So you don't get paid for services rendered--is that charity care or bad debt? Hoping to resolve this perennial question, the Healthcare Financial Management Association (HFMA) has issued new guidelines intended to help providers make such distinctions. The guidelines offer criteria for charity care policies, methods for valuation, recording and disclosure of charity care and bad debt, and classification of receipts relating to charity care. As the group notes, to date much charity care has been classified as bad debt, and bad debts reported at gross charges, which causes theoretical bad debt levels to rise above both revenue and expense growth. (And taking even paper losses can't be good!) While the guidelines are complex, in summary, they're intended to change bad debt disclosure to reflect only amounts intended to be collected, with an offsetting reduction in revenue in most hospital financial statements. With any luck, implementation of the HFMA principles should make it crystal clear how much charity care non-profits are actually delivering, and will keep those non-profits off of the IRS's viewscreen.
Find out more about the guidelines:
- read this piece in AHANews.com
- review the guidance from the HFMA
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