The debate on what constitutes a bad debt and whether or not it is appropriate to list it on a cost report may become increasingly contentious as the stakes are raised as a result of the economic downturn.

From 1996 to 2006, the amount of national uncompensated care delivered by registered community hospitals went from $18 billion to more than $31 billion, according to the American Heart Association. HFMA notes that the rise in uncompensated care is "boosting health systems' bad debt to the point of making a significant dent in their revenue, enough to get dinged by ratings agencies."

The American Hospital Association, addressing the effect of the current economic recession on its website, notes that "As the economy falters and unemployment rises, the hospital's role as healthcare safety net and major economic employer becomes even more important." The website cites a recent report that shows elective procedures and admissions are falling, the credit crunch is making it harder and more costly for hospitals to finance building and technology improvements, and their investment gains are turning to losses. The site also points out that DATABANK, which tracks hospital trends in 30 states, reports that uncompensated care rose 8% between the third-quarter 2007 and the third-quarter 2008 while total margins fell from positive 6.1% to negative 1.6%.

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Publication Date: Thursday, January 08, 2009