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Report to the Legislature
Hospital Charity Care and Financial Data
Health Systems Quality Assurance
2022
Charity Care
in
Washington
Hospitals
January 2024
RCW 70.170
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 2
To request this document in another format, call 1-800-525-0127. Deaf or hard of hearing customers,
please call 711 (Washington Relay) or email [email protected].
Publication Number DOH 602-005
For more information or additional copies of this report:
Health Systems Quality Assurance
Community Health Systems
P.O. Box 47853
Olympia, WA 98504-7853
360-236-4210
Report Author
Carrie Baranowski, Charity Care Program Manager, Community Health Systems
Umair A. Shah, MD, MPH
Secretary of Health
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 3
Contents
Executive Summary ....................................................................................................................... 5
Background on charity care in Washington ................................................................................... 6
What is charity care? ................................................................................................................. 6
What is the role of the Department of Health? ........................................................................ 6
What are hospitals required to report and when? .................................................................... 6
How do hospitals report charity care and how is it calculated? ................................................ 9
2022 Washington state charity care data ..................................................................................... 9
Statewide charity care charges for hospital fiscal year 2022 .................................................... 9
Distribution of charity care among Washington hospitals ...................................................... 12
Adjusting billed charges to determine actual cost of providing charity care ........................... 12
Contribution of all purchasers of care to hospital charity care ............................................ 13
Uncompensated care in Washington .................................................................................. 14
Summary ..................................................................................................................................... 14
About this report ........................................................................................................................ 15
Appendix ..................................................................................................................................... 16
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 4
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 5
Executive Summary
The Department of Health (department) is required per RCW 70.170.060 to provide annual
updates to the public on the status of charity care provided by hospitals in Washington State.
Hospitals are required to develop a charity care policy, and to submit financial data regarding
charity care to the department. This report summarizes the charity care data provided by
Washington hospitals for the hospital fiscal year (FY) ending in 2022.
Hospitals reported an increase in charity care in FY 2022. Based on a cost-to-charge ratio,
Washington hospitals reported actual expenses of $424.1 million for charity care.
1
These
charges reflect an increase of 33 percent from those reported in FY 2021.
View more information on charity care, including detailed reports by hospital.
2
1
Since the data in this report are based on billed charges, not the actual payment expected by the hospital, the approximate
cost of providing charity care can be estimated by applying a cost-to-charge ratio. Multiplying the dollars by the cost-to-charge
ratio results in an approximate cost of what hospitals actually spent providing this service to patients. The statewide cost-to-
charge ratio is 0.374. Based on the $1.134 billion reported in charity care charges in FY 2022, the overall cost of providing
charity care statewide was about $424.1 million.
2
https://doh.wa.gov/data-statistical-reports/healthcare-washington/hospital-
and-patient-data/hospital-patient-information-and-charity-care
2
https://doh.wa.gov/data-statistical-reports/healthcare-washington/hospital-and-patient-data/hospital-patient-information-
and-charity-care
The amount of money hospitals spent on charity care services in Washington varied widely
with
the median amount across all hospitals at $1.23 million; however, the average was
more than three times higher at $4.12 million.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 6
Background on charity care in Washington
What is charity care?
Charity care is defined in chapter 70.170 RCW as “medically necessary hospital health care
rendered to indigent persons when third-party coverage, if any, has been exhausted, to the
extent that the persons are unable to pay for the care or to pay deductibles or coinsurance
amounts required by a third-party payer, as determined by the department.” Washington law
prohibits hospitals from denying patient access to care based on inability to pay or adopting
admission policies that significantly reduce charity care.
In 2022, legislation modified the requirements of hospital-based charity care. For care provided
on or before June 30, 2022, patients with family incomes below 100 percent of the federal
poverty guidelines receive hospital services at no cost. Hospitals must also provide discounted
care to patients between 100 and 200 percent of the poverty guidelines using a sliding scale.
For care provided on or after July 1, 2022, Washington hospitals are placed in one of two tiers
and must provide discounts corresponding to each tier. Tier 1 hospitals provide patients with
incomes up to 200 percent of the federal poverty guidelines services at no cost and patients
between 200 and 300 percent of the poverty guidelines receive care at a discount. Tier 2
hospitals provide patients with incomes up to 300 percent of the federal poverty guidelines
services at no cost and patients between 300 and 400 percent of the poverty guidelines receive
care at a discount. Appendix 2 of this report provides a listing of hospitals by tier.
These are the minimum requirements. Hospitals may extend free or discounted care to patients
earning more than these levels, and many do. The charity care policies for each hospital in
Washington may be found here.
3
What is the role of the Department?
The Charity Care Program (program) at the department is charged with monitoring financial
data reporting and enforcing charity care regulations at acute care and psychiatric hospitals.
