As new rules have been recently published regarding the requirements facing nonprofit hospitals due to the IRS Form 990, Schedule H, many hospitals may realize that they are not always taking the best approach to community benefit through presumptive charity and misclassifying a great number of charity-eligible patients.
Steve Levin, CEO of Connance, a healthcare revenue cycle solutions company, spoke about a number of risks to using presumptive charity and how to proactively identify patients living in poverty, as well as how to approach the charity care challenge in a strategic manner, during an interactive webinar on Wednesday.
Levin said during the webinar that over the past decade, state governments have increased pressure to prove a nonprofit hospital's status, and the IRS has objectified community benefits under the Form 990, Schedule H rules, as well as making their policies publicly available and defined. Starting in 2014, nonprofit hospitals that fail to meet Community Health Needs Assessments as required by the IRS will be subject to a $50,000 excise tax per hospital per year of non-compliance. In addition, those hospitals would lose their federal tax exemption status for the years of non-compliance.
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"This whole world of charity care and services is becoming even more important and picking up relevance in its role in community health and needs," he said.
According to Levin, a significant volume of charity is ending up in bad debt, which is generating little cash, diluting agency efforts and raising their costs, creating patient satisfaction risks and exposing healthcare providers to compliance risks. In fact, according to a Healthcare Finance Management Association study, nationally 25 percent of accounts in bad debt qualify for charity classification.
Part of the problem, said Levin, is that there are many unique characteristics of those living in poverty, which can often make it a challenge to classify them for charity care. He said that one in five consumers are functionally illiterate and cannot complete an application process, and more than 85 percent of the consumers estimated to have an income of less than $35,000 actually have incomes less than $50,000.
[See also: Charity care hammers hospital bottom lines]
Levin said in order to activate an exceptional charity care program, it all starts in the hospital's core mission.
"Institutions must commit to outreach efforts to deliver charity care; commit to a process that is fair and equitable; strive to eliminate barriers to the poorest and most inaccessible; commit to be proactive, not simply reactive; be accountable for performance; build a process that is consistent; and support the efforts defined in the Community Health Needs Assessment," he said.
According to Levin, as far as technology and analytics processes go, it must be remembered that charity eligibility and an account's collectability must remain as independent analytics.
"Different analytics are appropriate because a low propensity to pay does not mean charity. The analytics must be deployed specifically," he said.
In addition, when it comes to using analytics, making charity acceptance based on estimated income alone often over qualifies many patients.
"Ask yourself: what was our charity care analytic model built to predict? What data is utilized and will that be useful for the very young, very poor and the homeless? Is the application calibrated to the local economy and the hospital's historical policy? Is the decision for presumptive charity based on multiple rules? What is my risk in over-qualifying?" he added.
[See also: Charity Care Solutions]