A section 501(r) compliance program is the written documents and steps a tax-exempt hospital keeps current under 26 CFR 1.501(r)-3 through 1.501(r)-6: a community health needs assessment (CHNA) with an adopted implementation strategy, a financial assistance policy (FAP) and emergency medical care policy, a limit on charges, and billing and collection rules. Integral Healthcare Solutions (IHS) runs the CHNA process and drafts these documents. IHS is a consulting firm, not a law firm, and this page is not legal advice.
Last updated: November 2026
What do the 501(r) rules require of a hospital facility?
Each rule is a test a hospital organization must meet for each hospital facility it operates: CHNA and implementation strategy (section -3), FAP and emergency medical care policy (-4), limit on charges (-5), and billing and collection (-6). A hospital facility is a facility a state (the 50 states and the District of Columbia) requires to be licensed, registered or similarly recognized as a hospital, and buildings under one state license are one facility (1.501(r)-1(b)(17)). This page summarizes the eCFR text of -1, -2, -3, -4, -5, -6, -7 and 26 CFR 53.4959-1 as of October 28, 2026, opened November 3, 2026. Sections -1 through -6 apply to taxable years beginning after December 29, 2015 (1.501(r)-7(a)); the 53.4959-1 excise tax applies on and after December 29, 2014 (53.4959-1(c)). Form 990 reporting and state law are not covered.
CHNA and implementation strategy (section -3)
- Window. For any taxable year, the facility must have conducted a CHNA in that year or in either of the two taxable years immediately before it, except as paragraph (d) provides for acquired, new and terminated facilities (-3(a)(1)).
- Five steps. The facility defines its community, assesses its health needs, solicits and takes into account input from persons who represent the broad interests of the community, documents the CHNA in a written report adopted for it by an authorized body (the governing body, or a committee or party it authorizes, as state law permits; -1(b)(4)(i)), and makes the report widely available to the public (-3(b)(1)).
- Required input. The facility takes into account input from all three of these: at least one state, local, tribal or regional governmental public health department (or equivalent) or a State Office of Rural Health, with relevant knowledge; members of medically underserved, low-income and minority populations, or those serving them; and written comments on its latest CHNA and strategy (-3(b)(5)(i)).
- Report. It contains the six elements in -3(b)(6)(i), including an evaluation of the impact of actions taken since the prior CHNA.
- Strategy. For each significant health need, the written plan describes how the facility plans to address it or why it does not intend to (-3(c)(1)). An authorized body adopts it on or before the 15th day of the fifth month after the end of the taxable year in which the facility completes the final CHNA step, regardless of whether work began in a prior taxable year (-3(a)(2), (c)(5)(i)).
FAP and emergency medical care policy (section -4)
- The written FAP applies to all emergency and other medically necessary care the facility provides, including care provided in it by a substantially-related entity, and is widely publicized (-4(b)(1)(i), (ii)). Its items include the eligibility criteria and whether assistance is free or discounted care, the basis for calculating charges, how to apply, and, if there is no separate billing and collections policy, the actions that may be taken on nonpayment, and a list of providers other than the facility and whether the FAP covers them (-4(b)(1)(iii)).
- Widely publicizing includes a website posting, free paper copies on request by mail and in public locations including at least the emergency room (if any) and admissions areas, and translations for limited English proficiency groups at the thresholds in -4(b)(5)(ii).
- The written emergency medical care policy must require care for emergency medical conditions, without discrimination, whether or not the person is FAP-eligible, and prohibit actions that discourage emergency care (-4(c)(1), (2)).
Limit on charges (section -5)
- A FAP-eligible individual may be charged no more than the amounts generally billed to insured individuals (AGB) for emergency or other medically necessary care, and less than gross charges for other care the FAP covers (-5(a)).
- Under the look-back method the facility calculates its AGB percentage or percentages at least annually, dividing the sum of claims allowed by permitted insurers during a prior 12-month period by the sum of the associated gross charges, and applies each by the 120th day after that period ends (-5(b)(3)(i), (iv)).
Billing and collection (section -6)
- A facility may not engage in extraordinary collection actions (ECAs) against an individual before it has made reasonable efforts to determine whether the individual is FAP-eligible. ECAs by a debt purchaser, collection agency or other party holding a referred debt, or a substantially-related entity count as the facility's own (-6(a)). ECAs include selling the debt, credit bureau reporting, deferring or denying care or requiring payment first because of unpaid bills for earlier FAP-covered care, and legal actions such as liens and suits, with carve-outs (-6(b)(1)).
- Reasonable efforts are met only by a presumptive eligibility determination under (c)(2) (if it grants less than the most generous assistance, the facility must also notify the individual and allow a reasonable time to apply for more) or by notification and application processing under (c)(3) (-6(c)(1)). The (c)(3) route requires, among other steps, notice of the FAP at least 30 days before the first ECA (a written notice with a plain language summary, plus a reasonable effort to notify the individual orally), no ECAs for at least 120 days from the first post-discharge billing statement, and processing of any FAP application received; the care-deferral ECA has exceptions to both timing rules (-6(c)(3), (c)(4)(i), (iii)).
What happens if a facility misses a requirement?
- Except as (b) and (c) provide, a hospital organization that fails a section 501(r) requirement for a facility it operates may have its section 501(c)(3) status revoked (-2(a)). A minor omission or error that is inadvertent or due to reasonable cause is not a failure if corrected as promptly as is reasonable after discovery, including by establishing or reviewing compliance practices (-2(b)(1)). A failure that is neither willful nor egregious is excused if the facility corrects and discloses under guidance published in the Internal Revenue Bulletin (-2(c)).