Financial data is received and made publicly available via website posting to increase
transparency and public understanding of health care costs. The program reviews hospital
charity care policies and practices to ensure hospitals comply with the law. In addition, the
program assists hospital staff with understanding and compliance of both financial and charity
care requirements and assists patients seeking charity care.
What are hospitals required to report and when?
Hospitals are required by law to submit charity care policies to the department for review at
least 30 days before policies are adopted. Additionally, hospitals report the number of charity
3
https://doh.wa.gov/data-statistical-reports/healthcare-washington/hospital-and-patient-data/hospital-policies
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 7
care applications submitted and completed, as well as approved for each quarter. Hospitals are
also required to submit quarterly and year-end financial reports to the department using a
uniform system of accounting. The department uses these financial reports to report charity
care data and trends for the state each year. Fiscal years vary among hospitals in Washington,
with hospital fiscal years ending on March 31, June 30, September 30, or December 31.
Hospitals are required to report total patient services revenue, also called billed charges, and
the amount of patient services revenue that is written off as charity care. Hospitals are also
required to report bad debt. Bad debt is different from charity care and is defined as
uncollectible amounts, excluding contractual adjustments, which arise from failure to pay by
patients whose care has not been classified as charity care. All of this data is reported as part of
the hospital’s year-end financial report.
Hospitals report financial data to the department on an income statement. Below is an
abbreviated example of an income statement to illustrate the relationships between the
various revenue sources and expenses.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 8
Hospital: Sample Community
Hospital
Comment
Sample Hospital
Revenue
= TOTAL PATIENT SERVICES
REVENUE
Inpatient and outpatient revenue
equivalent to Total Billed Charges
615,000,000
- Provisions for Bad Debt
Unpaid charges billed to patient who
are not eligible for Charity Care,
deducted from total revenue
(15,000,000)
- Contractual Adjustments
Reductions from billed charges
negotiated by insurance companies,
deducted from total revenue
(350,000,000)
- Charity Care
Unpaid charges billed to patient
eligible for charity care, deducted
from total revenue
(25,000,000)
=NET PATIENT SERVICE REVENUE
Actual patient revenue received
225,000,000
+ OTHER OPERATING REVENUE
Actual revenue received for office
rental, cafeteria income, etc.
10,000,000
= TOTAL OPERATING REVENUE
Actual patient revenue and other
operating expenses
235,000,000
-TOTAL OPERATING EXPENSES
Total expense for operating the
hospital
(220,000,000)
= NET OPERATING REVENUE
Cash remaining after operation of
patient services
15,000,000
+/- NON-OPERATING-NET OF
EXPENSES
Nonpatient revenue (investments,
partnership fees)
5,000,000
= NET REVENUE BEFORE ITEMS
LISTED BELOW
Operating plus nonoperating
remainder
20,000,000
+/- EXTRAORDINARY ITEM
One time cash revenue or cash
expenses
0
= NET REVENUE OR (EXPENSE)
Net cash remaining after all
transactions
20,000,000
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 9
How do hospitals report charity care and how is it calculated?
The amount of charity care reported by hospitals is based on patient services revenue, known
as billed charges. These charges are based on the hospital’s charge master rate sheet, which
sets the price for every treatment and supply category a hospital uses. Every patient’s total bill
is comprised of the sum of the charge master rates of the various services or supplies used
during the stay before any adjustments based on insurance status. All patients, regardless of
insurance status, receive the same billed charges for the same services.
The billed charges reflect a markup that varies among hospitals and is higher than the amount
the hospital actually expects to be paid. Medicaid and Medicare pay a set rate for services
regardless of billed charges, and private insurance companies negotiate with hospitals for large
discounts off the master rate sheet.
Charity care is the amount of billed charges an indigent patient incurs for medically necessary
hospital health care. Since these charges include the markup, the dollar amount of charity care
reported by hospitals overestimates the true cost of providing charity care to indigent patients.
To estimate the true cost of providing charity care, the department applies a cost-to-charge
ratio. The formula is total operating expenses (the actual cost of running the hospital and
providing services) divided by total patient services revenue (billed charges).
Adjusted patient services revenue is the amount of revenue for non-Medicare and non-
Medicaid payers, which includes private insurance and self-pay. The proportion of patients
covered by Medicare or Medicaid varies widely among hospitals. The use of adjusted patient
services revenue allows for a comparison of hospital charity care as a percent of privately
sponsored patient revenue.
4
2022 Washington state charity care data
Statewide charity care charges for hospital fiscal year 2022
This report describes data collected from licensed Washington hospitals for their fiscal years
(FY) ending in 2022. FY 2022 includes data for the 12 months prior to the end of each hospital’s
fiscal calendar, including data for months in 2021 if the fiscal year starts prior to January 1,
2022.
