Hospital Financial Assistance Programs: What Nonprofit Hospitals Must Offer by Law and Why Most Qualifying Patients Never Apply
The United States has nearly 3,000 nonprofit community hospitals. In exchange for their tax exemption, worth an estimated $28 billion in 2020 according to KFF, federal law requires each one to run a financial assistance program for patients who can’t afford their bills. The program has to be written down, publicly posted, and actively communicated, and the hospital has to check whether a patient qualifies before taking aggressive collection steps. Nonprofit hospitals provided about $16 billion in charity care in 2020.
Plenty of eligible patients never get it. A Kaiser Health News analysis of hospital tax filings found that 45% of nonprofit hospital organizations routinely billed patients whose incomes were low enough to qualify. Those hospitals reported writing off about $2.7 billion in bills that likely would have been forgiven if the patients had applied. In a 2023 survey of more than 1,600 patients by the nonprofit Dollar For, 52% said their hospital never told them financial assistance existed.
What Section 501(r) Actually Requires
The ACA added Section 501(r) to the Internal Revenue Code. It requires tax-exempt hospitals to maintain a written Financial Assistance Policy (FAP) that explains who is eligible, how to apply, and what help is available. The hospital must widely publicize it, including on its website, in the facility, and through a plain-language summary. Billing statements must carry a conspicuous notice that assistance is available.
Section 501(r) also caps what a hospital can charge an eligible patient. Someone who qualifies for assistance can’t be charged more than the hospital generally bills insured patients for the same care.
The collection rules matter most once a bill is overdue. A hospital can’t take an extraordinary collection action (ECA) until it has made reasonable efforts to determine whether the patient qualifies. ECAs include reporting to credit bureaus, selling the debt, suing, garnishing wages, placing liens, and deferring or denying future care because of an unpaid bill.
What “Reasonable Efforts” Means
The regulation sets two clocks, both starting on the date of the first bill after discharge.
The first is a 120-day notification period. The hospital can’t start an ECA until at least 120 days have passed. Before it does, it must send a written notice that assistance is available, name the specific collection actions it plans to take, and give a deadline at least 30 days out. That notice has to include the plain-language summary of the FAP. The hospital must also make a reasonable effort to tell the patient about the program verbally.
The second is a 240-day application period. The hospital must accept and process an application submitted at any point during those 240 days. If you received bills and never saw a notice about financial assistance, the hospital may not have met its obligations.
Income Eligibility: Who Qualifies
Each hospital sets its own income limits, which is why eligibility can vary between two hospitals in the same city. Many policies offer free care to patients below 200% of the federal poverty level. In 2026, that’s $31,920 for a single adult or $66,000 for a family of four. Discounted care usually extends higher. KFF found that about three in five nonprofit hospitals cap discounted care at or below 400% of the poverty level, and the rest set higher limits.
Insurance doesn’t automatically disqualify you. Many policies cover the deductibles, coinsurance, and other balances insured patients can’t pay. Read the specific hospital’s FAP before assuming you’re out.
Applying, Including After the Bill Has Gone to Collections
Applications typically ask for proof of household income, such as tax returns, pay stubs, bank statements, or benefit letters. Some hospitals use simpler screening at lower incomes.
Timing works in your favor more than most patients realize. A bill that has already gone to a billing service or a collection agency can still qualify if you apply within the 240-day window. Many hospitals accept applications well beyond that.
If an account is already in collections, apply anyway, and tell the collection agency in writing that your application is pending. Once you submit an application during the application period, the hospital must suspend collection actions while it’s reviewed, even if the application is incomplete. If you’re approved, the hospital must reverse collection actions it already took and refund anything you paid above what you owe under the policy.
Finding the Right Contact at Any Hospital
The fastest route is the hospital billing office. Ask specifically for the “Financial Assistance Policy” or a “charity care application.” Most hospitals also post both on their website. For patients who have already received a collection notice, the hospital’s financial counselors or social work staff can be a better starting point than general billing. They handle these applications regularly and can often help request a hold on the account while it’s reviewed.
If the Hospital Violated Its Obligations
If a nonprofit hospital sent your account to collections without the required notices, or refused to process an application, you can file a complaint with the IRS on Form 13909, the Tax-Exempt Organization Complaint (Referral) Form. A hospital that fails to meet the Section 501(r) requirements can lose its tax-exempt status. Include a timeline with the dates of your first bill, any notices you received, when you asked about assistance, and when collection activity began.
Sources
American Hospital Association. “Fast Facts on U.S. Hospitals.” https://www.aha.org/statistics/fast-facts-us-hospitals
KFF. “The Estimated Value of Tax Exemption for Nonprofit Hospitals Was About $28 Billion in 2020.” March 2023. https://www.kff.org/health-costs/issue-brief/the-estimated-value-of-tax-exemption-for-nonprofit-hospitals-was-about-28-billion-in-2020/
Kaiser Health News. “Patients Eligible for Charity Care Instead Get Big Bills” (republished by Truthout). 2019. https://truthout.org/articles/patients-eligible-for-charity-care-instead-get-big-bills/
Consumer Financial Protection Bureau. “Medical Debt and Non-Profit Hospital Billing Practices.” https://www.consumerfinance.gov/about-us/blog/medical-debt-and-non-profit-hospital-billing-practices/
Clear Health Costs. “Looking for hospital financial aid? Good luck” (summarizing Dollar For’s “Bridging the Chasm” report). May 2024. https://clearhealthcosts.com/blog/2024/05/looking-for-hospital-financial-aid-good-luck-and-dont-hold-your-breath/
Internal Revenue Service. “Billing and Collections – Section 501(r)(6).” https://www.irs.gov/charities-non-profits/billing-and-collections-section-501r6
Illinois Health and Hospital Association. “Summary of IRS Hospital Tax-Exemption Requirements Section 501(r) Final Rule: Billing and Collections.” https://team-iha.org/finance/charity-care-financial-assistance/billing-and-collections/
U.S. Department of Health and Human Services, ASPE. “HHS Poverty Guidelines for 2026.” https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines
KFF. “Hospital Charity Care: How It Works and Why It Matters.” https://www.kff.org/health-costs/issue-brief/hospital-charity-care-how-it-works-and-why-it-matters/
Internal Revenue Service. Form 13909, Tax-Exempt Organization Complaint (Referral). https://www.irs.gov/pub/irs-pdf/f13909.pdf
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