McGraw-Hill/Irwin©2007, The McGraw-Hill Companies, All Rights Reserved Essentials of Accounting for Governmental and Not-for-Profit Organizations Chapter 12: Accounting for Hospitals and Other Care Providers

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

12-3 Ownership Types Investor Owned: Humana Corporation Stock is listed on the New York Stock Exchange Private Not-For-Profit: St. Josephs 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

12-4 Standard setting authority GASB - Category A GAAP –Authority over government related hospitals FASB - Categornot-for-profit GAAP –Private nonprofit hospitals Major FASBs 93, 116,117, 124, 136 –Investor owned hospitals Other FASBs AICPA Audit Guide for Health Care Organizations.- Level B GAAP for government related, private not-for-profits, and business oriented

12-5 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

12-6 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

12-7 Display Issues – Statement of Operations Private not-for-profits and Government related entities must provide a Performance Indicator which excludes: Equity transfers, Restricted Contributions, Contributions of LT assets, Most unrealized gains and losses, Restricted investment returns, Extraordinary items

12-8 Display Issues – Statement of Operations contd Patient service revenues shown net of contractual adjustments; separate out capitation agreement revenues Patient service revenue excludes charity care

12-9 Display Issues – Statement of Operations contd Operating revenues 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.

12-10 Display Issues – Balance Sheet The term restricted used only for donor restrictions; Assets whose use is limited is used to indicate board or bond covenant restrictions. FASB vs. GASB equity categories –FASB: unrestricted, temporarily restricted, permanently restricted –GASB: unrestricted, restricted, capital assets net of related debt

12-11 Comparison of Financial Statements 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

12-12 Comparison of Financial Statements Statement of Financial Position: –Classified, similar for not-for-profit, Government, Business except for 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 Earning s Statement of Cash Flows : –Bus and not-for-profit, 3 sections; Governmental, 4 sections