Washington, D.C., Jan. 18, 2019 (GLOBE NEWSWIRE) --
The Healthcare Financial Management Association (HFMA) has published an issue analysis , “ Revenue Recognition, Including Implicit Price Concession and Bad Debt Considerations, for Healthcare Organizations: Accounting Issues and Trends ,” to guide healthcare provider organizations as they implement accounting changes resulting from the Financial Accounting Standards Board (FASB) Accounting Standards Update 2014-09, “ Revenue from Contracts (Topic 606),” a cross-industry update. Calendar year 2018 marked the first implementation period for FASB Topic 606.
Although the bottom line for many healthcare providers may not change, providers may need to modify accounting systems, develop documentation, review contracts, and add new disclosures and language to financial statements as a result of FASB’s Topic 606. Some organizations may experience a change in the timing of revenue recognition, and possibly some significant financial statement adjustments. Changes in classification of certain items also could have a significant impact on key performance indicators used by management.
To provide some clarity to the healthcare industry on certain accounting and reporting issues related to FASB Topic 606, HFMA’s Principles and Practices Board ’s nine-page issue analysis highlights current issues and considerations in accounting for revenue. It includes sections on net patient service revenue accounting, accounting for other revenues, disclosures, accounting system implications, key performance indicators, and accounting policy documentation. The issue analysis may be accessed at www.hfma.org/principlesandpractices
The analysis addresses how each of the five steps in the new FASB revenue recognition model apply to recognition of net patient service revenue by healthcare providers. For example, prior to Topic 606, a hospital might have recorded a provision for doubtful accounts for a portion of the self-pay balance owed by a patient with commercial insurance. Under Topic 606, the amount previously displayed as a provision for doubtful accounts would not be reported separately in the hospital’s financial statements; instead, it would be treated as an implicit price concession, and included as a component of net patient service revenue.
Principles and Practices Board issue analyses are not sent out for public comment. Therefore, they are factual, but not authoritative. Additional interpretive guidance may be released as circumstances evolve. Consultation on these matters with independent auditors is highly recommended.
About HFMA
The Healthcare Financial Management Association (HFMA) is the nation's premier membership organization for healthcare finance leaders. HFMA builds and supports coalitions with other healthcare associations and industry groups to achieve consensus on solutions for the challenges the U.S. healthcare system faces today. Working with a broad cross-section of stakeholders, HFMA identifies gaps throughout the healthcare delivery system and bridges them through the establishment and sharing of knowledge and best practices. The Association helps healthcare stakeholders achieve optimal results by creating and providing education, analysis, and practical tools and solutions. Its mission is to lead the financial management of health care.
About the Principles and Practices Board.
HFMA’s Principles and Practices Board works with the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, and the Governmental Accounting Standards Board to address the unique financial reporting needs of healthcare organizations and improve consistency in accounting and financial reporting among different ownership types. The Principles and Practices Board publishes issue analyses to provide short-term practical assistance on emerging issues in healthcare financial management. Since 1977, the Board has also published position statements, which are released for public comment. The 2018-19 Principles and Practices Board is chaired by Brian P. Conner, Partner, Moss Adams LLP, and comprises 12 members with extensive accounting experience in provider organizations, accounting firms, and rating agencies.
Karen Thomas Healthcare Financial Management Association 708-492-3377 kthomas@hfma.org
