CH 14

Adjusting an Interest in Nonprofit Hospital Foundation If, at the hospital's request, the foundation [transferred] cash of $280,000 to the hospital, consisting of $30,000 that was unrestricted and $250,000 that was restricted for equipment acquisition, the hospital would make this journal entry, to adjust its interest in the foundation: To record receipt of cash from Hospital Foundation

Dr. Cash, restricted for capital acquisition 250,000 Dr. Cash. 30,000 Cr. Interest in Hospital Foundation. 280,000

Nonprofit hospitals report contributions in the same way that all other nonprofit entities do: A. Cash contributions—as contribution revenue or gains To record receipt of unrestricted cash donation. Dr. ______ Cr. ______ B. Non-cash contributions (such as supplies) are reported at the _____ value of the assets contributed. C. Contributed services is reported at _____ value if the services would typically need to be ______ if not donated.

Dr. Cash. 100,000 Cr. Contribution revenue ( or gains) - Support without donor restrictions 100,000 fair fair / purchased

Adjusting an Interest in Nonprofit Hospital Foundation If the hospital uses those resources to [acquire equipment], it would make this entry: To record acquisition of equipment Dr. __________ Cr. _________ It would also need to reclassify the restricted assets that it used: To record reclassification of net assets Dr. ________ Cr. ________

Dr. Equipment. 250,000 Cr. Cash. 250,000 Dr. Net assets with donor restrictions, Reclassifications out - satisfaction of equipment acquisition restrictions. 250,000 Cr. Net asset without donor restrictions, Reclassifications in - satisfaction of equipment acquisition restrictions. 250,000

Reporting an Interest in Nonprofit Hospital Foundations If, in 2018, a new foundation raised contributions of $900,000, of which $100,000 was unrestricted, and $800,000 was restricted by the donors to acquire new equipment, the nonprofit hospital would make this entry: To record change in interest in net assets of Hospital Foundation.

Dr. Interest in Hospital Foundation 900,000 Cr. Gains without donor restrictions - change in interest in net assets of Hospital Foundation. 100,000 Cr. Gains with donor restrictions - change in net assets of Hospital Foundation restricted to capital 800,000

All nonprofit hospitals report on two classes of net assets — with and without donor restrictions. Assets limited as to use are designations of assets without donor restrictions. Examples: Assets whose use is limited by non-donor contracts, such as a bond covenant. Assets set aside by the hospital's governing board for a specific project or function To. record board designation of resources for equipment modemization.

Dr. Investments - board designated for equipment 750,000 Cr. Investments. 750,000

Retrospective Third-Party Settlements At year end, a hospital estimates that it will need to refund $15,000 of the amount it collected from a retrospective contract because its analysis of reimbursable costs shows that the amount already paid under the contract was too high. To record provision for estimated refund to payer Y, pending negotiation of retrospective rate. Dr _______ Cr _______

Dr. Provision for contractual adjustments 15,000 Cr. Estimated third-party payer settlement payables. 15,000

What Factors Go Into Transaction Price? Transaction price uses hospital established rates, less:(减去) 1. ______ price concessions 2. ______ price concessions 隐性价格优惠 3. _______ for Doubtful Accounts 呆账准备金 4. _____ Care

Explicit Implicit Allowance Charity

Reporting Investment Income Nonprofit hospitals report investments using ______ standards. Governmental hospitals report using ____ standards. Both Boards generally require reporting investments in equity and debt securities at ________ vale. Both Boards require hospitals to present a performance indicator—revenues over expenses (FASB) or operating income (GASB)

FASB / GASB fair **we don't care what the basis is, true up the value which worth is right now

Nature of Hospital Payment Systems Retrospective payments = ______ payments made to hospitals based on ____ rates; Final settlement amounts are determined sometime after the service is provided. For example, Aetna may agree to pay an interim rate of 80% of a hospital's established rates. After the service is provided, the hospital submits its cost report to insurance company. then, the insurance company sets its final payment amount based on that report and its contract with the hospital.

