Financial Assistance Policy (FAP)

A nonprofit hospital's written policy, required under IRS Section 501(r), that determines whether a patient qualifies for free or reduced-cost care.

A financial assistance policy (FAP) is a hospital’s written rulebook for who gets free or discounted care and how to apply for it. Under IRS Section 501(r)(4), every nonprofit hospital that wants to keep its tax-exempt status has to have one — spelling out eligibility criteria, what counts as “financial assistance” (free care, discounted care, or both), and the application process, along with a separate written policy on emergency medical care. For-profit and government hospitals aren’t bound by this federal requirement.

The FAP matters most at the point where a bill would otherwise move toward collections. A nonprofit hospital has to make a real effort to tell patients the FAP exists and figure out whether they qualify before taking an extraordinary collection action like suing, reporting the debt to a credit bureau, or selling it — see Medical Debt Escalation for the full timeline and what counts as jumping ahead of that process.

If a nonprofit hospital never offered a FAP application or notice before your bill went to collections, that’s worth raising directly with the hospital’s billing office, and it’s the kind of gap a debt validation request can help surface once an account has already moved to an outside collector.

Frequently asked

Do all hospitals have to offer a financial assistance policy?

No — this requirement under IRS Section 501(r)(4) only applies to nonprofit hospitals that want to keep their tax-exempt status. For-profit and government hospitals aren't bound by it.

— US Debt Compass Editorial Team

What if a hospital never told me about its financial assistance policy before sending my bill to collections?

That's worth raising directly with the hospital's billing office — nonprofit hospitals have to make a real effort to notify patients and determine eligibility before taking an extraordinary collection action.