The bill is the gross charge. Federal law says that is not what an eligible patient pays.

A hospital bill arrives at what the tax rules call the gross charge: the list price, before any insurer has negotiated it down and before anything has been discounted. Almost nobody with insurance pays that figure. It is nonetheless the number printed on the statement.

For a hospital that is tax-exempt, federal law attaches four conditions to that exemption, and three of them are about the bill. The hospital must have a written financial assistance policy. It must limit what it charges a patient who qualifies under that policy. And it must not take certain collection actions before making reasonable efforts to work out whether the patient qualifies.

These are conditions of remaining tax-exempt, which is what gives them their force. A hospital organization that fails them for a given facility is not treated as exempt with respect to that facility.

That is the shape of the rule rather than a prediction about outcomes. The regulations also contain a correction regime: minor omissions and errors that are inadvertent and promptly corrected are treated as no failure at all, and a failure that is neither willful nor egregious can be excused where the hospital corrects and discloses it. The obligations below are real; losing an exemption over one of them is rare.

The rules described here are federal and apply the same way in every state. Many states impose their own charity care obligations on top, and some of those reach hospitals that federal law does not, so the state position is worth asking about separately and is not covered here.

This guide is educational information. It is not legal, tax or financial advice.

The requirement applies to a hospital organization exempt under the charitable provision of the tax code, meaning an organization that operates a facility a state requires to be licensed, registered or similarly recognized as a hospital. It also reaches any other organization the Treasury determines has the provision of hospital care as its principal function.

Two groups sit outside it entirely: for-profit hospitals, which have no exemption to condition, and government hospitals operated directly by a state or a local authority, which are exempt on a different basis.

Facility by facility

Where an organization operates more than one hospital facility, the law says it must meet the requirements separately with respect to each one, and that it is not treated as exempt with respect to any facility for which they are not separately met.

The practical consequence is that a policy is a document belonging to a hospital, not to a brand. Two hospitals in the same system can have different eligibility thresholds, different discounts and different application forms, and the one that matters is the one where the care was given.

The written financial assistance policy has to include five things:

• Eligibility criteria, and whether the assistance is free care or discounted care.
• The basis for calculating amounts charged to patients.
• The method for applying for financial assistance.
• What the hospital may do on non-payment, including collections action and reporting to credit agencies, where the hospital does not have a separate billing and collections policy.
• Measures to widely publicize the policy within the community the hospital serves.

The last one is worth pausing on. Publicizing the policy is not a courtesy; it is a statutory element of the policy itself. A hospital whose assistance is invisible to its own patients is not complying with a lesser part of the rule.

The regulations put a measurable floor under it. A hospital has to translate the policy, the application form and the plain language summary into the language of every limited English proficiency group that makes up the lesser of 1,000 individuals or 5 percent of the community it serves. Where a household's first language meets that threshold, translated documents are something to ask for rather than something to hope for.

The separate emergency care policy

Alongside it the hospital must have a second written policy, requiring it to provide care for emergency medical conditions without discrimination, and to do so regardless of whether the person is eligible under the financial assistance policy.

The regulations give that policy more content than the statute does. An emergency medical care policy does not comply unless it prohibits the hospital from actions that discourage people from seeking emergency care. Two examples are named in the regulation itself: demanding that emergency department patients pay before receiving treatment for an emergency condition, and permitting debt collection activities that interfere with providing emergency care without discrimination.

For emergency or other medically necessary care given to a person eligible under the policy, the hospital must limit the amount charged to not more than the amounts generally billed to individuals who have insurance covering such care. Separately, it must prohibit the use of gross charges.

That second clause is the one that does the visible work. The list price is not merely a starting point for negotiation for someone who qualifies; using it is prohibited.

How the ceiling is worked out

The regulations allow two methods. The look-back method takes the hospital's claims allowed by Medicare, or by Medicare together with private insurers, over a past twelve month period and expresses them as a percentage of the hospital's gross charges for those same claims. The prospective Medicare method instead estimates what Medicare and the patient together would be allowed for the care.

