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Chapter 12 Accounting for Hospitals and Other Health Care Providers

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1 Chapter 12 Accounting for Hospitals and Other Health Care Providers
Essentials of Accounting for Governmental and Not-for-Profit Organizations Chapter 12 Accounting for Hospitals and Other Health Care Providers McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

2 Overview of Chapter 12 Who has standard setting authority?
What types of entities are included? General reporting principles and Illustrative transactions Example Financial Statements

3 Ownership Types Investor Owned: Humana Corporation
Investor Owned: Humana Corporation Stock is widely held and the company is listed on the New York Stock Exchange Private Not-For-Profit: St. Joseph’s Hospital of Atlanta The Hospital is owned by the (Catholic) Archdiocese of Atlanta Government Owned: Medical College of Georgia Hospital The Hospital and other facilities are owned by the State of Georgia

4 Standard Setting Authority
GASB - Category A GAAP Authority over government related hospitals FASB - Private not-for-profit hospitals Major FASBs 93, 116,117, 124, 136 Investor owned hospitals Other FASBs Additional guidance is provided by the AICPA Audit Guide for Health Care Organizations.- This is level B GAAP for government related, private not-for-profits, and business oriented

5 What Types of Organizations?
Clinics Medical groups Individual practitioners Emergency care Laboratories Surgery care centers Continuing care HMOs Home health agencies Hospitals Nursing homes Rehabilitation centers

6 Hospital Financial Statements
Balance Sheet, Most use classified balance sheet – exception: continuing care communities Statement of Operations, Statement of Changes in Equity Statement of Cash Flows and Notes

7 Display Issues – Statement of Operations
Private not-for-profits and Government related entities must provide a Performance Indicator. This a measure of income which excludes: Equity transfers, Restricted Contributions, Contributions of LT assets, Most unrealized gains and losses, Restricted investment returns, and Extraordinary items

8 Display Issues – Statement of Operations, cont’d
Patient service revenues are shown net of contractual adjustments. Patient service revenue excludes charity care (service provided where there is no expectation of payment). The estimate of uncollectible accounts is shown as an operating expense.

9 Display Issues – Statement of Operations, cont’d
Operating revenues are often classified as Net patient service revenues, premium (capitation) revenue, and Other Revenue (parking lot, gift shop, cafeteria, and tuition). Unrestricted gifts may be treated as Operating or Nonoperating depending on policy. Expenses: Minimum must report 2 functions: health care and general/admin.

10 Display Issues – Balance Sheet
FASB vs. GASB equity accounts: FASB: unrestricted, temporarily restricted, and permanently restricted net assets The term restricted used only for donor restrictions; Assets whose use is limited is used to indicate board or bond covenant restrictions. GASB: unrestricted net assets, restricted net assets, and capital assets net of related debt

11 Comparison of Financial Statements
Two statements take the place of the Statement of Activities: Statement of Operations: Similar for not-for-profits, Government, Business Statement of Changes in Net Assets: not-for-profits must show details of net changes for unrestricted, temporarily and permanently restricted

12 Comparison of Financial Statements
Statement of Financial Position: Classified, similar for not-for-profit, Government, and commercial businesses except for the equity section not-for-profit: unrestricted, temporarily and permanently restricted Government: unrestricted, restricted, invested in capital assets net of debt Business: Contributed Capital and Retained Earnings Statement of Cash Flows: Business and not-for-profits use the FASB format (3 sections); Governments use the GASB format (4 sections)

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