Not only do we help healthcare providers do better business, we also help patients understand and exercise their rights.
If you or your loved one is having an issue, please feel free to address and we would be happy to either help you solve the problem or direct you to appropriate resources.
Patient Rights
Here’s a breakdown of IRS rules for nonprofit (501(c)(3)) hospitals and what they mean for your rights as a patient to charity care / financial assistance.
1. The Legal Foundation: IRS Section 501(r)
Nonprofit hospitals keep their tax‑exempt status only if they follow Section 501(r) of the Internal Revenue Code (created by the Affordable Care Act). [irs.gov], [legalclarity.org]
This law effectively ties their tax benefits to how they treat patients—especially those who cannot pay.
The 4 Core Requirements (501(r))
From the IRS perspective, nonprofit hospitals must comply with:
- Community Health Needs Assessment (CHNA) (every 3 years)
- Financial Assistance Policy (FAP) + emergency care policy
- Limits on what they can charge patients who qualify
- Fair billing & collections practices [irs.gov]
Failing to comply can lead to penalties or loss of tax‑exempt status. [legalclarity.org]
2. Required Charity Care / Financial Assistance Program
A. Hospitals MUST offer financial assistance
Every nonprofit hospital must:
- Have a written Financial Assistance Policy (FAP)
- Offer free or discounted care to qualifying patients
- Apply it to emergency and medically necessary services [ecfr.gov]
This is not optional—it’s a condition of being a 501(c)(3). [mederase.com]
B. What the Financial Assistance Policy must include
By law, the FAP has to clearly explain:
- Who qualifies (income criteria, etc.)
- Whether care is free or discounted
- How charges are calculated
- How to apply
- What happens if you don’t pay
- Which doctors/providers are covered [ecfr.gov]
It must also be:
- Widely publicized (website, paper copies, signage)
- Available in plain language and often multiple languages [crowe.com]
3. Your Key Patient Rights
1) Right to APPLY for charity care
You have the right to:
- Request the policy and application for free
- Apply for assistance even after receiving a bill
- Submit an application up to 240 days after your first bill [legalclarity.org]
👉 Important: Hospitals often don’t actively tell patients—you may need to ask.
2) Right to FREE or DISCOUNTED care (if eligible)
Eligibility is usually based on income (Federal Poverty Level).
Typical (but not mandated) ranges:
- ~0–200% FPL → free care
- ~200–400% FPL → discounted care [mederase.com]
⚠️ Hospitals set their own criteria, so benefits vary widely. [councilrep…a-assn.org]
3) Right to LIMITED charges
If you qualify:
- You cannot be charged more than what insured patients pay
- This cap is called “Amounts Generally Billed (AGB)” [legalclarity.org]
👉 This prevents nonprofit hospitals from charging inflated “list prices.”
4) Protection from aggressive collections
Nonprofit hospitals must:
- Check if you qualify for assistance before sending to collections
- Make “reasonable efforts” to determine eligibility first [irs.gov]
They generally cannot:
- Garnish wages
- Sue you
- Report to credit agencies
…until they follow these steps.
Under IRS 501(r), a nonprofit hospital must make “reasonable efforts” to see if you qualify for financial assistance before they can take aggressive actions like garnishment, lawsuits, or credit reporting. [irs.gov]
Here are those required steps in plain English:
✅ The REQUIRED steps hospitals must take (before collections)
1) Send you a bill + wait at least 120 days
- The hospital must send you a first billing statement
- Then wait at least 120 days before starting “extraordinary collection actions” (ECAs) [team-iha.org], [legalclarity.org]
👉 During this time, they are supposed to give you a chance to apply for help.
2) Notify you about financial assistance (multiple times)
They must actively inform you that help exists:
- Include a plain-language summary of the Financial Assistance Policy with bills
- Tell you how to apply
- Tell you where to get free copies of the policy/forms
[legalclarity.org]
👉 This can’t be hidden—you’re supposed to be clearly notified.
3) Give a final warning at least 30 days before collections
Before taking serious action, they must:
- Send a written notice that says:
- Financial assistance is still available
- A deadline to apply
- That collections will start if you don’t act
[team-iha.org]
👉 This is basically your “last chance” notice.
4) Accept and process applications for up to 240 days
Even after the billing starts:
- You have up to 240 days from the first bill to apply
- They must review your application fairly
[legalclarity.org]
👉 This is longer than the 120-day wait period.
5) Evaluate your eligibility BEFORE collections
They must:
- Make a good-faith effort to determine if you qualify
- Pause collections while a complete application is being reviewed
🚫 What they CANNOT do before finishing these steps
Until those steps above are completed, they cannot:
- Report you to credit bureaus
- Garnish your wages
- File a lawsuit
- Put a lien on your property
- Send debt to aggressive collections
All of those are legally defined as “Extraordinary Collection Actions (ECAs)” [content.ne…estlaw.com]
🧠 Key timing summary (this matters a lot)
| Timeframe | What happens |
|---|---|
| Day 0 | First bill sent |
| Day 0–120 | Must notify you about financial assistance |
| Before any ECA | Must send final 30-day warning |
| Up to Day 240 | You can still apply for aid |
⚠️ Real-world insight (very important)
In practice, many hospitals or collectors:
- Don’t clearly explain assistance
- Rush toward collections
- Assume patients won’t apply
But if they skip any of these steps, they may be violating federal law tied to their tax-exempt status.
✅ What this means for YOU
If a nonprofit hospital (or its collector) did any of the following:
- Sent you to collections too quickly
- Never clearly told you about financial assistance
- Didn’t give a 30-day warning
- Didn’t allow you to apply
👉 You may have grounds to challenge the debt or the collection action
5) Right to emergency care regardless of ability to pay
Under 501(r):
- Hospitals must have an emergency care policy
- They cannot delay treatment to ask about payment or eligibility [wipfli.com]
(This overlaps with EMTALA federal law.)
6) Right to access and transparency
Hospitals must:
- Post the FAP online
- Provide paper copies upon request
- Offer a plain-language summary [crowe.com]
If they don’t, they may be out of compliance.
4. Important Limitations (What the Law DOESN’T Guarantee)
Even though the program is required:
1. No single national eligibility standard
- Each hospital sets its own income thresholds and rules
- Assistance can vary dramatically between hospitals [councilrep…a-assn.org]
2. Not all hospitals are covered
- Applies only to nonprofit (501(c)(3)) hospitals
- For-profit hospitals are NOT required to offer charity care [legalclarity.org]
3. You usually must apply
- Hospitals are required to make it available, not automatically apply it
- Many eligible patients never receive it because they don’t apply [mederase.com]
5. Practical Takeaways
If you’re dealing with a hospital bill:
✅ You likely have rights if the hospital is nonprofit
✅ Ask for the “Financial Assistance Policy” immediately
✅ Apply—even if you have insurance or already got a bill
✅ Do it before 240 days from the first billing statement
✅ If collections start early, that may violate IRS rules
This area is powerful but underused—knowing these rules puts you in a much stronger position.
