According to the University of California, San Francisco, emergency room visits to U.S. hospitals increased more than 23 percent from 1997 to 2007, which is double what researchers expected the rise would be based on population growth. Relatively low reimbursements to physicians who care for patients on Medicaid, the federal-state health program for the poor who meet certain criteria, were believed to be a key factor behind the increase.

This emergency room study raises concerns about the growing strain on America’s safety-net services because of the recession and the impact of the national health care overhaul law. The law will increase coverage to an estimated 16 million Americans by expanding Medicaid programs in 2014, raising questions about whether there will be enough physicians and services to accommodate them.

According to Moody’s Investors Service, the recent 0.4 percent net reduction in inpatient hospital rates announced by the Centers for Medicare and Medicaid Services for federal FY11 is “an unambiguous credit negative for not-for-profit hospitals and a key driver to our maintaining a negative outlook for the industry.” On Oct. 1, the estimated $440 million rate reduction will take place, which is an “extremely rare event.”
Besides the FY11 cuts, hospitals are also challenged with Medicaid rates, tougher negotiations with commercial payers, a sluggish economy and poor volume.

Read more about these cuts in this extended article.

The Patient Protection and the Affordable Care Act has a number of new requirements for tax-exempt hospitals. In response to a request for comments from the Internal Revenue Service, the Healthcare Financial Management Association (HFMA) has submitted comments regarding the application of certain requirements. These comments have the potential to help tax-exempt healthcare providers demonstrate that they are fulfilling their tax-exempt purpose and build upon a high standard of community service.

Additional requirements under the Affordable Care Act include the following:
- Community Health Needs Assessment (CHNA) — Effective for tax years beginning March 23, 2012.
- Financial Assistance Policy
- Limitation on Charges
- Billing and Collection

For further analysis on these additional requirements and for more information about HFMA’s comments, please click here.

According to USA Today, in 2012, self-employed workers, small businesses, charities and government agencies will be required to issue Form 1099s to every vendor from which they purchase more than $600 in goods during the year. The IRS national taxpayer advocate said that a little-known provision in the health care reform law could significantly increase tax record keeping requirements and costs.
Currently, businesses are required to provide Form 1099s for services, but not for goods. With this new rule, for example, a self-employed consultant who buys a $700 computer from an office supply store would be required to send a Form 1099 to the store and the IRS.

To read more about this click here.

The information contained in this blog is not intended to be tax advice, is of a general nature, and is based on authorities that are subject to change. Application to your specific situation should be determined in consultation with your tax advisor. IRS Circular 230 Disclosure: Any tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein.

The Healthcare Financial Management Association says the HITECH Act has expanded the financial risk for hospitals that do not meet the privacy and security requirements under the Health Insurance Portability and Accountability Act (HIPAA). HIPAA mandates certain privacy and security protections to encourage the realization of administrative efficiencies through healthcare information technologies. The HITECH Act expands the financial risk of violations of HIPAA and extends HIPAA procedures and penalties to business associates. Compliance efforts should focus on high-risk areas, including information access management, access control, and impermissible disclosures of protected health information.

For more information about HIPAA and the HITECH Act, contact of REDW’s Information Technology Team.