Charity Care and Certain Other Community Benefits at Cost


Non-Cost Accounting Methodology
If you are not using a cost accounting methodology, answering this question will require you to complete Worksheets 1 - 8.

Joint Ventures
For joint ventures, only the proportionate share of each joint venture should be included in these calculations. This includes the proportionate share of total expenses for joint ventures when calculating column (f) on the Schedule H. In completing the worksheets, it may be useful to calculate the worksheets for each entity separately unless your hospital has a system to collect all this information in the aggregate.

For the determination of "persons served" for column (b), the instructions say to use "contacts" or "encounters." While neither term is defined, it is intended to allow hospitals to count each time a patient is served. So, if the same patient is served 3 times at the hospital and provided with free care each time, the number of contacts or encounters would be 3. A person served can be reported in more than one row.

For calculating the direct offsetting revenue in column (d), do not include restricted or unrestricted grants or contributions that the organization uses to provide a community benefit.

Calculating Total Expense Column (f)
To calculate column (f), the net community benefit expense column (e) should be divided by the sum of the amount on Form 990, Part IX, line 25, column (A) and the proportionate share of the total expense of all joint ventures for which the expenses have been reported in Part I of the Schedule H (to the extent that these expenses are not already included in Form 990, Part IX, line 25, column (A)). The total expense number used for the denominator should not include any bad debt expense. A summary of this is as follows:

The ratio of net community benefit expense should be made up of the following:

   - Net community benefit expense column (e)

   - Amount on Form 990, Part IX, line 25, column (A)
   - PLUS Proportionate share of total expense of joint ventures reported in Part I of Schedule H
   - MINUS Bad debt expense included in Form 990, Part IX, line 25, column (A)
   - MINUS Proportionate share of bad debt expense of joint ventures reported in Part I of Schedule H

For example, if your organization's Form 990 Part IX, line 25, column (A) amount was $30 million, your proportionate share of joint venture total expense was $12 million, your bad debt expense was $3 million, and your proportionate share of joint venture bad debt was $2 million, your denominator would be $30M + $12M - $3M - $2M = $37M.

NARRATIVE REQUIRED: Yes. Part VI, Line 1, when the amount of bad debt expense removed from the total expense calculation should be stated.


Our total expense from Form 990, Part IX, line 25, column (A) was $38,000,000. The bad debt expense included in this amount was $1,000,000. This left us with a total expense of $37,000,000 for purposes of calculating line 7, column (f).

INSTRUCTIONS: Click here for the applicable IRS Schedule H instructions.

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