November 17, 2014
Charity care in a health care environment gives patients reduced or even free services to those who have low incomes. The idea of charity care was associated to the way hospitals helped low- income families. The write-offs and potential costs that are provided to the patients are determined before anything is done. It is up to the discretion of the hospital if any or all the cost is written-off. Write- offs are removed from the books (accounting) of the hospital. Most hospitals do not tell their patients that charity care can be provided to them, which has resulted in a drop in the amount of cases over the years. “Medicaid expansion under the Affordable Care Act has led to a related reduction in self-pay and charity care cases at hospitals in the U.S., according to a study from the Colorado Hospital Association.”(ACAInternational Sept 2014)
Bad Debt in a health care environment is a bill that is generated and supposed to be paid by a third-party or the individual who it was rendered to and has not been paid. Hospitals need to make the effort in collecting these debts but for the most part most of these debts come from low income patients who could have qualified for charity care but were never informed.
The difference between charity care and bad debt is that bad debt is counted as an uncompensated cost. Though some have said if it should be included. Bad debt for businesses is
not claimed as charity write-offs. As of late it is mandated that not for profit hospitals can add bad debt to their taxes but have to calculate it a different line. Charity care and bad debit have to be accounted for and the patient financial services personnel assist with how the uncollectible account should be placed. As stated in our textbook “Accountants have developed allowance methods for uncollectible. These...
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