What is Uncompensated Care?

Bad Debt & Charity Care

Doctors and health care providers have a long tradition of treating patients, regardless of their ability to pay.  That’s where the term uncompensated care comes in.  In short, the term refers to patients who are unable or unwilling to pay for health care services.

Uncompensated care is comprised of both charity care and bad debt.  The difference between the two is that charity care is care for which health care providers never expect to be reimbursed, while bad debt is when a health care provider cannot obtain reimbursement for care provided.

Billion of Dollars

According to the American Hospital Association (AHA), U.S. hospitals provided $41.1 billion in uncompensated care in 2011.  That’s $1.8 billion more than in 2010.  This accounted for 5.9% of United States hospital expenses.  This total includes bad debt and charity care, but excludes other unfunded costs of care, such as underpayment from Medicaid and Medicare.

Most uncompensated care is generated from patients that have little or no income.  Therefore, the amount of uncompensated care provided is greatly affected by Medicaid funding.  In general, the more low income patients who have hospital coverage provided by Medicaid, the lower the level of uncompensated care.

The amount of uncompensated care is based on the full charges of the health care services, not based upon contractual adjustments rates.

Cost Shift

As you can see, uncompensated care can be a significant amount of money and greatly affect the bottom line of health care facilities.  The money lost through uncompensated care needs to be made up in other ways.  Health care providers are often forced to absorb the costs or to shift it to private insurers.  This phenomenon, known as cost shift, is a primary reason for increases in health care costs.