Patient Access Monthly Journal
Source: The Academy of Healthcare Revenue

Optimizing Charity Care Eligibility Screening in Patient Access

February, 2007 – Over the past year, scrutiny from lawmakers over not-for-profit providers’ charity care guidelines has increased, and some hospitals have been accused of not providing enough community benefit to warrant their tax-exempt status. Part of the problem with charity care guidelines has been the relative lack of consensus of what exactly qualifies as charity care. Some providers classify charity care as waiving bills for patients who otherwise could not afford to pay for services, while others classify their charity care as free care and bad debt. Some providers also include Medicare and Medicaid shortfalls in their total disclosed community benefit amounts. Although this lack of consensus exists, many lawmakers are starting to propose and pass legislation clarifying charity care requirements. Another pressing concern for many providers is that current charity care policies and eligibility screening processes that are ineffective can increase the amount of uncompensated care that must be classified and written off as bad debt.

According to the American Hospital Association, providers absorbed $28.8 billion in uncompensated care in 2005, which includes charity care and bad debt. Furthermore, uncompensated care has increased by approximately 33 percent since 2000.

In addition, a recent survey of providers found that 92 percent of respondents reported that part of their bad debt could likely be classified as charity care.1 In light of the recent scrutiny of hospitals’ charity care amounts and the sharp increase in bad debt experienced by providers, hospitals’ charity care eligibility screening processes in patient access is a key area for improvement in many facilities. However, many providers lack the tools and resources necessary to adequately screen patients for charity care, resulting in higher bad debt write-offs.

There are several reasons why charity care-eligible patients may not be identified and documented as eligible for charity care. Among some of those reasons are that patients may not be notified of providers’ financial assistance opportunities and may be discouraged by (and not complete) the complex paper work required in order to qualify. Surveying patients about their knowledge of charity care policies prior to discharge can be an effective starting place for revenue cycle leaders to assess the effectiveness of their organization’s charity care policies.

The majority of providers still offer some form of charity care (e.g., sliding scale discounts) based on patients’ standing in the federal poverty guidelines. While many providers’ financial assistance is available only to patients under 200-250 percent of the federal poverty level (FPL), increasing the income qualification threshold (up to 400 percent FPL) can increase the amount of uncompensated care that is classified as bad debt. An added benefit that could also result is a reduced number of accounts sent to collection. In addition, simplifying the documentation requirements patients must complete to apply for charity care can also ultimately increase the amount provided.

Another strategy some best-performing providers have implemented is automated eligibility screening mechanisms. For example, South Suburban Hospital, a 194-bed acute-care facility located in Hazel Crest, Illinois, implemented an automated charity care system to ensure that all eligible patients are appropriately assessed for charity care eligibility before they receive care. The automated system was loaded with South Suburban’s charity care guidelines, which offers financial assistance to patients up to 400 percent of the FPL on a sliding scale. To further enhance the effectiveness of South Suburban’s charity care program, the automated system was also fitted with applications in English and Spanish.

While such automated screening mechanisms can prove valuable, patient access staff members must also be thoroughly educated in all charity care policies and procedures. This is needed to enhance the effectiveness of screening processes in patient access, ensuring that patients are appropriately notified of the hospitals’ financial assistance opportunities and can be connected to financial counselors or other designated staff to complete all necessary forms.

Uncompensated care is expected to continue its steady increase in the coming years, especially as the uninsured population grows. An additional concern are the increasing out-of-pocket costs of insured patients, which may disproportionately affect the patients who do not qualify for public aid yet who do not have the immediate financial resources to pay their medical expenses. Revenue cycle leaders are encouraged to review their charity care policies and procedures. For example, The Catholic Hospital Association’s charity care guidelines can be a valuable resource for comparing and developing a clear and publicly-supported charity care policy for your organization.

1 “Acts of Charity: Charity Care Strategies for Hospitals in a Changing Landscape,” PricewaterhouseCoopers’ Health Research Institute, 2006.

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