Summary: Pursuant to a congressional request, GAO examined how 13 nonprofit children's hospitals dealt with unreimbursed charges for patient care.
GAO found that: (1) unreimbursed charges averaged about 20 percent of the 13 hospitals' total patient care charges in fiscal year (FY) 1986; (2) contractually arranged allowances and discounts accounted for 59 percent of the unreimbursed charges, followed by charity care and bad debt; (3) hospitals attempted to mitigate the impact of unreimbursed charges by setting patient charges higher than expenses, renegotiating allowance and discount contracts, scaling back other services, and generating income from other sources; (4) 4 of the 13 hospitals received sufficient patient revenues to cover expenses, while the other 9 did not set patient charges high enough to cover expenses; (5) six of those nine hospitals generated enough income from other operations and fund raising to offset the shortfall in patient revenues; and (6) two of the three hospitals that ended FY 1986 with a deficit had unique, extenuating circumstances which primarily caused the deficit.
