Medicare defines uncompensated care as the total amount of charity care and bad debt. Prior to April 2003, only bad debt was reported in Worksheet E. Beginning April 2003, Medicare required acute care hospitals to provide more detailed uncompensated care information in Worksheet S-10. Below is an excerpt from the hospital cost report instructions defining uncompensated care, charity care and bad debt. (Provider Reimbursement Manual 15-2, Chapter 36, Section 3609.4, p. 36-41.5)
Worksheet S-10-Hospital Uncompensated Care Data--Section 112(b) of the Balance Budget Refinement Act (BBRA) requires that hospitals submit cost reports containing data on the cost incurred by the hospital for providing inpatient and outpatient hospital services for which the hospital is not compensated. This worksheet is applicable for short-term acute care hospitals only…Uncompensated Care-Defined as charity care and bad debt.”
“Charity care—Health services for which hospital policies determine the patient is unable to pay. Charity care results from a provider’s policy to provide health care services free of charge (or where only partial payment is expected not to include contractual allowances for otherwise insured patients) to individuals who meet certain financial criteria. For the purpose of uncompensated care charity care is measured on the basis of revenue forgone, at full-established rates. Charity care does not include contractual write-offs.
Bad Debt--For the purpose of uncompensated care it is the unpaid dollar amount for services rendered from a patient or third party payer, for which the provider expected payment, excluding Medicare bad debt.
For the purpose of collecting data for uncompensated care, both charity care and bad debt should be combined and reported.”
During the first few years after implementing Worksheet S-10, CMS made changes to the information collected on the worksheet. In 2010, CMS introduced a new hospital cost report form (2552-10) and changed the data collected on S-10 from the previous form (2552-96). This means that some data elements in Worksheet S-10 are not consistently available for all years.