responding to final 501(r) regulations for tax-exempt hospitals.

To fully comply with the IRS's final regulations for maintaining tax-exempt status, hospitals must: Adhere to the requirements related to community health needs assessments. Develop a strategy for complying with the extensive requirements regarding financial assistance policies (FAPs). Determine how they will calculate amounts generally billed,which is the maximum FAP-eligible individuals can be charged for emergency or other medically necessary care. Establish FAP eligibility prior to engaging in any extraordinary collections actions.

Preparing for section 501(r).

Steps hospitals should take to prepare for Section 501(r) requirements include the following: Prepare the board for its role in approving updated financial assistance, billing and collections, and emergency medical care policies. Revisit financial assistance policy eligibility requirements. Conduct a policy gap analysis. Review how the current financial assistance policy is publicized and make adjustments where necessary.

A Form 990 Schedule H conundrum: how much of your bad debt might be charity?

IRS Form 990 Schedule H requires hospitals to estimate the amount of bad debt expense attributable to patients eligible for charity under the hospital's charity care policy. Responses to Schedule H, Part III.A.3 open up the entire patient collection process to examination by the IRS, state officials, and the public. Using predictive analytics can help hospitals efficiently identify charity-eligible patients when answering Part III.A.3.

Strategies for accurate community benefit reporting.

Steps a hospital can take to ensure it receives full credit for the community benefit it provides include: Ensuring that community benefit spending is reported as expense on the books of the organization that operates the hospital; Verifying that the ratio of net community benefit expense divided by total expense accurately depicts the organization's charitable activities; Reviewing all contracts and arrangements between the hospital and other entities to assess whether documentation supports that community benefit is being provided; Ensuring that "what counts" criteria are met.

Drivers of expenditure growth in outpatient care services.

OBJECTIVE: To identify and analyze drivers of costs for healthcare services delivered in outpatient settings. STUDY DESIGN: We estimated 2 regression models of state-level annual outpatient expenditures. The first model uses data on operating costs for hospital outpatient services from hospital cost reports. The second model uses outpatient claims data from a large, national, group health insurer, and covers all varieties of outpatient providers for a specific insured population. RESULTS: Several different cost drivers affected the growth of outpatient costs in the late 1990s. Foremost among the drivers is the change associated with demographics and general economic conditions, and economy-wide inflation, which together accounted for 60% of the growth in outpatient costs. Characteristics directly related to the healthcare sector had a smaller, but still significant role in cost growth. The supply of physicians and specialists accounted for 10% of cost growth, whereas supply and structure of outpatient facilities were responsible for an additional 5% of outpatient cost increase. The health status of the population was associated with 8% of expenditure growth; technology and treatment practices accounted for 7% of growth; and provider operating costs, such as wage levels, were linked to 9% of the growth. CONCLUSIONS: Some level of growth in outpatient care spending may be cost effective, because outpatient services can substitute for more expensive care in other settings. Strategies for limiting growth in the costs of outpatient care will be more effective if focused on enhancing cooperation between payers, providers, and other stakeholders in assuring an appropriate and cost-effective supply of outpatient care resources.

Drivers of healthcare expenditures associated with physician services.

OBJECTIVE: To identify and rank the key contributors to increases in healthcare costs for physician services. STUDY DESIGN: We performed regression analysis using state-level physician cost data from the state health expenditure accounts maintained by the Centers for Medicare and Medicaid Services (CMS) and a national, private (commercial) health insurer. RESULTS: We estimated that during 1990 to 2000, nominal physician expenditures per capita grew 4.7% annually. Forty-two percent of this growth was attributable to general price inflation measured by the gross domestic product price deflator. The category of general economic variables and demographics was the next largest contributor to growth at 17%, followed by physician supply and provider structure (12%) and technology and treatment patterns (11%). Operating costs, health status, healthcare regulation, and health insurance benefit and product design comprised the remaining 18% of the growth. CONCLUSIONS: Because physicians are central to the healthcare system in the United States, efforts to contain physician spending reverberate through all healthcare services. The combined effect of an increase in the number and proportion of specialty care physicians, the continued development of clinical approaches for the control of chronic disease, and an aging population requiring intensive medical care imply that the current increase in healthcare expenditures could continue unabated, unless effective cost-control devices are deployed. To be effective, emerging strategies for influencing the affordability of healthcare services are likely to require a greater level of partnership between payers, providers, and other stakeholders.