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Hospitals usually count bad debit in the non-compensation costs but there is a question of whether or not it should be included. There is some gray area when it comes to the difference between bad debit and charity when it comes to the Health care environment. Bad debit that won are bills that people don’t pay for whatever reason and there is a difference between those who won’t pay and the ones who just can’t. For a health care business, bad debit is not something that they can write off as bad debit but there is a law that says a nonprofit hospital can add bad debit to their tax filings as long as they put it in a different line item calculation. “The study of nonprofits’ tax filings did not include all bad debt, but only bad debt attributable to charity care, if a hospital provided it”, (Ernst & Young, 2009). The number of reimbursed hospital care continues to grow along with the need to report uncompensated care and to separate difference between bad debit and charity care. The difficulty and confusion is whether or not these practices are in line and are they consistent with the amount of charity care and bad debt that health care organizations have and is it being classified in the right way.
Certain treatment that is considered urgent and with some federal regulations, require that there be a “provision of service without consideration” and it looks the person’s ability to pay especially those with complex medical needs. For hospitals, the billing and payment arrangement made with patients with very unpredictable treatment can be complex, it have to include third party and government payers which ends up in a payment processing delay. These are all factors to be considered when a health care origination considers the amount of monies to be collected, the time it takes to collect, the time put into managing the receivables end and the cost of the bad debit. When, a patient come in for treatment it should be at this point that it is recognized that this will be a uncollectible account, so that the accounting will match the expenses and the revenues for that period so that the outstanding value is recorded properly in receivables.