Exam 17: Accounting and Reporting for the Federal Government

The following are key terms in Chapter 17 that relate to accounting for health care organizations: 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 For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

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.

There are three main reasons why a hospital does not receive the full amount that they normally charge 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.

Contingencies that are unique to health care providers arise from malpractice claims,risk contracting,and payor payment programs,obligations to provide uncompensated care,and contractual agreements with physicians.

Which of the following would not be considered a health care organization required to follow the guidance of the AICPA Audit and Accounting Guide Health Care Organizations?

Assets whose use is limited by contracts or agreements with outside parties other than donors or grantors are labeled

Which of the following would be an appropriate performance indicator for a not-for-profit health care organization?

Donated medicines that normally would be purchased by a hospital should be recorded at fair market value and should be credited to

All health care organizations report investments at fair value and report unrealized gains or losses on the statement of operations.

Show entries in general journal form for the following transactions of Bothwell Regional Hospital,a not-for-profit hospital. 1)For the month just ended the hospital received in cash $8,000 from the hospital's gift shop sales,and received donated medicines with a fair value of $47,000.These medicines are of the type the hospital normally would purchase. 2)The hospital's finance officer,in compliance with the directive of the governing board,invested $600,000 of operating cash in certificates of deposit to be held for future purchases of equipment. 3)New fixed equipment costing $750,000 was purchased from money given the hospital in a prior year to be held until needed for equipment purchases. 4)A federal grant was received in cash in the amount of $400,000 to be used for heart research.During the current year only $50,000 was spent for this research program.

The primary source of revenue for most hospitals is

In accounting for health care entities,the provision for bad debt should always be recorded as a revenue deduction,rather than as an expense.

SFAS No.117 requires that interest received on endowment funds be reported in the statement of cash flows as a(n)

Which of the following statements is not true regarding generally accepted accounting principles (GAAP)applicable to health care organizations?

The AICPA Audit and Accounting Guide Health Care Organizations requires that health care organizations prepare a balance sheet (or statement of net assets)and the following additional statements:

The statement of activities required by SFAS No.117 for not-for-profit health care entities must display changes for the period in which of the following categories of net assets?

Equipment purchased from the restricted resources of a private hospital should be depreciated.

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 St.John received donated medical supplies worth $2,000; supplies they 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 St.John 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 assets should St.John report in its balance sheet as board designated,assuming it had no board designated net assets at the beginning of the year?

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

Congress mandated diagnosis-related groups (DRG)as a method for recording costs in health care organizations in the early 1980s,in part to facilitate Medicare's prospective payment system.Explain what the DRG system is and describe the impact this change may have had on the cost accounting systems of health care organizations.