Charity Care and Bad Debt
Using your text and at least one scholarly source, prepare a two to three-page paper (excluding title and reference page), in APA format, on the following:
Explain the difference between Charity Care and Bad Debt in a healthcare environment.
Explain how the patient financial services personnel assist in determining which category the uncollectible account should be placed.
Discuss the financial implications of gross uncollectibles on the bottom line of the healthcare institution, and explain how these are recorded on the financial statements.
Explain the difference between Charity Care and Bad Debt in a healthcare environment.
Healthcare facilities across the country provide uncompensated care either in terms of charity or bad debt. Uncompensated care refers to the finances a healthcare facility loses to care administered without any payment being received. The two forms of uncompensated care (uncollectible accounts) are differentiated from one another by considering whether the facility expected payment or not (Epstein & Schneider, 2014). Charity care refers to healthcare services that are given to a patient for free without the hospital expecting compensation. This care is usually offered to patients who have been identified as needy and not able to cater for their medical bills (Epstein & Schneider, 2014). This type of care is regulated and funded by the facility’s charity care policy. A patient’s eligibility for charity is established before the provision of care. A bad debt, on the other hand, refers to a case whereby a hospital provides services expecting payment but does not receive it (Epstein & Schneider, 2014). Bad debts arise when a patient is unwilling or unable to pay for the healthcare services offered. In the case of bad debt, a patient does not seek any financial assistance before admission.
Explain how the patient financial services personnel assist in determining which category the uncollectible account should be placed.
The patient financial services personnel play a critical role in establishing where an uncollectible account should be placed. The team is usually tasked with recording information on the costs of the various services offered by a healthcare facility. It also keeps records of the care costs for various patients, which makes it possible for the department to establish the debt incurred or that will be incurred if a patient accesses certain services (Finkler & Ward, 2006). The patient financial services personnel should assess the patient eligibility to charity before admission for healthcare services. This helps in determining whether an uncollectible account will be classified as a charity or a bad debt. Basically, the patient financial services personnel act as a link between the patients and the facility (Finkler & Ward, 2006). This relationship is essential in determining whether a patient is able to pay for a certain service or not. They scrutinize the patient’s financial records to ascertain their ability to pay for healthcare services. The reports from the scrutiny inform the most appropriate placement.
Discuss the financial implications of gross uncollectible on the bottom line of the healthcare institution, and explain how these are recorded on the financial statements.
The gross uncollectible that are accumulated by a healthcare facility are usually treated as an expense to the facility’s revenue (Epstein & Schneider, 2014). Accounts that have been determined as uncollectible are usually written off and have major implications on the finances of a healthcare facility. In the income statements, these uncollectable are classified under expenses. If a healthcare facility has been affected by major debts, it is likely to report low revenues, which would adversely affect its ability to meet the healthcare needs of patients in the future (Epstein & Schneider, 2014). The facility may lack enough finances to stock up resources for the delivery of certain healthcare services. The inability to meet the cost of the healthcare services will consequently drive the facility into bankruptcy. Basically, healthcare institutions set up for-profit suffer major financial losses through the provision of services that are not necessarily paid for. These institutions should conduct regular checks on their uncollectible to avoid revenue expenses, which may consequently drive them into delayed growth or permanent closure.
References
Epstein, L., & Schneider, A. (2014). Accounting for Healthcare Professionals. San Diego: Bridgepoint Education Inc.
Finkler, S. A., & Ward, D. M. (2006). Accounting Fundamentals for Healthcare Management. Sudbury.