Initial interim 临时的， 中期的

Bad debt expense may only be reported by ______ hospitals Represent adjusted estimates of amount to be recovered that are based on _____ patient factors. The hospital estimated that overall uncollectible amounts were roughly 2% of transaction price after other factors which is $30,00. To record bad debt expense and reduce receivables for estimated uncollectible amounts. Dr. ______ Cr. ______

Nonprofit individual Dr. Bad debt expense. 30,000 Cr. Allowance for uncollectible accounts 30,000

Reporting Operating Expenses Many hospitals report their expenses either by function, for example: N_____ and other p_______ services G_______ services F_______ services A______ services Many report using natural classification: S_______ , s_____ , i______, d______. Others use both functions and natural classificaitons

Nursing and other professional services General services Fiscal services Administrative services Many report using natural classification: Salaries, supplies, interest, depreciation Others use both functions and natural classificaitons

Two Nonprofit Hospital Statements About [Operations] 1. The nonprofit Statement of __________ 2. The nonprofit Statement of _________

Operations Changes in Net Assets

Notes to Financial Statements for Charity Care Both nonprofit and governmental hospitals must disclose: A. ______ for providing charity care B. ______ of charity care provided—calculated based on the provider's direct and indirect costs of providing that care. C. ______ the hospital uses to measure charity care D. ______ of resources the hospital received to subsidize charity care, such as gifts and grants restricted for charity care.

Policy Level Method Amount

Governmental hospitals report using only 3 basic financial statements: 1.Statement of _______ 2.Statement of revenues, expenses, and _____ in net position 3.Statement of _______

Position changes cash flows

Revenue at established rates: __________ - Explicit prices concessions: Contractual adjustments (________) Retrospective adjustments (________) - Implicit price concessions: Employee discounts (_________) - Allowance for doubtful account (_______) - Charity care (_______)ƒ = Revenue at transaction price = $1,390,000

Revenue at established rates = $1,700,000 - (Explicit prices concessions)： Contractual adjustments (180,000) Retrospective adjustments (40,000) - (Implicit price concessions)： Employee discounts (10,000) - (Allowance for doubtful accounts): (30,000） - (Charity care): (50,000) Revenue at transaction price = $1,390,000

Transaction Price Illustration Revenue at established rates is $1,700,000 Explicit prices concessions: Contractual adjustments are 180,000 and Retrospective adjustments are 40,000. Implicit price concessions for employee discounts are 10,000. Allowance for doubtful accounts are 30,000. Charity care is 50,000. What is the revenue at transaction price? Bad debt expense [ 12,000] ?????

Revenue at established rates = $1,700,000 Explicit prices concessions Contractual adjustments [180,000] Retrospective adjustments [ 40,000] Implicit price concessions Employee discounts [ 10,000] Allowance for doubtful accounts [ 30,000] Charity care [ 50,000] Revenue at transaction price = $1,390,000

Governmental hospitals typically have _____ sources of GAAP: 1. ________ Codification — Provided that the hospital meets the GASB definition of an _______ Fund 2. _______ Audit and Accounting Guide, Health Care Entities. Governmental Hospitals that do not focus on _______ recovery are reported using the same standards as _________. For example, many a state-operated mental health care facilities.

TWO GASB / Enterprise AICPA / cost / general governments

The nonprofit Statement of Changes in Net Assets reports changes in the two required net asset classifications as well as changes in net assets for the hospital as a whole. the amounts reported for changes in net assets without donor restrictions are highly ______ 汇总. This is followed by detailed changes in net assets with donor restrictions adding to _____ changes in net assets.

aggregated total

Governmental hospitals statement of revenues, expenses, and changes in net position reports all changes in net assets, including all revenues, expenses _____ regard to restrictions on their use. Operating expenses must be ______ from operating revenues to show operating income. Nonoperating revenues (such as investment income) and expenses (such as interest expense) are reported separately after _______ income but before _______ contributions and transfers, arriving at total change in net position.

