Factors affecting charity care and bad debt charges in Washington hospitals

Uncompensated care has become a major issue in hospital finance as the number of uninsured persons has increased and hospital revenues have declined. Uncompensated care charges have two components--charity care and bad debt--that are distinct conceptually but often are commingled in hospital accounting practice. Data on charges assigned to charity care and bad debt in 1987 for 82 short-stay hospitals in Washington were merged with data from the 1987 Medicare Cost Report and AHA Annual Survey. The regression analyses performed indicate that the determinants of the percent of charges for charity care, bad debt, and total uncompensated care differ and suggest that bad debt should be isolated from charity care when estimating a hospital's level of effort in providing care to indigent patients.