4
Adjusted patient services revenue subtracts Medicare and Medicaid specific patient services revenue from total patient
services revenue to allow meaningful comparisons of charity care provided among hospitals. The federal Centers for Medicare
and Medicaid Services (CMS) prohibits hospitals from billing patients for the difference between the billed charges and the
Medicare or Medicaid payment levels set by CMS. Therefore, patients covered by Medicare or Medicaid can’t be charity care
patients. The proportion of patients covered by Medicare or Medicaid varies widely among hospitals.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 10
All charity care data for FY 2022 were due to the department by June 29, 2023. Ten hospitals
still have not provided data for their 2022 fiscal year; 93 of 103 hospitals reported charity care
information in year-end financial reports. Of the ten hospitals that did not submit year-end
reports, we have provided the annual financial estimates for eight hospitals based on their
quarterly financial reports or audited financial statements. For two other hospitals, no charity
care data is available because no FY 2022 financial reports were submitted to the department
(Table 1).
Table 1. Washington Hospitals That Did Not Submit Year-End Financial Reports, Fiscal Year
2022.
Lic.
No
Hospital
Lic.
No
Hospital
39
Trios Health
167
Ferry County Memorial Hospital*
79
Ocean Beach Hospital
195
Snoqualmie Valley Hospital
111
East Adams Rural Hospital
213
CHI/Franciscan Rehabilitation Hospital
148
Kindred Hospital Seattle*
924
US Healthvest/Smokey Point Behavioral
Hospital
156
WhidbeyHealth
928
US Healthvest/South Sound Behavioral
Hospital
* Did not provide either year-end or quarterly
financial data
Hospital financial reporting requirements are a result of RCW 43.70.052. Chapter 246-454 WAC
requires submission of both year-end and quarterly financial reports. A hospital is provided one
hundred twenty days after the close of its fiscal year to file its year-end report. This time period
may be extended up to and including an additional sixty days. Quarterly reports are required to
be submitted within forty-five days after each calendar quarter.
The department provides hospitals with the year-end reporting template seven to ten days
after the close of each hospital’s fiscal year and deadline reminders, for both year-end and
quarterly reports, fourteen days prior to the due dates. Additionally, the department provides
education and assistance to hospitals that experience reporting complications, such as staff
turnover or system issues that potentially hinder the ability to report in a timely manner.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 11
Figure 1. Statewide Hospital Charity Care in Washington, Fiscal Years 2013 - 2022.
Following a decline in charity care after implementation of the Affordable Care Act (ACA) in
2013, charity care increased from 2016 through 2020. The rate decreased in 2021 and
increased in 2022. As a percentage of total hospital patient services revenue, charity care
charges dropped from 2.9 percent to 1.3 percent from 2013 to 2022 (Figure 1 and Table 2). The
increase from 2021 to 2022 may be attributed to 2022 legislation that increased eligibility for
charity care discounts. Patients with family income up to 300 percent of the federal poverty
guidelines are now eligible for charity care at all Washington hospitals and patients with family
income up to 400 percent of the federal poverty guidelines are eligible for charity care at large
hospitals and large health care systems. Approximately fifty percent of patients receiving care
in Washington hospitals are eligible to receive charity care.
Table 2. Statewide Hospital Charity Care in Washington, Fiscal Years 2013-2022
Table 2 notes: Adjusted patient service revenue is the total hospital revenue minus Medicare and Medicaid charges. Operating
margin is the total hospital patient service operating revenue (net of deductions) minus total patient service operating
expenses expressed as a percent. Note: Patient services revenue is the same as billed charges.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 12
Distribution of charity care among Washington hospitals
Charity care varied widely among hospitals in fiscal year 2022, ranging from $37,126 to
$126,780,263. The median amount of charity care per hospital was $2,994,727. However, the
average was much higher at $11,344,483 as several hospitals provided substantial charity care.
The amount varied among hospitals in rural and urban areas and in different geographic areas
of the state. These variations do not seem to be explained by population size. Some of the
variation may be a function of the proportion of hospital revenue coming from Medicare and
Medicaid.
Differences in charity care among hospitals may reflect demographic and socioeconomic
differences in service areas, hospital service availability, and charity care practices within the
hospital. A high level of reported charity care, for example, may reflect greater need for charity
care in the community. Likewise, a low level of charity care may reflect a relative absence of
need for charity care in a hospital’s service area.
Figure 2. Range of Charity Care in Washington, Fiscal Year 2022.
Adjusting billed charges to determine actual cost of providing
charity care
Because billed charges reflect mark-ups that vary between hospitals and are significantly higher
than the expected payment, determining the actual cost of providing charity care to eligible
patients is challenging. One way to estimate the cost of providing charity care is to use a cost-
to-charge ratio.
5
The formula is total operating expenses (the actual cost of running the hospital
and providing services) divided by total patient services revenue (billed charges).
