Part III. Bad Debt — 2025 Inst 990 (Schedule H) (PDF)

Section A In this section, (a) enter combined bad debt expense; (b) provide an estimate of how much bad debt expense, if any, reasonably could be attributable to persons who would likely qualify for financial assistance under the organization’s FAP; and (c) provide a rationale for what portion of bad debt, if any, the organization believes is community benefit. In addition, the organization must enter whether it has adopted Healthcare Financial Management Association Statement No. 15, Valuation and Financial Presentation of Charity Care, Implicit Price Concessions and Bad Debts by Institutional Healthcare Providers (“Statement 15”), and provide the text or page number of its footnote, if applicable, to its audited financial statements that describe the bad debt expense.

Line 1. Indicate if the organization enters bad debt expense in accordance with Statement 15.

Note: Statement 15 hasn't been adopted by the American Institute of Certified Public Accountants (AICPA). The IRS doesn't require organizations to adopt Statement 15 or use it to determine bad debt expense or financial assistance costs. Some organizations may rely on Statement 15 in reporting bad debt expense and financial assistance in their audited financial statements. Statement 15 provides instructions for recordkeeping, valuation, and disclosure for bad debts.

Line 2. Use the most accurate system and methodology available to the organization to enter bad debt expense. If only a portion of a patient’s bill for services is written off as a bad debt, include only the proportionate amount attributable to the bad debt. Include the organization’s proportionate share of the bad debt expense of joint ventures in which it had an ownership interest during the tax year .

Describe in Part VI the methodology used in determining the amount entered on line 2 as bad debt, including how the organization accounted for discounts and payments on patient accounts in determining bad debt expense.

Line 3. Provide an estimate of the amount of bad debt entered on line 2 that is reasonably attributable to patients who likely would qualify for financial assistance under the hospital's FAP as entered on Part I, lines 1 through 4, but for whom insufficient information was obtained to determine their eligibility. Don't include this amount in Part I, line 7. Organizations can use any reasonable methodology to estimate this amount, such as record reviews, an assessment of financial assistance applications that were denied due to incomplete documentation, analysis of demographics, or other analytical methods.

Describe in Part VI the methodology used to determine the amount entered on line 3 and the rationale, if any, for including any portion of bad debt as community benefit.

Line 4. In Part VI, provide the footnote from the organization's audited financial statements on bad debt expense, if applicable, or the footnotes related to “accounts receivable,” “allowance for doubtful accounts,” or similar designations. Alternatively, enter the page number(s) on which the footnote or footnotes appear in the organization's most recent audited financial statements, which must be attached to this return. If the footnote or footnotes address only the filing organization's bad debt expense or “accounts receivable,” “allowance for doubtful

accounts,” or similar designations, provide the exact wording of the footnote or footnotes, or enter the page number(s) in which the footnote or footnotes appear in the attached audited financial statements.

If the organization's financial statements include a footnote on these issues that also includes other information, enter in Part VI only the relevant portions of the footnote. If the organization is a member of a group with consolidated financial statements, the organization can summarize that portion, if any, of the footnote or footnotes that apply. If the organization's financial statements don't include a footnote that discusses bad debt expense, “accounts receivable,” "allowance for doubtful accounts," or similar designations, include a statement in Part VI that the organization's audited financial statements don't include a footnote discussing these issues and explain how the organization's financial statements account for bad debt, if at all.

Section B In this section, (a) combine allowable costs to provide services reimbursed by Medicare (don't include community benefit costs included in Part I, line 7), (b) combine Medicare reimbursements attributable to such costs, and(c) combine Medicare surplus or shortfall. Include in Section B only those allowable costs and Medicare reimbursements that are reported in the organization's Medicare Cost Report(s) for the year, including its share of any such allowable costs and reimbursement from disregarded entities and joint ventures in which it has an ownership interest. Don't include any Medicare-related expenses or revenue properly entered in Part I, line 7f or 7g.

In Part VI, the organization should describe what portion of its Medicare shortfall, if any, it believes should constitute community benefit, and explain its rationale for its position. As described below, the organization can also enter in Part VI the amount of any Medicare revenues and costs not included in its Medicare Cost Report(s) for the year, and can enter a reconciliation of the amounts entered in Section B (including the surplus or shortfall entered on line 7) and the total revenues and costs attributable to all of the organization's Medicare programs.

