear rules to protect patients.”

If a hospital fails to follow the new rules, considered “the final step in Obamacare’s rules for nonprofit hospitals,” it could lose its tax-exempt status.

About half of the hospitals in America are nonprofits and are required to offer some level of charitable health services to the underserved in their communities. But, some of the big prestigious nonprofit medical centers have been criticized as “for-profits in disguise.” Their tax-exempt status costs state and local governments millions of dollars in lost taxes; some localities seek compensation in the form of PILOTS, or payments in lieu of taxes.—Larry Kaplan