Interview an appropriate staff member in your organization's finance department who will be
able to assist in reviewing an operating statement and answering the following questions:
1. Discuss the concept of revenues including net patient revenues and operating revenues.
Provide examples of each.
2. What are contractual allowances and how does this impact the organizations bottom line?
3. Discuss wage, patient care supply, depreciation, administrative and other operating
expenses.
4. What is bad debt and how is it managed within your organization?
5. What is charity care?
Please provide a synopsis of the interview talking points and analysis of the questions posed.
1.
2. Contractual allowances are the differences between what a healthcare provider or facility bills
for the services they provide in comparison to what will actually be paid or reimbursed
(Parmakian, 2020). Often times, Medicare, Medicaid, and other insurers typically pay a rate that
is lower than what healthcare providers are charging for services (McEwen et al., 2019). Patient
revenues are calculated after the contractual allowances are calculated and are not included on
financial statements (McEwen et al., 2019). The bottom line of an organization is the facilities’
net income, the total income minus the total expense, over a period of time.
3.
4. Bad debt is the amount of money that the hospital is unable to collected and is subtracted from
the facilities’ revenue (McEwen et al., 2019). Bad debt consists of services that the hospital
anticipated compensation for but did not receive payment (AHA, 2010). Bad debt is typically
generated from patients that are either impoverished or uninsured. A calculation of bad debt and
charity care make up the uncompensated care charges of a hospital. At my facility, we have a
Corporate Billing and Collection Policy. Before initiating collection efforts, MedStar will go to
extensive efforts to determine if a patient meets specific criteria for financial assistance
according to our Financial Assistance Policy. If a patient does not fall under the criteria for
financial assistance, then MedStar Health will follow government regulations outlined in the
Corporate Billing and Collection Policy to collect patient debts and will contract with third party
collection agencies in the recovery of bad debts as well.
5. Charity care provides services for patients that the hospital anticipates the patient being unable
to pay for (AHA, 2010). Charity care is different than bad debt because the hospital anticipates a
lack of payment whereas with bad debt, the hospital doesn’t receive payment (McEwen et al.,
2019). Although charity care is not accounted for in an organization’s revenue since the hospital
doesn’t expect payment, it is calculated when determining an organization’s uncompensated care
(McEwen et al., 2019). The amount of charity care that a facility provides varies by facility and
is determined by using the Charity Care Process. The Charity Care Process is a process used by
hospitals to determine an individual’s eligibility for charity care (AHA, 2010). Factors that are
examined during this process include sources of income, patient assets, and types of insurance
patients may have (AHA, 2010). At MedStar Health, we are committed to ensuring that the
uninsured and underinsured have access to emergency and medically necessary services. If a
patient is unable to pay for medical care, with no other financial resources, then they may qualify
for free or reduced medical care. At MedStar, we provide financial assistance to patients whose
households are below 200% of the federal poverty level ad reduced care up to 400% of the
federal poverty level. When a patient enters the Emergency Room at our facility they are given a
financial assistance policy information sheet. If a patient is in need of financial assistance, then
they are able to apply online or visit the Admitting Department to apply.
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