New accounting rule won't instantly affect nonprofit hospital ratings, S&P says

A recent accounting standard change for hospitals reporting bad debt won't have a significant effect on U.S. nonprofit hospitals' credit, according to a report from S&P Global Ratings.

The Financial Accounting Standards Board's accounting standard change was adopted in 2014. It requires healthcare organizations to report record bad debt as an operating expense rather than as a counterbalance to patient revenue, according to S&P.

"We believe that this will have a minor impact on the majority of our rated organizations, but we believe that the majority of healthcare organizations are still reviewing the overall impact to their respective organizations and that significant adoption will not occur until fiscal 2019 audits," said Brian Williamson, a credit analyst for the rating agency.

S&P said the accounting standard change already took effect for early-adopting nonpublic companies with annual reporting periods beginning after Dec. 15, 2017, as well as for nonpublic companies with interim periods beginning after Dec. 15 of this year. The rating agency plans to follow the change beginning with 2018 audits for early adopters, and for all organizations for all reporting periods in fiscal year 2019 and into the future.

 

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