The guidance is in reference to accounting standards issued by the Financial Accounting Standards Board in 2014. Calendar year 2018 is the first period for which healthcare organizations will apply the standards.
The accounting changes replaced revenue recognition guidance specific to healthcare with a single principles-based revenue recognition standard applicable to most industries, according to an HFMA report. Changes involve rules to calculate revenue. They also affect the assessment of bad debt, which is money owed to hospitals that can’t be recovered.
Due to these changes, providers may need to alter accounting systems, create documentation, review contracts and add new disclosures and language to financial statements, association representatives said in a news release. But they do not anticipate that many providers will see effects to their bottom line.
“Some organizations may experience a change in the timing of revenue recognition, and possibly some significant financial statement adjustments,” HFMA representatives added. “Changes in classification of certain items also could have a significant impact on key performance indicators used by management.”
That’s why the HFMA Principles and Practices Board has published a nine-page issue analysis. The analysis seeks to clarify for healthcare organizations the Financial Accounting Standards Board’s revenue recognition standard and how each step within the standards board’s model applies to recognition of net patient service revenue.
Access the analysis here.
More articles on healthcare finance:
HCA reportedly selling $1B in debt to aid Mission Health acquisition
Universal Health Services finance chief Steve Filton on cost containment and challenges hospital CFOs face
Medicare payments not covering care costs, many physician practices say
Becker’s 3rd Annual Fall Chief Pharmacy Officer Summit is the top tier event that the people leading the future of pharmacy convene. This 3-day event is built specifically for Chief Pharmacy Officers and senior pharmacy leaders. The sessions examine the workforce, financial and clinical priorities shaping pharmacy today. Becker’s is where candid discussions flourish and new ideas thrive. Becker's 3rd Annual Fall Chief Pharmacy Officer Summit