5
http://medical-dictionary.thefreedictionary.com/hospital+cost-to-charge+ratio
$37,126
$2,994,727
$11,344,483
$126,780,263
Lowest
Median
Average
Highest
Charity Care Range
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 13
As an example of how the cost-to-charge ratio works, if a hospital had billed charges of
$1,000,000 and a cost-to-charge ratio of .345, the actual cost for that hospital to treat patients
is $345,000. If that same hospital reported charity care billed charges of $100,000, the cost of
treating those patients is $34,500. The higher the ratio, the closer the billed charges are to the
actual cost of treating patients. This is only an estimate based on overall hospital performance.
Washington hospitals reported $1.134 billion in charity care billed charges in 2022, which
amounts to $424.1 million in actual expenses based on a cost-to-charge formula.
6
Cost-to-
charge ratios ranged from .20 to 1.86 with a statewide average of .37. Below are some
examples of cost-to-charge ratios for Washington hospitals, including a high, average, and low.
Hospital
Charity Care
Charges
Cost-to-Charge
Ratio
7
Estimated Actual
Cost of Charity
Care
Odessa Memorial Hospital
$54,469
1.86
$101,046
Tri-State Memorial Hospital
$2,428,489
.507
$1,230,649
CHI/Saint Francis Community
Hospital
$24,828,681
.204
$5,074,117
Contribution of all purchasers of care to hospital charity care
Charity care as a percent of adjusted (non-Medicare, non-Medicaid) revenue decreased from
6.2 percent in FY 2013 to 2.4 percent in FY 2016. It increased to 3.1 percent in FY 2017 and
steadily climbed to 3.9 percent in FY 2020. FY 2020 matched FY 2017 at 3.1 percent. In 2022
charity care as a percent of adjusted revenue increased to 3.5 percent. Because charity care is
unreimbursed, all payers – including insurance companies and patients who self-pay –
contribute to covering the cost of charity care provided by the hospital. Throughout this time,
fluctuations in the statewide operating margin, which is a measure of hospital profitability, do
not appear to have adversely affected the amount of charity care provided in Washington
(Table 2).
6
Since the data in this report are based on billed charges, not the actual payment expected by the hospital, the approximate
cost of providing charity care can be estimated by applying a cost-to-charge ratio. Multiplying the dollars by the cost-to-charge
ratio results in an approximate cost of what hospitals actually spent providing this service to patients. The statewide cost-to-
charge ratio is 0.374. Based on the $1.134 billion reported in charity care charges in FY 2022, the overall cost of providing
charity care statewide was about $424.1 million.
7
Note: The figures in this column are rounded to the third decimal place whereas the Estimated Actual Cost of Charity Care
totals in the column to the right are computed by multiplying by the cost-to-charge ratio figure rounded to the eighth decimal
place.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 14
Uncompensated care in Washington
Uncompensated care includes both charity care and bad debt. Looking at uncompensated care
gives us a bigger picture of the impact of the ACA and a way to compare Washington to other
states.
Prior to the implementation of the ACA, both charity care and bad debt had been increasing.
Both began to decline in 2013 with implementation of ACA provisions and this continued until
2017, when charity care began to rise again. In 2021, charity care decreased while bad debt
increased slightly. The opposite occurred in 2022, charity care increased while bad debt
decreased (Figure 3).
Figure 3. Hospital Charity Care and Bad Debt Patient Service Charges in Washington, Fiscal
Years 2013 – 2022
Summary
In 2013, as a result of the ACA, Washington saw the first decline in the amount of charity care
reported by hospitals since the department began gathering these data in 1989. That decline
ceased in 2016, increased steadily through 2020, and experienced a one-year decline in 2021.
From 2021 to 2022, Washington saw charity care charges peak at $1,134,448,310 which may be
attributed to 2022 legislation that increased eligibility for charity care discounts to
approximately fifty percent of patients receiving care in Washington hospitals.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 15
About this report
The department has issued an annual report since 1990 as directed by chapter 70.170 of the
Revised Code of Washington (RCW). Your feedback is important to us. Submit your comments
by email at [email protected] to help us continue to improve the charity care report.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 16
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 17
Appendices
Appendix 1. Total Patient Service Revenue, Adjusted Patient Services Revenue, and Amount of
Charity Care as a Percent for Washington Hospital Fiscal Years Ending During Fiscal Year 2022.
View expanded data.
8
8
https://data.wa.gov/dataset/HOFIDAR-Yearly-Balance-Sheet-and-Income-Statement/g3t6-ugwe
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 18
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 19
Appendix 2. Washington Hospital Map & Tier Listing, 2022.
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 20
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 21
WASHINGTON STATE DEPARTMENT OF HEALTH
2022 Charity Care in Washington Hospitals | 22
