Charity Care (Financial Assistance)
Free or reduced-cost hospital care provided to patients who cannot afford to pay, required of all 501(c)(3) nonprofit hospitals under IRS Section 501(r) and frequently offered voluntarily by for-profit and government hospitals.
Charity Care (Financial Assistance) is a term from U.S. hospital cost and quality reporting — the field that produces the CMS Hospital Compare program, the Medicare Inpatient Payment files, and the patient-facing tools built on top of them. The definition below covers what the term means in CMS files, what it does not mean, and how it interacts with the other measures CMS publishes. On the LakeQuality value rubric, Charity Care (Financial Assistance) is one of the inputs (directly or indirectly) to the combined cost-and-quality grade. Understanding how the term is computed at CMS — what counts and what does not — is part of reading hospital pages defensibly.
Each hospital page on LakeQuality surfaces the specific Charity Care (Financial Assistance) value for that facility (when CMS reports one), so the general definition here translates into a concrete data point on the per-hospital pages you actually use.
How It Works
Charity care, formally called Financial Assistance in most hospital policies, is free or discounted hospital care provided to patients unable to pay based on income and asset criteria set by the hospital. Under IRS Section 501(r), added by Section 9007 of the Affordable Care Act, every 501(c)(3) tax-exempt hospital must: (1) establish a written Financial Assistance Policy (FAP) specifying income eligibility and discount levels, (2) conduct a Community Health Needs Assessment every 3 years and adopt an implementation strategy, (3) limit charges for FAP-eligible patients to Amounts Generally Billed (AGB) to insured patients rather than chargemaster rates, and (4) make reasonable efforts to determine FAP eligibility before engaging in extraordinary collection actions like wage garnishment, property liens, or credit reporting. Most nonprofit hospital FAPs extend free care to patients with household incomes below 200-300% of the Federal Poverty Level (for 2025, 300% FPL equals approximately $46,950 for an individual and $96,450 for a family of four), with sliding-scale discounts typically extending to 400-500% FPL. Many hospital systems have expanded eligibility further: Cleveland Clinic and Mass General Brigham offer free care to 400% FPL; Kaiser Permanente extends financial assistance to members in qualifying hardship. Senator Grassley and others have investigated charity care adequacy, finding that median nonprofit hospitals spend 2-4% of operating expenses on charity care while the estimated value of their tax exemption runs 5-6% of expenses. States including Washington, Oregon, Illinois, Colorado, and Minnesota have passed state-level charity care mandates with specific income thresholds (often 300-400% FPL for free care) and prohibit aggressive collections against eligible patients. Patients facing large hospital bills should always ask the hospital's financial counselor about the FAP; approval often eliminates or dramatically reduces bills. Many hospital bills mailed to uninsured patients include FAP information but studies show most eligible patients don't apply, making proactive outreach by the hospital essential to closing the gap.
Related Terms
- Nonprofit Hospital, A hospital organized as a 501(c)(3) tax-exempt entity, making up about 58% of U.S. community hospitals, that reinvests revenue into the community in exchange for federal, state, and local tax exemptions.
- Disproportionate Share Hospital (DSH) Payments, Supplemental Medicare and Medicaid payments to hospitals that serve a disproportionate number of low-income patients, totaling approximately $28 billion annually across both programs.
- Good Faith Estimate, A written estimate of expected charges for scheduled healthcare services that uninsured or self-pay patients have the right to receive under the No Surprises Act, effective January 1, 2022.
- Cash-Pay Rate (Discounted Cash Price), The price a hospital charges self-pay or uninsured patients who pay directly, often substantially lower than both the chargemaster and some commercial negotiated rates.
- Medical Debt, Unpaid healthcare bills, the leading cause of personal bankruptcy in the United States, affecting approximately 100 million Americans who carry some form of medical debt.
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About This Definition
This definition is part of the HospitalCostData Hospital Pricing Glossary, 47 terms explaining hospital costs, quality ratings, and healthcare billing. Written for patients, journalists, researchers, and healthcare professionals.