Community Benefit Glossary

Below is a list of commonly used community benefit terms and their definitions.

Bad Debt

Cost of care provided to patients who did not pay their bills and who did not seek or receive financial assistance.

Charity Care

Free or discounted health services provided to persons who meet the hospital’s criteria for financial assistance and are deemed unable to pay for all or a portion of the services their child receives. 

Community Benefit

The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. To meet the definition of a community benefit, programs and services must be provided in response to an identified community need and address at least one of the community benefit objectives: improve access to health care services, enhance the health of the community, advance medical or health knowledge, or relieve or reduce the burden of government or other community efforts.

Subsidized Health Services

These are clinical services that Children’s Mercy provides because they are needed in our community, even though the services create a financial loss to the hospital. To be defined as “community benefit” for the IRS, these services also must meet the criteria that, if Children’s Mercy did not offer these services, they would be unavailable in our community – the community’s capacity to provide the service could not cover all of the community’s need – or the service would become the responsibility of the government or another tax-exempt organization. 

Uncompensated Care 

Uncompensated care is the cost of medical services for which a hospital does not receive payment from government payers, insurance companies or patients. Uncompensated would include bad debt, charity care, and unreimbursed care.

Unreimbursed Care

Unreimbursed care is the shortfall created when the amount paid by the government-sponsored program is less than the hospital’s cost to care for that patient. 

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