501(r) and the Impact on Complex Accident Claims

Posted by Chad Powers on Sep 28, 2015 5:06:00 PM
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Minimize your Hospital’s Exposure to Financial Clawback

Recently the IRS released final regulations for 501(r) that have led to a number of questions around financial assistance and collections policies for 501(c)(3) providers. The impact of 501(r) on accident claims tends to be overlooked because accident claims typically account for less than 3% of outstanding accounts receivables. However, when managed properly, accident claim reimbursements can significantly improve financial performance. It is imperative that providers properly adhere to the new requirements defined in Section 501(r) in order to compliantly maximize revenues on accident claims and prevent potential clawbacks from FAP-eligible patients.

For motor vehicle claims, Section 501(r)’s Financial Assistance Policy (FAP) mandate deserves attention. The final regulations require hospitals to establish a written FAP for emergency and other medically necessary care. A critical component of a Section 501(r)-compliant FAP is the eligibility criteria for financial assistance. The final regulations do not mandate any particular eligibility criteria. Rather, the final regulations only require that a FAP specify the eligibility criteria for receiving financial assistance.

Key Take-Aways:

  • Review the terms and conditions set forth in your Financial Assistance Policy to assure eligibility criteria is specified
  • The Clawback Provision of Section 501(r)’s can have serious financial implications if your FAP is too broadly or too narrowly worded
  •  MRA recommends adding language to your FAP that pends or denies eligibility for financial assistance when a patient is injured in a motor vehicle accident and is pursuing a personal injury claim.

If a hospital determines that a patient is FAP-eligible, it must refund the amount the patient has paid in excess of stated FAP guidelines. Section 501(r), however does not provide a specific look-back period. The comments to the final regulations note that any refund will relate to payments “for the care” at issue, and is intended only for payments for the episode(s) of care to which an individual’s FAP application (and therefore his or her FAP-eligibility determination) relates.

For example, assume that a hospital receives payment from the third part liability insurance proceeds following settlement of a patient’s personal injury action. Later, the patient is determined to be FAP-eligible for that episode of care. If the hospital’s FAP does not expressly carve out third party liability insurance from the FAP-eligibility determination, then the hospital could find itself in the position of having to refund some or even all of the payment.

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