Line 5. Enter all net patient service revenue (for Medicare fee for service (FFS) patients) associated with the allowable costs the organization entered in its Medicare Cost Report(s) for the year, including payments for indirect medical education (IME) (except for Medicare Advantage IME), Medicare disproportionate share hospital (DSH) revenue, coinsurance, patient deductible, outliers, capital, bad debt, and any other amounts paid to the organization on the basis of its Medicare Cost Report. Don't include revenue related to subsidized health services as entered in Part I, line 7g (see Worksheet 6), research as entered in Part I, line 7h (see Worksheet 7), or direct graduate medical education (GME) as entered in Part I, line 7f (see Worksheet 5). If the organization has more than one Medicare provider number, combine the revenue attributable to costs reported on the Medicare Cost Report(s) submitted under each provider number, and enter the combined revenues on line 5.

Line 6. Enter all Medicare allowable costs reported in the organization's Medicare Cost Report(s), except those already entered on line 7g, Part I (subsidized health services), and costs associated with direct GME already entered on line 7f, Part I (health professions education). This can be determined using Worksheet A. If Worksheet A isn't used, the organization must still subtract the costs attributable to subsidized health services and direct GME from the Medicare allowable costs it enters on line 6. If the organization has more than one Medicare provider number, it should combine the costs reported in the Medicare Cost Report(s) submitted under each provider number and enter the combined costs on line 6.

2025 Instructions for Schedule H (Form 990) 5

Worksheet A (Optional) Complete Worksheets 5 and 6 before completing this Worksheet A.

Total Medicare allowable costs (from Medicare Cost Report) . . . . . . . . . . . . . . . . . . . . . . ^$
Total Medicare allowable costs (from line 1) included in Worksheet 6, line 3, col. (A) . . . . . . . ^$
Total Medicare allowable costs (from line 1) included in Worksheet 5, line 8 (direct GME) . . . . ^$
Total adjustments to Medicare allowable costs (add lines 2 and 3) . . . . . . . . . . . . . . . . . . . . . . ^$
Total Medicare allowable costs (line 1 minus line 4). Enter this value on Part III, line 6 . . . . . . . . . . . ^$

Line 7. Subtract line 6 from the amount on line 5. If line 6 exceeds line 5, enter the surplus (the shortfall) as a negative number.

Tip: Lines 5, 6, and 7 don't include certain Medicare program revenues and costs, and thus cannot reflect all of the organization's revenues and costs associated with its participation in Medicare programs. The organization can describe in Part VI the Medicare revenues and costs not included in its Medicare Cost Report(s) for the year (for example, revenues and costs for freestanding ambulatory surgery centers, physician services billed by the organization, clinical laboratory services, and revenues and costs of Medicare Part C and Part D programs). The organization can enter on Part VI, line 1, a reconciliation of amounts entered in Section B (including the surplus or shortfall entered on line 7) and all of the organization's total revenues and total expenses attributable to Medicare programs.

Line 8. Check the box that best describes the costing methodology used to enter the Medicare allowable costs on line 6. Describe this methodology in Part VI.

The organization must also describe in Part VI its rationale for treating the amount entered on Part III, line 7, or any portion of it, as a community benefit. An organization's rationale must have a reasonable basis. Don't include this amount in Part I, line 7.

If the organization received any prior year settlements for Medicare-related services in the current tax year, it can provide an explanation on Part VI, line 1.

Section C In this section, enter the organization's written debt collection policy.

Line 9a. Answer “Yes” if the organization had a written debt collection policy on the collection of amounts owed by patients during its tax year .

For purposes of line 9a, a “written debt collection policy” includes a written billing and collections policy, or in the case of an organization that doesn't have a separate written billing and collections policy, a written FAP that includes the actions the organization may take in the event of nonpayment, including collection actions and reporting to credit agencies.

Line 9b. Answer “Yes” if the organization's written debt collection policy that applied to the facilities that served the largest number of the organization's patients during the tax year contained provisions for collecting amounts due from those patients who the organization knows qualify for financial assistance. If the organization answers “Yes,” describe in Part VI the collection practices that it follows for such patients, whether

or not such practices apply specifically to such patients or more broadly to also cover other types of patients.