How Maryland Pays for Uncompensated Care: The HSCRC UCC Policy Explained

By Two Pillars & Co Advisory Group · Sources checked October 2026

What is uncompensated care?

Uncompensated care, abbreviated UCC, is hospital care provided for which no compensation is received, typically a combination of charity care and bad debt.^[1] Charity care is provided to patients who lack health coverage or whose coverage does not pay the full cost of the bill. The HSCRC’s report distinguishes two kinds: free care, for which the patient owes nothing out of pocket, which hospitals are required by statute to provide to patients with household income below 200 percent of the federal poverty level, and reduced-cost care, for which the patient is responsible for only a portion of costs.^[1] Bad debt is the unpaid balance for care for which payment was expected but not received.

The problem the policy solves is fairness. Without a statewide mechanism, hospitals serving many low-income patients would carry a heavy burden, while hospitals serving fewer would not. The HSCRC’s policy objective is to equitably share the financial burden of providing hospital care to patients who are uninsured or underinsured and cannot afford to pay.^[1]

How is uncompensated care funded?

The HSCRC’s rate year 2024 staff report describes a two-part solution. First, a statewide UCC markup is added to hospital rates, based on statewide actual UCC and applied uniformly to acute care hospital rates; for rate year 2024 that markup was 4.29 percent. Second, hospitals contribute to or draw from a statewide pool: hospitals with more UCC than the statewide average, after incorporating predicted UCC, draw from the pool, and hospitals with less than average pay into it. For rate year 2024, 23 regulated acute care hospitals would pay into the pool while 19 would withdraw.^[1]

In practice this means UCC is paid by patients and payers through rates, because the markup is built into every hospital’s rates, and that all hospitals receive funding from all payers for uncompensated care costs. The report describes the effect on consumers and payers as paying through rates, the effect on hospitals as protection for those with high volumes of low-income patients, and the effect on health equity as ensuring Marylanders can access care at any hospital regardless of insurance status.^[1]

What are actual and predicted UCC?

Each hospital’s contribution to or withdrawal from the pool is based on a 50/50 blend of two numbers. Hospital-specific actual UCC is determined from the hospital’s annual financial filings for the previous year. Hospital-specific predicted UCC comes from a logistic regression model: the HSCRC allows a nine-month runout period for hospitals to report charity care and bad debt write-offs after the fiscal year ends, and uses that data to predict the UCC built into rates for the next year, with the Area Deprivation Index, payer type and site of care as independent variables. An expected UCC amount is calculated for every patient encounter and summed by hospital.^[1]

The reason for the blend is incentive design. The report explains that incorporating predicted UCC encourages hospitals to responsibly collect payments from patients and payers who can afford to pay, and that the pool prevents UCC costs from rising too quickly.^[1] The pool also protects the sustainability of the fund while constraining growth of health care rates for all patients and payers.^[1]

How does UCC fit into the annual update?

UCC is one component of the annual update factor. In the rate year 2026 recommendation, the 5.68 percent revenue increase for global budget hospitals included a net increase to uncompensated care, and the document also addressed the UCC fund, whose calculation uses a 50/50 blend of actual UCC data and predicted UCC.^[2] The HSCRC also lists UCC among the factors that adjust a global budget: changes in the level of uncompensated care are one of the reasons annual revenue is adjusted.^[4]

What changed for rate year 2027, and what is coming

The HSCRC’s rate year 2027 uncompensated care report, dated September 9, 2026, proposes no change in methodology. It sets the statewide UCC markup built into Maryland hospital rates at 4.01 percent for rate year 2027, down from 4.29 percent in the rate year 2024 report, and shows 16 regulated acute care hospitals paying into the pool while 25 withdraw.^[5]

Coverage changes are the main pressure ahead. At its October 21, 2026 meeting the Commission heard a Medicaid update on federal House Resolution 1. Legally present immigrants lost Medicaid eligibility on October 1, 2026, with an estimated 4,500 adults losing coverage; Affordable Care Act expansion adults will be subject to work requirements and six-month eligibility renewals starting January 1, 2027, with an estimated 152,000 adults affected. For fiscal year 2027, earlier estimates ranged from 27,200 to 39,400 people losing coverage, with an impact on hospital uncompensated care of $10.7 million to $12.4 million, and the numbers were expected to rise by a small amount after the interim final rule on work requirements. The impact is expected to ramp up from summer 2027, so fiscal year 2028 effects will be larger.^[6] The HSCRC’s AHEAD workplan lists a UCC forward funding implementation plan among its current projects.^[6] Executives should therefore expect the markup, and each hospital’s pool position, to move, and should plan for higher uncompensated care.

Why UCC is a live issue

Uncompensated care can rise when people lose coverage. The Regulatory Working Group’s report on cost-shifting records that stakeholders emphasized the need to consider likely changes in Medicaid eligibility and levels of uncompensated care, along with other impacts of the federal law known as House Resolution 1, when designing State policy.^[3] If coverage falls, UCC rises, and the statewide markup would need to rise to fund it. That is a reason hospital finance leaders track coverage trends in their own communities and model what higher UCC would do to their pool position.

Because the cost of uncompensated care is shared, hospitals with high volumes of low-income patients are not at a financial disadvantage compared with hospitals serving higher-income patients, which the HSCRC lists as an intended effect of the policy.^[1]

Frequently asked questions

What to do next

1. Pull your hospital’s actual and predicted UCC and pool position.
2. Model the effect of higher UCC from coverage loss.
3. Review collection and financial assistance processes.
4. Track the statewide UCC markup each rate year.