The regulation's own worked example shows a hospital calculating one percentage for inpatient services and a different one for outpatient services from the same exercise, and the two come out far apart. Those figures are the regulation's illustration rather than any real hospital's, and the point they make is structural: the discount is a computed percentage of gross charges, it differs by hospital, and it can differ between inpatient and outpatient care at the same hospital.

Care that is neither emergency nor medically necessary

The ceiling on charges applies to emergency and other medically necessary care. For any other care covered by the policy, the rule is weaker but not absent: the charge must be less than gross charges.

The statute says a hospital must not engage in extraordinary collection actions before making reasonable efforts to determine whether the person is eligible for assistance. The regulations then define what an extraordinary collection action is, and the definition is a closed list rather than a standard.

Against a person, in relation to a bill for care covered by the policy, these are extraordinary collection actions:

• Selling the debt to another party, unless the sale is made under a written agreement meeting conditions set out in the regulation.
• Reporting adverse information about the person to consumer credit reporting agencies or credit bureaus.
• Deferring or denying care, or requiring a payment before providing medically necessary care, because of nonpayment of one or more earlier bills.
• Any action requiring legal or judicial process, including placing a lien on property, foreclosing on real property, attaching or seizing a bank account or other personal property, commencing a civil action, causing an arrest, causing a writ of body attachment, and garnishing wages.

The third item carries a presumption written into the regulation. Where a hospital requires a payment before providing medically necessary care to someone with outstanding bills, that requirement is presumed to be because of the nonpayment unless the hospital can show it was based on factors other than, and without regard to, the unpaid bills.

The regulations set out what reasonable efforts means, and most of it is measured in days from a single event: the date the hospital provides the first post-discharge billing statement for the care.

The two longer periods do different jobs and are often confused. The 120 days is a shield against collection. The 240 days is a window to apply, and it runs to twice as long. An application made in month seven, after a bill has already gone to collection, can still be inside the period the hospital is required to process.

Where a hospital aggregates bills from several episodes of care before acting, the 120 days runs from the first post-discharge billing statement for the most recent episode in that aggregation, not the oldest.

The one collection action the shield does not cover

The 120 day period covers three of the four actions in Part 5. It expressly excepts the third one: deferring or denying care, or requiring payment before providing medically necessary care, because of an earlier unpaid bill.

For that action the hospital may give notice of less than 30 days, provided it hands over an application form and a written notice setting a deadline no earlier than the later of 30 days after that notice or 240 days after the first post-discharge bill.

What filing the form obliges the hospital to do

This is the part that makes applying worth doing even where the outcome is uncertain. Where a complete application arrives during the application period, the hospital has to do all of the following:

• Suspend any extraordinary collection actions already under way.
• Decide whether the person is eligible and notify them in writing, including the basis for the decision.
• If eligible for anything other than free care, provide a billing statement showing the amount owed as an eligible individual and how that amount was worked out.
• Refund any amount already paid that exceeds what the person is now determined to owe, including money paid to a party the hospital referred or sold the debt to, unless the excess is under a small threshold currently set at $5 and changeable by published guidance.
• Take all reasonably available measures to reverse any extraordinary collection action already taken, with the debt sale and deny-care actions treated separately.

An incomplete application is not nothing either. It also requires the hospital to suspend collection actions, and to send written notice describing the further information or documents needed, together with contact details for help completing it.

The usual route is an application. It is not the only one. The regulations provide for presumptive eligibility, where a hospital determines that someone is eligible for assistance without any application at all, on the strength of information it already holds or can obtain.

The regulation's own example is a hospital that learns a patient qualifies for benefits under a state program that bases eligibility on household income, presumptively determines the patient is eligible for free care on that basis, and notifies the patient that nothing is owed. On those facts the hospital has made reasonable efforts.

Why this matters even where a form has been filed

Presumptive eligibility often produces the hospital's least generous discount rather than its most generous, because it is based on partial information. The regulations deal with that: where a hospital presumptively determines someone eligible for less than the most generous assistance available, it must still give that person a reasonable opportunity to apply for more, and must consider a complete application received within the application period.

Two things follow for anyone holding a large hospital bill. Assistance can arrive without being applied for, so a notice reducing a bill is worth reading rather than filing. And an amount already reduced can sometimes be reduced further.

The kind of hospital, the date of the first bill and the three documents settle most of this. Everything else follows from them.