- Failing section 501(r)(3) for a facility in a taxable year carries a tax of 50,000 dollars for that facility and year (53.4959-1(a)(1)), in addition to any income tax on a noncompliant facility's income in a multi-facility organization (-2(d); 53.4959-1(b)(2)). Correction and disclosure under -2(c) do not remove it unless the failure is an omission or error described in and corrected under -2(b) (53.4959-1(b)(1)).
Who needs a 501(r) program and what triggers the work?
A hospital organization (one recognized or seeking recognition under section 501(c)(3) that operates a hospital facility, -1(b)(18)) needs one. These events start the work.
- Your most recent CHNA was conducted in the second taxable year before the current one, so the current year is the last it covers (-3(a)(1)).
- The organization acquires a facility, which must meet section -3 by the last day of the organization's second taxable year beginning after the acquisition date (-3(d)(1)).
How does IHS help a hospital with 501(r)?
IHS runs the CHNA process and drafts the documents sections -3 through -6 call for, and the hospital's authorized body adopts them. Thomas G. Goddard, JD, PhD, IHS founder and former URAC Chief Operating Officer and General Counsel, leads it. This program sits in the IHS Compliance Services practice line.
The process
- A gap assessment and evidence map of your documents against sections -3 to -6.
- Drafts of the report outline, strategy, policies, AGB worksheet and ECA notice templates for your authorized body to approve.
- A mock review, then readiness support through adoption and posting.
What you supply
Claims and community data, community input, adoption by your authorized body, website posting, signage, and review by your counsel.
The real limit
IHS does not give tax-exemption legal advice, adopt documents for your board or communicate with the Internal Revenue Service. Your organization and counsel handle all agency contact.
What should a hospital have ready for a 501(r) review?
- Your last CHNA report and strategy, their dates, and the authorized-body adoption records (-3(a), (b)(1)(iv), (b)(2)).
- Input records, including from a public health department or State Office of Rural Health, and proof the report is posted (-3(b)(5)(i), (b)(7)(i)).
- Your FAP, application form, plain language summary, provider list and billing and collections policy (-4(b)).
- Your emergency medical care policy, AGB method, percentages, claims data and calculation date (-4(c), -5(b)).
- ECA notice templates and collection agency contracts (-6(a), (c)(4)).
The free introductory call walks through this list.
How do the options for producing the CHNA compare?
| Option | What section -3 says |
|---|---|
| Separate report | Each facility documents its CHNA in a separate report unless it adopts a joint report (-3(b)(6)(iv)). |
| Joint report | Satisfies the report requirement if an authorized body of the facility adopts it, it meets the content requirements, it is clearly identified as applying to the facility, and all collaborators define their community the same way (-3(b)(6)(v)(A)). |
| Outside help | The report is considered to describe its process and methods if, among other things, it identifies any parties it collaborated with or contracted with for assistance (-3(b)(6)(ii)). |
What does a 501(r) program cost?
The sections opened set no filing or application fee. IHS scopes each engagement after a free introductory call.
What a 501(r) program is not
- It is not legal or tax advice. IHS is a consulting firm, not a law firm.
- It is not a guarantee of any Internal Revenue Service outcome.
Frequently asked questions
How often must a hospital conduct a CHNA?
For any taxable year, the facility must have conducted a CHNA in that year or in either of the two taxable years immediately before it, except as paragraph (d) provides for acquired, new and terminated facilities (26 CFR 1.501(r)-3(a)(1)).
By when must the implementation strategy be adopted, and by whom?
An authorized body of the facility must adopt it on or before the 15th day of the fifth month after the end of the taxable year in which the facility completes the final CHNA step (26 CFR 1.501(r)-3(a)(2), (c)(5)(i)).
Does each hospital in a system need its own CHNA report?
Each hospital facility documents its CHNA in a separate report unless an authorized body of the facility adopts a joint report that meets the conditions in (b)(6)(v) (26 CFR 1.501(r)-3(b)(6)(iv)).
What is amounts generally billed (AGB)?
AGB means the amounts generally billed for emergency or other medically necessary care to individuals who have insurance covering that care, determined under 26 CFR 1.501(r)-5(b).
When may a hospital begin extraordinary collection actions?
Only after it has made reasonable efforts to determine whether the individual is FAP-eligible (26 CFR 1.501(r)-6(a)). Those efforts are met only by a presumptive eligibility determination (with notice if it grants less than the most generous assistance) or by notification and application processing (-6(c)(1)). The notification route requires, among other steps, notice of the FAP at least 30 days before the first ECA and no ECAs for at least 120 days from the first post-discharge billing statement; care-deferral ECAs have exceptions to both (-6(c)(3), (c)(4)).
What happens if a hospital misses a 501(r) requirement?
Its section 501(c)(3) status may be revoked, subject to 26 CFR 1.501(r)-2(b) and (c). Failing section 501(r)(3), the CHNA and implementation strategy requirement, carries a 50,000-dollar tax per facility per taxable year (26 CFR 53.4959-1(a)(1)).
Can a consultant conduct our CHNA?
Section -3 contemplates outside help: the report is considered to describe its process and methods if, among other things, it identifies parties it collaborated with or contracted with for assistance (26 CFR 1.501(r)-3(b)(6)(ii)). Its authorized body adopts it.
Does IHS talk to the IRS for us?
No. IHS does not communicate with the Internal Revenue Service for you. Your organization and its counsel handle every contact with the agency.