If you received a large hospital bill and the hospital is a nonprofit, federal law may cap what you legally owe. That cap is called the Amount Generally Billed, or AGB. Section 501(r) of the Internal Revenue Code requires every 501(c)(3) hospital to calculate an AGB percentage and use it as the ceiling on charges for any patient who qualifies for financial assistance, also called charity care.
Quick Answer: The Amount Generally Billed (AGB) is the maximum a nonprofit hospital can charge a financially eligible patient. In 2026, most hospitals set their AGB between 20% and 60% of gross charges, meaning a $10,000 bill could be capped at $2,000 to $6,000 for a qualifying patient. If the hospital is overcharging you above the AGB, that is a federal compliance violation.
Understanding AGB can reduce your hospital bill significantly. This guide explains exactly what AGB is, how hospitals calculate it, how to find your hospital's published AGB percentage, and what to do if you suspect a billing error or overcharge. You can also upload your itemized bill to the CoveredUSA Bill Analyzer to flag AGB violations and other overcharges automatically.
What Is Amount Generally Billed (AGB)?
AGB is defined in IRS regulations under 26 CFR 1.501(r)-5 as the amount a hospital generally collects from patients who have insurance coverage for the same care. It is not the chargemaster rate (the full sticker price). It is closer to the discounted rate that Medicare, Medicaid, or a commercial insurer would actually pay.
The logic behind AGB is straightforward: a nonprofit hospital receives significant federal tax benefits because of its charitable mission. In exchange, the IRS requires those hospitals to limit charges to low-income or uninsured patients to no more than what insured patients effectively pay. This is the 501(r)(5) limitation on charges.
Key facts about AGB as of 2026:
- AGB applies to every emergency or medically necessary service at a qualifying hospital
- AGB is a percentage of gross charges, not a flat dollar cap
- If you are approved for the hospital's Financial Assistance Policy (FAP), the hospital cannot charge you more than the AGB amount
- Hospitals must publish their AGB percentage publicly, typically on their billing or financial assistance webpage
How 501(r) Works: The Full Framework
Section 501(r) of the Internal Revenue Code was added by the Affordable Care Act. It applies to all hospitals that hold 501(c)(3) tax-exempt status, covering roughly 2,900 nonprofit community hospitals in the United States. A hospital that fails to comply risks losing its federal tax exemption, a severe penalty worth millions of dollars annually.
The 501(r) framework has four main requirements:
501(r)(3), Community Health Needs Assessment. Every three years the hospital must assess the health needs of its community and adopt an implementation strategy to address them.
501(r)(4), Financial Assistance Policy (FAP). The hospital must maintain a written FAP describing who qualifies for free or discounted care, what documentation is required, and how billing is handled. The FAP must be made publicly available and translated for communities where more than 5% of residents speak a language other than English.
501(r)(5), Limitation on Charges. This is the AGB rule. Patients approved under the FAP cannot be charged more than the AGB for emergency or medically necessary care. For all other care, the charge must be less than gross charges (i.e., some discount must apply).
501(r)(6), Billing and Collections. Hospitals must make reasonable efforts to determine whether a patient qualifies for financial assistance before taking any extraordinary collection actions such as reporting to credit bureaus, lawsuits, or wage garnishment.
For patients, 501(r)(5) and 501(r)(6) are the most immediately actionable protections. The AGB cap and the collections moratorium apply to you regardless of whether you asked for financial assistance, as long as you ultimately qualify. According to IRS guidance on Section 501(r)(5), hospitals must apply the AGB limitation even retroactively if a patient is later found to be FAP-eligible.
How Hospitals Calculate the AGB Percentage
Hospitals use one of two IRS-approved methods to calculate their AGB percentage. They must choose one method and apply it consistently.
Method 1: The Look-Back Method
Under the look-back method, the hospital reviews all claims paid during a prior 12-month period and calculates:
AGB% = Total allowed amounts from all payors / Total associated gross charges
"Allowed amounts" means the actual amounts collected from Medicare, Medicaid, and private insurers. Gross charges are the full chargemaster prices billed before any contractual adjustment. The resulting percentage is applied to the gross charge on a new patient's bill to determine the AGB cap.
For example, if a hospital billed $10 billion in gross charges over the prior year and collected $2.2 billion in allowed amounts from insurers and government programs, the AGB percentage would be 22%. A patient with a $10,000 gross charge bill would have their bill capped at $2,200 under the FAP.
Real-world AGB percentages vary widely. Some large urban hospital systems post AGB percentages as low as 18% to 22% of gross charges. Smaller community hospitals, which collect less from commercial insurers and rely more on Medicare and Medicaid, may post AGB percentages closer to 50% to 65%.
Method 2: The Prospective Medicare or Medicaid Method
Under the prospective method, the hospital determines what Medicare fee-for-service or Medicaid would pay for the specific services rendered and uses that as the AGB. This approach is more granular: instead of a single facility-wide percentage, the hospital calculates the AGB service by service.
