The Hilltop Institute logo


News from The Hilltop Institute at UMBC

IRS Issues Final Rules for Charitable Hospitals under the Affordable Care Act

On December 31, 2014, the Internal Revenue Service (IRS) published final rules implementing the “Additional Requirements for Charitable Hospitals” section of the Affordable Care Act (ACA). These rules relate to tax-exempt hospitals’ community health needs assessments (CHNAs); financial assistance policies (FAPs); and hospital charges, billing, and collection practices. Proposed rules addressing these ACA provisions have been pending since 2012 and 2013.

In summary, the final rules:

  • Allow tax-exempt hospital organizations operating more than one facility under a single license to submit a joint CHNA for the system. §1.501(r)-1
  • Retain the three-year CHNA cycle but provide tax-exempt hospitals more time to adopt an implementation strategy. §1.501(r)-3
  • Impose a new requirement that a CHNA report include an evaluation—as opposed to a “plan to evaluate”—of the impact of any actions taken by a tax-exempt hospital to address significant  health needs identified in the hospital’s most recent CHNA. §1.501(r)-3
  • Clarify that the health needs a tax-exempt hospital may consider in its CHNA include not only the need to address financial and other barriers to care but also the need to prevent illness, to ensure adequate nutrition, or to address social, behavioral, and environmental factors that influence health in the community. §1.501(r)-3
  • Require hospitals to provide written translations of FAP documents in the language spoken by each Limited English Proficiency language group that constitutes the lesser of 1,000 individuals, or 5 percent of the community served by the hospital facility or the population likely to be affected or encountered by the hospital facility. §1.501(r)-4
  • Maintain the requirement that a tax-exempt hospital must “widely publicize” its FAP. However, the final rules now require a hospital facility to make a reasonable effort to orally notify an individual about the hospital’s FAP and explain how to obtain assistance with the FAP application process at least 30 days before initiating “extraordinary collection activities,” such as reporting a debt to a collection agency, selling it to a third party, or garnishing wages. §1.501(r)-6
  • Provide that the IRS will consider all relevant facts and circumstances in determining whether to revoke §501(c)(3) status for failure to meet one or more requirements of ACA §9007. §1.501(r)-2.

The final rules are effective immediately but continue to allow reliance on both the 2012 and 2013 proposed rules until a hospital organization’s first taxable year beginning after December 29, 2015.

For more information, contact Gayle Nelson (410.455.6803).

Hilltop’s Hospital Community Benefit Program is a central resource created specifically for state and local policymakers who seek to ensure that tax-exempt hospital community benefit activities are responsive to pressing community health needs. The program provides tools to state and local health departments, hospital regulators, legislators, revenue collection and budgeting agencies, and hospitals, as these stakeholders develop approaches that suit the unique needs of their communities and work toward a more accessible, coordinated, and effective community health system.


The Hilltop Institute at the University of Maryland, Baltimore County (UMBC) is a non-partisan health research organization dedicated to improving the health and wellbeing of vulnerable populations. Hilltop conducts research, analysis, and evaluations on behalf of government agencies, foundations, and nonprofit organizations at the national, state, and local levels. Hilltop is committed to addressing complex issues through informed, objective, and innovative research and analysis.

The Hilltop Institute
University of Maryland, Baltimore County
Sondheim Hall, 3rd Floor
1000 Hilltop Circle
Baltimore, Maryland 21250