• Find out whether the hospital is a nonprofit, a for-profit or a government hospital. Only the first is covered by these federal rules, though state law may reach the others.
• Write down the date of the first bill received after leaving hospital. Both federal periods run from it.
• Ask in writing for three named documents: the financial assistance policy, its plain language summary, and the application form.
• Ask which hospital facility the care was given at, and get that facility's policy rather than the system's general page. The requirements apply facility by facility.
• Apply even where there is insurance. The ceiling on charges is defined by what insured patients are billed, so coverage does not put anyone outside the policy.
• Apply even if the bill has already gone to collection. The application period runs to at least the 240th day after that first bill.
• If a discount has already been applied without an application, ask whether it was a presumptive determination and what the most generous assistance under the policy would be.
• Apply even if the bill has already been paid. A successful application requires the hospital to refund anything paid above what an eligible patient owes, including to a debt buyer.
• Send whatever is ready rather than waiting for a complete file. An incomplete application still suspends collection actions and obliges the hospital to write and say what else it needs.
• If the household's first language is spoken by 1,000 people or 5 percent of the community, ask for the translated policy, form and summary.
• If the hospital has reported the debt to a credit bureau, sold it, sued, or required payment before further care, ask in writing what reasonable efforts it made to determine eligibility before doing so.
• Keep the emergency care policy in mind separately. Care for an emergency medical condition is owed without discrimination and regardless of eligibility for assistance.
• Ask the state hospital regulator or attorney general's office what the state requires. Several states go further than the federal rules and reach hospitals the federal rules do not.

The four conditions attached to a hospital organization's tax exemption
26 U.S.C. 501(r)(1). Retrieved September 5, 2026.

Which hospital organizations are covered, and that the requirements apply separately to each hospital facility
26 U.S.C. 501(r)(2)(A) and (B). Retrieved September 5, 2026.

The five elements of the financial assistance policy, including measures to widely publicize it, and the separate emergency medical care policy
26 U.S.C. 501(r)(4)(A) and (B). Retrieved September 5, 2026.

Charges limited to not more than the amounts generally billed to insured individuals, and the prohibition on using gross charges
26 U.S.C. 501(r)(5). Retrieved September 5, 2026.

No extraordinary collection actions before reasonable efforts to determine eligibility
26 U.S.C. 501(r)(6). Retrieved September 5, 2026.

The two methods for calculating amounts generally billed, and the rule that other covered care must be charged at less than gross charges
26 CFR 1.501(r)-5(a) and (b). Retrieved September 5, 2026.

The definition of an extraordinary collection action, and the presumption where payment is required before further care
26 CFR 1.501(r)-6(b)(1). Retrieved September 5, 2026.

What a complete application obliges the hospital to do: suspend collection, decide and give reasons in writing, provide a billing statement, refund anything overpaid, and reverse collection actions already taken
26 CFR 1.501(r)-6(c)(6). Retrieved September 5, 2026.

Incomplete applications also suspend collection and require written notice of what else is needed
26 CFR 1.501(r)-6(c)(5). Retrieved September 5, 2026.

The emergency policy must prohibit actions that discourage people from seeking emergency care, including demanding payment before treatment
26 CFR 1.501(r)-4(c)(2). Retrieved September 5, 2026.

Translation for each limited English proficiency group of the lesser of 1,000 individuals or 5 percent of the community
26 CFR 1.501(r)-4(b)(5)(ii). Retrieved September 5, 2026.

Minor and inadvertent errors promptly corrected, and excusing a failure that is neither willful nor egregious
26 CFR 1.501(r)-2. Retrieved September 5, 2026.

Presumptive eligibility, and the opportunity to apply for more generous assistance
26 CFR 1.501(r)-6(c)(2). Retrieved September 5, 2026.

At least 120 days before an extraordinary collection action, 30 days written notice identifying the intended actions, and the rule for aggregated bills
26 CFR 1.501(r)-6(c)(3) and (c)(4). Retrieved September 5, 2026.

The application period, ending no earlier than the 240th day after the first post-discharge billing statement, and that a hospital may accept an application outside it
26 CFR 1.501(r)-1(b)(3). Retrieved September 5, 2026.