Hospital Charity Care: The 501(r) Rules

Updated August 3, 2026. Quick answer: every non-profit hospital in the United States is required by federal tax law to have a written financial assistance policy, to cap what it charges people who qualify, and to hold off on collections until it has checked whether you qualify. You can apply for at least 240 days after the first bill — including after the bill has gone to collections, and including if you have insurance.

The four rules that matter, in the order they help you

1. The hospital must have a policy, in writing, and publish it

26 U.S.C. 501(r)(4) (via Cornell LII): ‘[the policy must include] eligibility criteria for financial assistance, and whether such assistance includes free or discounted care’; ‘the basis for calculating amounts charged to patients’; ‘the method for applying for financial assistance’; ‘[for organizations without a separate billing policy] the actions the organization may take in the event of non-payment’; ‘measures to widely publicize the policy within the community.’ 26 CFR 1.501(r)-4 (via Cornell CFR mirror):…

— IRC 501(r)(4)(A)-(B); 26 CFR 1.501(r)-4(a)(1), (b)(1)(iii)(A)-(D), (b)(5)

It must state who qualifies, how charges are calculated, how to apply, and what happens if you do not pay — and it must be on the hospital’s website with paper copies free on request. If you cannot find it, ask for the plain-language summary by name. Staff who handle billing every day sometimes do not know it exists.

2. If you qualify, you cannot be charged the sticker price

26 U.S.C. 501(r)(5) (via Cornell LII): ‘[the hospital] limits amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance … to not more than the amounts generally billed to individuals who have insurance covering such care’ and ‘[the hospital] prohibits the use of gross charges.’ 26 CFR 1.501(r)-5(a)(1) (via Cornell CFR mirror): hospital facilities must limit charges for FAP-eligible individuals to ‘not more than the amounts generally billed to individuals who…

— IRC 501(r)(5)(A)-(B); 26 CFR 1.501(r)-5(a)(1), (c), (d)

This is the provision worth understanding properly. A qualifying patient may not be charged more than amounts generally billed to insured patients — and the regulation prohibits the use of gross charges for that care. The chargemaster rate, the enormous number on the first statement, is precisely what a qualifying patient cannot be charged.

And the IRS is explicit that this does not distinguish between insured and uninsured patients. Having insurance does not disqualify you. A high deductible on a large hospital bill is one of the commonest situations in which people pay in full without ever asking.

3. They cannot come after you before they have checked

26 U.S.C. 501(r)(6) (via Cornell LII): the hospital ‘refrain[s] from… extraordinary collection actions before the organization has made reasonable efforts to determine whether the individual is eligible for assistance’ under the FAP. 26 CFR 1.501(r)-6(a) (via Cornell CFR mirror): ECAs are barred ‘before the hospital facility has made reasonable efforts to determine whether the individual is eligible for assistance.’ 1.501(r)-6(b)(1): ECAs include (i) ‘Selling an individual’s debt to another party’; (ii)…

— IRC 501(r)(6); 26 CFR 1.501(r)-6(a), (b)(1)(i)-(iv)

Read what counts as an extraordinary collection action: selling the debt, reporting you to credit bureaus, placing a lien, foreclosing, seizing a bank account, suing, garnishing wages — and deferring or denying medically necessary care because of an unpaid bill. None of it may happen until the hospital has made reasonable efforts to determine whether you qualify for assistance.

4. The window is long, and it runs after the bill

26 CFR 1.501(r)-1(b)(3) (via Cornell CFR mirror): ‘”Application period” means the period during which a hospital facility must accept and process an application for financial assistance under its FAP submitted by an individual in order to have made reasonable efforts to determine whether the individual is FAP-eligible under §1.501(r)-6(c). A hospital facility may accept and process an individual’s FAP application submitted outside of the application period. With respect to any care provided by a hospital…

— 26 CFR 1.501(r)-1(b)(3); 26 CFR 1.501(r)-6(c)(3)(i), (c)(4)(iii)(A)

240 days from the first post-discharge billing statement, with a separate 120-day period before collection actions may begin at all. So a bill that has already gone to collections is often still inside the application window. People assume they are too late. Usually they are not.

What the federal rules do NOT set

They do not set the income thresholds. Section 501(r) requires a policy and caps what a qualifying patient can be charged, but each hospital sets its own eligibility bands. Two hospitals on the same street can have materially different cutoffs, and many use figures well above what people assume — some extend partial assistance to households at several times the federal poverty level. Read the policy of the hospital that billed you, not a general article. That includes this one.

They also apply to non-profit hospitals. For-profit and public hospitals may have assistance programmes, and often do, but they are not operating under this section.

How to apply, practically

1. Ask for the financial assistance policy and the plain-language summary by those names, and ask for the application form.
2. Ask for an itemised bill at the same time. Auditing it comes first — there is no sense applying for help with charges that are wrong.
3. Apply even if you think you earn too much. The bands are set by the hospital and are frequently higher than people expect.
4. Apply even if the bill is old, and even if it is with a collector. The 240-day window runs from the first statement, not from the date of care.
5. Put the application date in writing and keep a copy. It matters for what the hospital may do next.

What we could not confirm. The regulation text here comes from Cornell Law School’s CFR mirror rather than eCFR.gov directly, because eCFR redirected every automated request to a verification wall and CMS.gov returned 403 site-wide. The mirror reproduces the official 26 CFR text and was cross-checked against the statute and against IRS pages, which were consistent. We did not verify the three permitted methods for calculating amounts generally billed — only that gross charges may not be used.

Related: audit the bill first · what a medical bill does to your credit · negotiating what is left.

General information drawn from the Internal Revenue Code, federal regulations, CMS and Medicare materials, not legal, financial or medical advice. Hospital financial-assistance policies are set by each hospital within federal rules, so eligibility bands differ between hospitals in the same city. Billing rules and figures change and every figure here is year-labelled with its source named. We sell nothing on these pages: no debt settlement, no negotiation service, no advocacy.