Charity Care

Charity care — formally "financial assistance" — is the free or discounted health care a hospital provides to patients who qualify under its financial assistance policy because they cannot afford to pay. A critical distinction is that charity care is reported "at cost," not at charges. Hospital "charges" (list prices) are typically several times the actual cost of providing care, so reporting charity care at cost gives a more honest picture of the resources a hospital actually devotes to patients who can't pay. Schedule H of Form 990 requires the at-cost figure. Charity care is distinct from bad debt: charity care is care the hospital knew up front it would not be paid for, while bad debt is unpaid bills the hospital expected to collect. Only charity care counts as community benefit; bad debt does not.

If a hospital's charges for a charity-care patient were $50,000 but its cost-to-charge ratio is 0.25, it reports $12,500 of charity care at cost — not $50,000.