Charity Care at Cost (Part I, line 7a)


DISCUSSION:The only place the IRS instructions describe charity care is in the Part 1, line 1 instructions.

Complete Worksheets 1 and 2 for this line.

You may wish to begin with Worksheet 2 unless the hospital uses a cost accounting methodology, rather than a cost-to-charge ratio for calculating costs. If you use a cost accounting methodology, the calculations for Worksheet 2 may be unnecessary.

The cost accounting methodology must be equivalent to the approach in the worksheet and the related instructions.

NARRATIVE REQUIRED: No

Worksheet 1 (Click here for Worksheet 1 instructions)

Gross patient charges
1.   Amount of gross patient charges written off pursuant to charity care policies 1. _______________
Total community benefit expense
2.   Ratio of patient care cost to charges (from Workshop 2, if used) 2. _______________
3.   Estimated cost (multiply line 1 by line 2, or obtain from cost accounting) 3. _______________
4.   Medicaid provider taxes 4. _______________
5.   Total community benefit expense (add lines 3 and 4; enter on Part I, line 7a, column (c)) 5. _______________
Direct offsetting revenue
6.   Revenues from uncompensated care pools or programs (enter on Part I, line 7a, column (d)) 6. _______________
7.   Net community benefit expense (subtract line 6 from line 5; enter on Part I, line 7a, column (e)) 7. _______________
8.   Total expense (enter amount from Form 990, Part IX, LIne 25, column (A), and include the organization's share of joint venture expenses.) 8. _______________
9.   Percent of total expense (divide line 7 by line 8; enter on Part I, line 7a, column (f)) 9. _______________%



Worksheet 2 (Click here for Worksheet 2 instructions)

Patient Care Cost
1.   Total operating expense
 1. _________
Less Adjustments
2.   Non-patient care activities 2. _________
3.   Medicaid provider taxes 3. _________
4.   Total community benefit expense 4. _________
5.   Total community building expense 5. _________
6.   Total adjustments (add lines 2-5)
 6. _________
7.   Adjusted patient care cost (subtract line 6 from line 1)
 7. _________
Patient Care Charges
8.   Gross patient charges
 8. _________
Less: Adjustments
9.   Gross charges for community benefit programs
 9. _________
10.   Adjusted patient care charges (subtract line 9 from line 8)
10. _________
Calculation of Ratio of Patient Care Costs to Charges
11.   Ratio of patient care costs to charges (divide line 7 by line 10; report on the applicable lines of Worksheets 1, 3, or 6)
11. _______%

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