all all without deducted operating capital

What makes a hospital qualify as nonprofit? a. Receive significant contributions from providers who do not expect proportionate _____ in return b. Operate to provide goods and services, but not at a ______ c. No _____. no shares to be ____ transferred or redeemed

benefits profit owners sold

Reporting Governmental Hospital Net Position Governmental hospitals present a single, all-inclusive statement of revenues, expenses, and changes in ______ that focuses on 3 categories of net position: Net Investment in ______ assets R________ U_______ Restricted in this case includes donor restrictions but also ______ and_____ restrictions

capital / restricted / Unrestricted net position contractual legal

When hospitals enter into ______ they receive agreed-upon premium payments from third parties. The third parties are typically called health maintenance organizations (HMOs). The HMO pays an established monthly rate for each person covered, regardless of the amount of actual services provided. Capitation payments: are ______ revenues, not hospital _______ revenue.

capitation agreements premium service

Medical Malpractice Claims method Estimates of losses from malpractice claims may be made: By making a ______ review of all claims By applying ______ experience regarding losses to outstanding claims Using ______ methods

case-by-case historical both

Governments present a single, all-inclusive operating statement. This statement must distinguish between operating and nonoperating activities; most arrive at a total net gain or loss; Neither "operating" nor "nonoperating" is defined; Certain items are excluded from net gain or loss: Capital contributions, additions to permanent or term endowments, special and extraordinary items, transfers. Overall total is called ________ .

change in net position

Governmental Hospital Foundations If a governmental hospital created a foundation, it would report it as a [_______], in a separate column, if it met these 3 criteria: a. The economic resources received or held by the _______ organization are entirely or almost entirely for the direct benefit of the hospital b. The hospital is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the organization; and c. The economic resources received or held by the organization are _______ to the hospital.

component unit separate significant

Notes to Financial Statements for Revenue: if not clear from the face of the financial statements, nonprofit hospitals must disclose: A. Customer _____ revenue separate from other sources of revenue such as interest income and lease revenues) B. disclose disaggregated ______ by type of contract C. Changes in estimated contract revenues resulting from contract balances that existed at the beginning of the year D. Amount of bad debt expenses (or ______ ) for the year

contract information impairment losses

Nonprofit hospitals must apply the following five steps to determine revenue: Step 1: Identify the _____ with the customer. Step 2: Identify the _______ obligations in the contract. Step 3: Determine the transaction ____. Step 4: Allocate the transaction price to the performance _______ in the contract. Step 5: Recognize ______ when (or as) the entity satisfies a performance obligation

contract(s) performance price obligations revenue

Accounting for Capitation Premiums: In arrangements with HMOs, hospitals contract to receive agreed-upon premiums, per person, per month the contract. It doesn't matter how few or how many services the hospital actually provides under There is no adjustment based on ______. Transaction price = contract rate. The HMO or hospital chose to change the negotiated rate in the ______ contract. To record capitation premium revenues.

cost next To record capitation premium revenues. Dr. Cash. 400,000 Cr. Premium revenue 400,000

Current and Noncurrent Claims Financial reporting for claims should distinguish between current and non-current amounts. Amounts that are expected to be paid within one year after the date of the financial statements should be reported as _____ claims liabilities. The remainder of the accrual is classified as non-current.

current

Balance Sheets Both business-oriented, nonprofit hospitals and governmental hospitals are required to present ____ assets and ______ liabilities separate from other assets and liabilities Assets whose use is limited are separated from other assets, and externally imposed limitations are shown separately from internal limitations (either on the _____ of the statements or in the ____ )

current / current face / notes

Reporting Donor Restricted Contributions to Nonprofits All contributions are recorded as either without donor restrictions or with donor restrictions when received. When donor-restricted resources are released from restriction, nonprofit hospitals record a reclassification out of donor-restricted assets. Expenses resulting from use of the reclassified resources are reported as _____ in _____ net assets.

decreases / unrestricted

Health Care Service Providers, these nonprofit organization characteristics require a markedly different focus: No focus on "_______" and No reporting to owners about p___ /l____, or _____ These nonprofit organization must demonstrate ______ to donors Must report ______ donations have been used Must report _______ strings are attached to donations

earnings Profit/loss EPS accountability 问责制 how What

GASB definition of governments (Chapter 1)—must have one or more of the following: 1. Officers popularly _____ or controlling majority of governing body appointed or elected by governmental officials. 2. Power to enact or enforce tax______. 3. Power to directly issue "_______" debt. 4. Government may unilaterally ______ organization and assume their assets and liabilities.

