Exam 16: Accounting for Health Care Organizations

What auditing issues are of particular significance to the health care industry?

Where would a capitation fee be reported on a health care entity's financial statements?

In accordance with the FASB Codification estimated uncollectible account amounts are reported in the same manner for patient accounts receivable and donor pledges receivable.

How would the cash acquisition of equipment be reported on a health care entity's statement of cash flows?

Financial reporting standards for all hospitals are established by the FASB.

Which of the following entities would not be considered a health care organization?

Similar to for-profit entities, under FASB standards, not-for-profit health care entities are required to classify investments in debt securities into trading, available-for-sale, and held to maturity for reporting purposes.

Which of the following could be included in the performance indicator measure provided by a nongovernmental not-for-profit hospital?

In accordance with the FASB Codification, net assets released from restriction should be included as part of the performance indicator on a health care entity's statement of operations.

Where does a nongovernmental not-for-profit health care entity report increases that have occurred in its net assets with donor restrictions?

Explain how one can evaluate both the financial performance of a hospital and the quality of health care the hospital provides.

Which of the following is shown on a statement of changes in net assets?

Which of the following statements is True about diagnosis-related groups (DRGs)?

Contractual Adjustments is properly characterized as:

Which of the following volunteer services is most likely to be reported by a nongovernmental not-for-profit hospital as contribution revenue and an expense?

Record in general journal form the following selected transactions for Avalon General Hospital, a nongovernmental not-for-profit institution. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 1. Gross charges for patient services rendered during the period amounted to $7,870,000, of which $350,000 represented charity care for indigent patients. 2. During the year the provision for bad debts was set at $190,000 and contractual adjustments amounted to $435,000.  3. A wealthy donor donated $2,000,000 to construct a new cardiology wing on the hospital. 4. During the year, the new cardiology wing (see item 3) was one-half completed at a cost of $1,000,000.

Under GAAP, both governmental and nongovernmental not-for-profit health care entities are required to identify operating and nonoperating activity on their operating statements.

Georgetown Hospital, a governmental hospital, recorded during its fiscal year ended September 30, gross patient services valued at $15,000,000, excluding charity care services of $1,600,000. However, contractual adjustments by third-party payors amounted to $1,200,000. In May of that year it received donated medical supplies worth $2,000; supplies it had planned to purchase had it not been for the gift. At year-end, the governing board set aside investments in the amount of $500,000 for future plant expansion and $250,000 to be invested with the related earnings used for a special prenatal care program. 1. In its operating statement for the year ended September 30, how much should Georgetown report as net patient services revenue? 2. For the year ended September 30, how should the donation of medical supplies be reported? 3. What amount of unrestricted net position should Georgetown report in its balance sheet as board designated, assuming it had no board designated net position at the beginning of the year?

A hospital originally recorded all patient services it provided as a $500,000 debit to accounts receivable. Upon review the hospital determined that a contractual adjustment of $200,000 needs to be made, and estimated bad debts of $5,000 need to be recorded. In addition, at the time the receivable was recorded the hospital did not realize $100,000 should be considered charity services. Based on the information provided, what is the net amount of accounts receivable that the hospital would report on its financial statements?

For each of the following definitions, indicate the key term from the list that best matches by placing the appropriate definition. A. Contractual adjustments B. Capitation fees C. Charity care D. Diagnosis-related groups E. Prospective payment system F. Health maintenance organizations G. Performance indicator H. Third-party payor ________ 1. A prepaid health care plan that functions as a broker of health care between the consumer/patient requiring services and the health care provider ________ 2. Medicare's system in which payments are based on allowed service costs within the same diagnosis-related group rather than on actual cost of services rendered ________ 3. Fixed dollar amount of fees per person paid periodically by a third-party payor to a health care provider ________ 4. The difference between the gross patient service revenue and the negotiated payment by third-party payors in arriving at net patient service revenue ________ 5. Health services provided to persons with a demonstrated inability to pay