Senator’s Investigation Leads Him to Call for Stronger 501(r) Scrutiny

The Chairman of the Senate Finance Committee is calling on his committee, as well as that of the Senate Judiciary Committee, to strengthen the collection practice requirements for hospitals and healthcare providers who receive non-profit status under Section 501(r) from the Internal Revenue Service. The call is based on information gathered by Sen. Chuck Grassley [R-Iowa], the chairman of the Senate Finance Committee, following published reports detailing the “aggressive” collection practices at hospital networks in Virginia and Tennessee.

Sen. Grassley sent a letter to his colleagues on both committees last week that included nearly 1,000 pages of correspondence exchanged with both healthcare providers that details their collection policies and procedures.

Under Section 501(r), non-profit hospitals must provide charity care, but does not dictate how much needs to be provided. Only 1% of of the former patients who have past due bills owed to Methodist Le Bonheur Healthcare in Tennessee received financial assistance during the collections process, out of a group of nearly 1 million individuals, according to a published report.

In his letter, Sen. Grassley noted that the behavior in question is likely not limited to the two hospitals he queried, and that more robust standards are needed.

“This inquiry unfortunately has shown that, if anything, the requirements of 501(r) need to be strengthened rather than softened,” Sen. Grassley wrote. “Stories about non-profit hospitals engaging in billing and debt-collection practices that defy the spirit of Section 501(r), at least, are not limited to the two hospitals discussed” in his inquiry.

Published reports during the past two years have spotlighted the collection practices at hospitals across the country, including those in VirginiaOklahomaNew YorkTennessee, and Maryland, each of which were all accused of being too aggressive with their collection efforts. In most cases, the aggressiveness came in the form of filing lawsuits against individuals with unpaid debts and using judgments and liens to recover money they were owed. Many hospitals stopped filing collection lawsuits and enforcing judgments as a result of the publicity.

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