Hospitals that use the prospective method must apply it consistently across patient populations. They cannot switch between methods to find a higher AGB for a specific patient or service type.
The CFR regulations at 26 CFR 1.501(r)-5 specify that both methods are acceptable but cannot be used simultaneously by the same facility.
Who Qualifies for the AGB Cap?
The AGB cap applies to any patient who qualifies for the hospital's Financial Assistance Policy. Qualifying generally depends on income relative to the Federal Poverty Level (FPL). Most hospitals structure their FAP in tiers:
| Income Level (% of FPL) | Typical Assistance Level |
|---|
| Up to 100% FPL | Free care (zero patient cost) |
| 101% to 200% FPL | Heavily discounted; often capped at AGB |
| 201% to 300% FPL | Discounted at or near AGB |
| 301% to 400% FPL | Partial discount; varies by hospital |
| Above 400% FPL | Standard billing; no FAP discount |
The 2026 Federal Poverty Level guidelines (from ASPE at HHS) set the 100% FPL baseline at the following annual income levels:
| Household Size | 100% FPL (2026, Contiguous U.S.) |
|---|
| 1 | $15,960 |
| 2 | $21,640 |
| 3 | $27,320 |
| 4 | $33,000 |
| 5 | $38,680 |
| 6 | $44,360 |
| 7 | $50,040 |
| 8 | $55,720 |
| Each additional | +$5,680 |
Note: Alaska and Hawaii have higher FPL thresholds. Every hospital sets its own FAP income cutoff, but hospitals cannot charge FAP-eligible patients more than the AGB once they are approved.
Uninsured patients are almost always eligible to at least receive care at the AGB rate, even if they do not qualify for full charity care. Some hospitals explicitly publish separate "uninsured discount policies" that apply the AGB as a default discount before income verification.
How to Find Your Hospital's AGB Percentage
The IRS requires every 501(c)(3) hospital to make its AGB calculation publicly available. Here is how to find it:
- Search the hospital's website for "financial assistance policy" or "charity care." There is usually a dedicated patient resources or billing section.
- Look for a document or page titled "Amount Generally Billed" or "AGB Calculation." Many hospitals post the current AGB percentage directly on the page.
- If you cannot find it online, call the hospital's billing or patient financial services department and ask for the current AGB percentage in writing.
- You can also check the hospital's IRS Form 990, Schedule H, which all 501(c)(3) hospitals must file annually and which includes FAP and AGB information. Form 990s are publicly available at ProPublica's Nonprofit Explorer.
If the hospital cannot or will not provide its AGB percentage, that itself may indicate a 501(r) compliance issue, which can be reported to the IRS using Form 13909.
How to Apply for Financial Assistance and the AGB Cap
Applying for financial assistance and invoking the AGB protection is a formal process. Here are the steps:
- Request the Financial Assistance Application. Ask the hospital's billing department for the FAP application form. Under 501(r)(6), hospitals must give you at least 240 days from the first post-discharge statement to apply.
- Gather your income documentation. Most hospitals require recent pay stubs, last year's tax return, bank statements, or a self-attestation form if documentation is unavailable.
- Submit the completed application. Return it to the hospital's patient financial services office. Keep a dated copy for your records.
- Receive a determination letter. The hospital must respond in writing confirming approval, denial, or a request for additional documentation.
- Request a corrected bill. If approved, ask for an updated statement reflecting the AGB-adjusted amount. Compare the revised bill to the hospital's published AGB percentage to verify the math.
- Dispute errors in writing. If the revised bill still exceeds the AGB, send a written dispute citing IRS Treas. Reg. 1.501(r)-5 and requesting a corrected statement.
Documents you will typically need:
- Federal or state income tax return (most recent)
- Two to three recent pay stubs or proof of income
- Social Security award letter (if applicable)
- Bank statements (last one to three months)
- Proof of household size (birth certificates, marriage certificate)
- Government-issued ID
Common reasons applications get denied:
- Income documentation was incomplete or missing
- Income exceeded the hospital's FAP cutoff threshold
- Application submitted after the 240-day window
- Services were elective rather than emergency or medically necessary
- Hospital determined the patient was eligible for other coverage (Medicaid, ACA plan)
What About Overcharges Above the AGB?
Hospitals sometimes bill patients above the AGB even for services where the patient is FAP-eligible. This can happen due to:
- Billing errors where the FAP approval was not communicated to billing
- Charges by employed physicians billed separately from the facility
- Items coded as "not medically necessary" that the patient believes were necessary
- Arithmetic errors in the AGB percentage calculation itself
The CoveredUSA Bill Analyzer compares each line of your hospital bill against published Medicare and Medicaid rates, flags line items that appear to exceed standard allowed amounts, and identifies services that may qualify for charity care or AGB protection. Uploading your itemized bill takes about 30 seconds and gives you a concrete list of charges to challenge.
