Is it Charity?

July 1, 2006

Our providers sometimes see patients in the hospital who will never pay their bills. Is this considered charitable work, and is there a place for it in the financial statements for the practice?

Question: Our providers sometimes see patients in the hospital who will never pay their bills. Is this considered charitable work, and is there a place for it in the financial statements for the practice?

Answer: Many practices break out both bad debt and a second category for professional courtesy and charity care. Charity care usually constitutes one-tenth or so of total gross charges for practices.

However, I think anything assigned to a charity-care category should be charitable on purpose. Debts that you tried to collect but could not should be designated bad debt, and it's ideal to track specific reasons for each occurence. For example, if you can recognize that you write off as bad debt lots of care provided to the uninsured, you can consider creating a proactive collection policy in which you reacch out to uninsured patients before they even leave the hospital, offering a uniformly discounted rate for payment within five days of service.