Charity Care: Hospital Financial Assistance Programs
Charity care is the free or discounted care a hospital provides to patients who meet documented financial-need criteria. Distinct from bad debt; required for IRS 501(r) status at nonprofit hospitals.
What is charity care?
Charity care is the portion of a hospital's care provided at no charge or reduced charge to patients who lack the financial means to pay. Eligibility is based on a documented financial-assistance policy (FAP) that uses Federal Poverty Level (FPL) thresholds. Care provided as charity is recorded at cost (not charges) for IRS Form 990 Schedule H reporting.
Charity care vs bad debt
The distinction matters operationally and legally:
- Charity care — patient was screened, met financial-need criteria, and qualified for the hospital's FAP. Recorded as community benefit.
- Bad debt — patient could pay but didn't; account written off after collection efforts. Not community benefit.
Misclassifying bad debt as charity inflates community benefit reporting. Misclassifying charity-eligible patients as bad debt is a 501(r) violation.
IRS 501(r) requirements
Nonprofit hospitals must (under 501(r)):
- Conduct a Community Health Needs Assessment (CHNA) every 3 years.
- Maintain a written Financial Assistance Policy (FAP).
- Limit charges to FAP-eligible patients to amounts generally billed (AGB).
- Make reasonable efforts to determine FAP eligibility before extraordinary collection actions.
Charity care analytics views
- Charity care as % of total operating expense — Form 990 Schedule H reporting.
- Patient cohorts likely FAP-eligible but not screened — proactive eligibility surface.
- Charity care vs bad debt classification rates by patient cohort — 501(r) compliance check.
- Uncompensated care trend (charity + bad debt) by payer mix shift.
Where Vizier fits
Vizier joins your patient demographic data, encounter data, and account-status data via the EHR connector and surfaces patients who likely qualify for FAP but were never screened. Catching the eligibility-screening gap up front converts what would have become uncollectible bad debt into properly documented charity care — improves community benefit reporting and reduces 501(r) audit exposure.