Once you identify a potential overcharge, send a written dispute to the hospital's billing department. If the hospital does not resolve the dispute, you can escalate to:
- Your state attorney general's consumer protection division, which often enforces 501(r) compliance at the state level
- The IRS Tax Exempt and Government Entities division, which handles 501(r) violations through Form 13909 (Tax-Exempt Organization Complaint Form)
- Your state insurance commissioner, if the charges involve a surprise billing or network issue covered by the No Surprises Act
AGB vs. Other Billing Protections
AGB is one of several overlapping protections patients have on hospital bills. Understanding how they interact helps you identify every applicable discount:
| Protection | Who It Covers | What It Limits |
|---|
| AGB (501(r)(5)) | FAP-eligible patients at nonprofit hospitals | Charges cannot exceed the AGB percentage of gross charges |
| No Surprises Act (NSA) | Any patient receiving out-of-network emergency care | Out-of-network charges capped at in-network cost-sharing |
| Medicaid DSH rules | Medicaid-eligible patients | Cannot charge more than cost for Medicaid-covered services |
| State charity care laws | Varies by state | Some states require uninsured discounts even at for-profit hospitals |
| Medicare limiting charge | Medicare patients seeing non-participating providers | Charge cannot exceed 115% of Medicare-approved amount |
If you are uninsured or underinsured and received emergency care at a nonprofit hospital, AGB and the No Surprises Act may both apply. A patient who qualifies for charity care at a 22% AGB hospital and also received out-of-network emergency services could potentially have protections under both frameworks. Use every applicable protection.
How to Apply for Next Steps
If you received a hospital bill and believe you may qualify for charity care:
Step 1. Contact the hospital billing department and ask for the FAP application and the current AGB percentage. Under federal law they must provide both.
Step 2. Upload your itemized bill to the CoveredUSA Bill Analyzer to identify overcharges, inflated line items, and AGB-eligible services before you pay.
Step 3. Complete the FAP application with your income documentation. Submit within the 240-day window from your first billing statement.
Step 4. If you are denied or believe the hospital miscalculated the AGB, send a written dispute referencing 26 CFR 1.501(r)-5 and request a corrected bill within 30 days.
Step 5. If the hospital does not respond appropriately, file a complaint with your state attorney general or the IRS using Form 13909.
Upload your hospital bill to the free CoveredUSA Bill Analyzer to find errors, overcharges, and charity care options in 30 seconds.
Frequently Asked Questions
What does amount generally billed mean?
Amount generally billed (AGB) is the maximum dollar amount a 501(c)(3) nonprofit hospital can charge a patient who qualifies for the hospital's Financial Assistance Policy. It is calculated as a percentage of gross charges based on what Medicare, Medicaid, and commercial insurers actually pay the hospital, not the full chargemaster rate.
What is a typical AGB percentage in 2026?
AGB percentages vary by hospital but most fall between 20% and 65% of gross charges. Large academic medical centers with high commercial insurance revenue tend to have lower AGB percentages (18% to 30%). Smaller community hospitals with more Medicaid patients tend to have higher AGB percentages (40% to 65%).
Does AGB apply to for-profit hospitals?
No. The AGB requirement applies only to hospitals that hold 501(c)(3) nonprofit status under federal tax law. For-profit hospitals are not subject to 501(r). However, some states have their own charity care laws that apply to for-profit hospitals separately.
What happens if a hospital charges more than the AGB?
A hospital that charges a FAP-eligible patient more than the AGB violates Section 501(r)(5) of the Internal Revenue Code. The hospital is required to correct the billing. Persistent violations can result in the hospital losing its federal tax-exempt status. Patients can report violations to the IRS using Form 13909.
Can I apply for financial assistance after I have already paid?
In most cases, yes. IRS regulations allow hospitals to refund or credit an overpayment if a patient is found to be FAP-eligible after payment. The hospital's FAP must specify its policy on retroactive application. Always apply even if you have partially paid.
How do I find a hospital's FAP and AGB percentage?
Look on the hospital's website under "billing," "financial assistance," or "patient resources." Hospitals are required by 501(r)(4) to make their FAP and AGB calculation publicly available. If you cannot find it online, call the billing department and request it in writing. You can also find the information on the hospital's IRS Form 990, Schedule H, which is available for free on ProPublica's Nonprofit Explorer.
Does AGB apply to physician bills from hospital-employed doctors?
This depends on whether the physician group is a "hospital facility" under the 501(r) regulations. Physicians employed by the hospital and treated as part of the hospital facility generally must follow the same FAP and AGB rules. Physicians who bill independently on separate statements may not be covered by the hospital's 501(r) obligations, though some states require hospitals to include employed physicians in their FAP.
What is the difference between AGB and charity care?
Charity care means the hospital provides care at no cost to the patient. AGB is a cap on charges for patients who qualify for financial assistance but are not receiving fully free care. A patient at 50% FPL might receive charity care at $0 cost, while a patient at 250% FPL might receive a bill capped at the AGB percentage. Both protections come from the same 501(r)(4) and 501(r)(5) framework.
