An association issued a statement defining the sometimes confusing terms of “charity care” and “bed debt.” It also calls for healthcare organizations to reclassify Medicare and Medicaid shortfalls based on these terms.

The Healthcare Financial Management Association’s statement applies to for-profit and tax-exempt providers that have to account for uncompensated care. Bad debt results only when a patient who has been determined to be able to pay for healthcare services is unwilling to settle the claim, the statement said. Charity care, in contrast, is given to a patient “with demonstrated inability to pay.”

With respect to Medicaid and Medicare shortfalls, the statement said in neither case do Medicaid and Medicaid shortfalls count as charity care. Shortfalls are the difference between what the government programs pay and what the services actually cost. The statement could affect the way nursing homes characterize bad debt and charity care.