Charity Care Reporting Requirements

The federal government has implemented three similar charity care reporting requirements designed to measure a tax-exempt hospital’s level of charity care.

Medicare Cost Report 2552-10 forms – Worksheet S-10 – uncompensated care data

Worksheet S-10 has been dramatically revised as part of the new 2552-10 hospital cost report forms and now must be included as part of the Medicare Cost Report for Prospective Payment System (PPS) and Critical Access hospitals.  The Medicare Cost Report 2552-10, including worksheet S-10, is due 5 months after the hospital’s fiscal year end.

Currently, the information reported on Worksheet S-10 is used as part of the Electronic Health Records Incentive payment calculation.  Therefore, if this worksheet is not completed, a hospital cannot receive its appropriate incentive payments.

It is anticipated that in the future this worksheet will play a major role in overall Medicare reimbursement for areas such as, but not limited to, Medicare DSH and/or bad debt reimbursement.

IRS Form 990, Schedule H

Hospitals that are tax exempt under Code Section 501(c)(3) are required to complete Schedule H.  The filing deadline, if fully extended, is roughly 45 days before the next fiscal year end. The penalty for not filing or filing an incomplete IRS Form 990 is $100 per day with a maximum penalty of $50,000.

Schedule H requires disclosure of a tax-exempt hospital’s levels of charity care and other community benefits, bad debt levels, Medicare surplus or shortfalls, and other non-financial information.

Community Health Needs Assessments (CHNA)

Section 9007(a) of the Affordable Care Act (ACA) requires that all tax-exempt hospitals conduct a CHNA at least every three years.  Input from the hospital’s service area community must be included as part of the assessment.  The CHNAs must (1) make widely available financial assistance policies; (2) clearly identify eligibility criteria; and (3) identify how the amounts billed to patients for discounted care are determined.

Failure to comply with the CHNA and ACA requirements can result in an excise tax of up to $50,000.  The first CHNA must be completed by the last day of the hospital’s first tax year beginning after March 23, 2012.  The IRS must review every tax-exempt hospital’s community benefit every three years.

As part of the ACA requirements, hospitals must notify patients of the hospital’s financial assistance policies through “reasonable efforts.”  The notification must be done before initiating collection efforts and/or reporting of accounts to credit rating agencies.

In addition, hospitals must restrict the charges of uninsured and/or indigent patients to the amounts generally charged to insured patients.

On July 12, 2011, the IRS published a Notice and Request for Comments regarding CHNAs.  To date, however, the IRS has not issued proposed or final regulations with respect to CHNAs.


One challenge for tax-exempt hospitals is to link the multiple requirements of IRS Form 990, Schedule H, the Medicare S-10 worksheet, and CHNAs, which all require similar information.  Although similar, the particular data reported will not always reconcile among the three reporting mechanisms because the instructions for each reporting mechanism are different.

In addition to the administrative burden these federally mandated reporting requirements place on the staff of tax-exempt hospitals, the general public has access to these reports.  Therefore, public scrutiny of your charity care efforts is potentially yet another hurdle for you to cross.

If your organization needs any assistance in understanding, reviewing or preparing these forms, please contact Marc Levy.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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