1. 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 © 2013 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. Private Not-For-Profit:
Ownership Types
Investor Owned:
Human Inc. stock is widely held and the company is listed on the New York Stock Exchange
Private Not-For-Profit:
The Hospital is owned by the (Catholic) Archdiocese of Atlanta
Government Owned:
The NY City Health and Hospital Corporation was created by the NY state legislature

4. Ownership Types – Standard Setter
Investor Owned:
FASB – except standards specifically for not-for-profits
Private Not-For-Profit:
FASB– particularly, standards for not-for-profits such as SFAS 116 & 117
Government Owned:
GASB

5. 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, 164
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

6. 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

7. Contractual Adjustments
Third-party payers commonly receive discounts for services.
The amount of these discounts are estimated and recorded at the time of service
They are reported as “contra-revenues”

8. Contractual Adjustments vs Charity Care
Contractual Adjustment Entry:
Contractual Adjustment …. Dr
Patient Accounts Rec. ……Cr
Charity care (no expectation of receiving payment)
No Journal entry

9. Hospital Financial Statements
Balance Sheet,
Most use classified balance sheet – exception: continuing care communities
Statement of Operations,
Statement of Changes in Net Assets (or “Changes in Equity” if investor owned)
Statement of Cash Flows and Notes

10. 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

11. 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.

12. 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.

13. Display Issues – Balance Sheet
FASB vs. GASB net asset 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(position), restricted net assets(position), and net investment in capital assets

14. 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

15. 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 net assets
Government: unrestricted net assets(position), restricted net assets(position), and net investment in capital assets
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)