Exam 16: Accounting for Health Care Organizations

Health care organizations often collaborate and combine with related entities in providing health care services.

A contractual adjustment is recorded as a contra-revenue account.

Under the FASB GAAP hierarchy the AICPA Audit and Accounting Guide Health Care Entities would be category (b)authoritative guidance.

The purpose of a performance indicator is to provide an operating measure for not-for-profit health care organizations that is equivalent to income from continuing operations of for-profit health care organizations.

According to FASB standards,which of the following entities would not be considered a health care organization?

There are three main reasons why a nongovernmental not-for-profit hospital does not receive the full amount that it normally charges for a room: 1)contractual adjustments arising from transactions with third-party payors,2)charity service provided to indigent patients,and 3)bad debts.Compare the accounting treatment for the three reasons listed.

Contrast the statement of cash flows that nongovernmental not-for-profit hospitals prepare to those that governmental hospitals prepare.

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

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

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

The primary source of revenue for most hospitals is

Contractual adjustments are properly characterized as

Assets set aside by the governing board for the eventual construction of a hospital addition should be recorded as "assets limited as to use."

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 should 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?

"The goal of financial and operational analysis for the manager is to determine the creditworthiness of the health care organization." Do you agree with the statement? Why or why not?

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,the hospital did not consider $100,000 of charity services provided.Based on the information provided,what is the net amount of accounts receivable that the hospital would report on its financial statements?

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

Charity service and bad debts in a public hospital that follows business-type accounting are

Record in general journal form the following selected transactions for Avalon General Hospital,a nongovernmental not-for-profit institution. 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 in the hospital. 4)During the year,the new cardiology wing (see item 3)was one-half completed at a cost of $1,000,000.

An annual contributor to a not-for-profit hospital made an unrestricted pledge in October 2013 that will be paid in March 2014.Assuming the hospital's fiscal year-end is December 31,2013,the pledge in October 2013 should be credited to: