Introduction to Healthcare Accounting
[Pages:40]Introduction to Health Care Accounting
James C. Patton
February 26, 2007
Agenda
? Accounting Issues Impacting Not-For-Profit Health Care Organizations
? Accounting Hot Topics ? Trustee Responsibility for Hospital Financial Viability
2
Accounting Issues Impacting Not-for-Profit Health Care Organizations
? Revenue Recognition:
? How hospitals are paid ? Patient accounts receivable ? Allowance for bad debts and charity ? Allowance for contractual adjustments ? Estimated third-party payor settlements
? Professional Liability ? Charitable Contributions
3
How Hospitals are Paid
? Major Sources of Payment for Services:
? Federal government (Medicare) ? State government (Medicaid, a joint program with the Federal
government) ? Private payors (BCBS plans and commercial payors) ? Patients (private payors)
4
How Hospitals are Paid
? Payment Methodologies:
? Prospective ? Per diem ? Cost ? Percent of charges ? Capitation
? Payment methodologies impact accounting
5
Patient Accounts Receivable
? Composition of patient accounts receivable:
? By payor class ? By aging
? Gross or net? ? Revenue cut-off
6
Patient Accounts Receivable
? Questions to ask:
? Are patient accounts recorded at gross or net? ? How does management ensure proper cut-off at month end? ? Are accounts prorated? ? Are there any trends in the composition of receivables?
7
Allowance for Contractual Adjustments
? What is a contractual adjustment? ? Purpose of the allowance for contractual adjustments--
Net realizable value ? Gross vs. net is key consideration--when are
contractual adjustments recognized? ? Approaches to estimate the allowance:
? Contract management system ? Historical experience
8
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