elected levy tax-exempt dissolve

Reporting Governmental Investment Income Governmental hospitals that meet the definition of _______ funds must distinguish between operating and non-operating revenues and expenses Investment income (comprised of dividends, interest, and _____ and ______ investment gains and losses) is always classified as _______.

enterprise realized unrealized non-operating

Accounting for Patient Service Revenues All hospitals (nonprofit and governmental) initially record revenue at _________ rates Dr. __________ 1,700,000 Cr. __________ 1,700,000

established Dr. Patient accounts receivable. 1,700,000 Cr. Patient service revenue. 1,700,000

Contractual Adjustments are differences between a hospital's ______ rate and the amount ____ paid by third parties is called a contractual adjustment. When third-party payer rates are established prospectively, contractual adjustments are know _______. When third-party payer rates are retroactive, contractual adjustments usually must be estimated at ______ .

established / actually immediately year end

Goods and Services Contributed to Governmental Hospitals Contributions of assets other than cash are reported at_____ value when all 4 eligibility requirements have been met such as supplies, commodities, buildings, land No GAAP exists for contributions of services A. Volunteer work B. Services that would need to be purchased if not donated. ???????? Most hospitals do not record service contributions if it is governmental is not going recognize it (watch the video)

fair

Reporting Operating Expenses Both nonprofit and governmental hospitals use [______] accounting and report depreciation expense to show the using up of their assets: To record depreciation for the year Dr. ______ expense. 200,000 Cr. _______ depreciation - plant and equipment 200,000

full accrual Depreciation Accumulated

Sources of GAAP for the distinction between nonprofits and governments hospital is often ______ . Some governmental entities are even organized under nonprofit corporation laws. 1. Most nonprofits depend on ______ funding. 2.Many nonprofits provide services requested by _________. 3. Governmental hospitals don't exist to make a ________ either.

fuzzy government governments profit

New Revenue Recognition Requirements: In 2018, the FASB established a new method of recognizing exchange (or reciprocal) transaction revenue for all entities including full profit and nonprofit hospitals. The new method does not apply to _________ hospitals, although they are followed by GASB standards and AICPA Guide, Health Care Entities.

governmental

Nature of Hospital Payment Systems § insured patients § G______ payers: Medicare and Medicaid § P______ insurers: health maintenance organizations (HMOs) and Blue Cross § uninsured patients §Some of these are called s______ §Others may be classified as c________

governmental private third-party payers self-payers charity care

Allowance for Doubtful Accounts are estimates of amounts not expected to be paid and that do not meet the definition of charity care, and significant judgment required to distinguish bad debt from charity care. Nonprofit hospital are then Only entities that may report BAD DEBT expense when: Change in estimated amount is patient-specific, Also called "________".

impairment losses

IBNR—Incurred but not Reported Claims All claims must be considered regardless of whether claims have been made or asserted for incidents occurring before the balance sheet date. Claims that have not been made are called _____ but not _____ claims An estimate must be made for IBNR claims if it is: 1. ______ that claims will be asserted and 2.Losses can be________ estimated

incurred / reported Probable / reasonably

Cash Flows Statements Nonprofit and Governmental cash flows statements look a lot alike but, there are major differences: A. The nonprofit hospital cash flow statement is presented using the ______ method, whereas the governmental cash flow statement is presented using the ______ method. B. The nonprofit hospital cash flow statement presents three classifications of cash flows: ______ activities, ______ activities, and _____ activities. The governmental hospital cash flow statement provides four classifications: ______ activities, _________ activities, _______ activities, and ______ activities. C. The starting point for the operating activity portion of the nonprofit cash flow statement is the _______ . The starting (reconciliation) point for the governmental cash flow statement is ________ for the year

indirect / direct operating / investing / financing operating / capital and related financing / noncapital financing / investing change in net assets operating income (loss)

Revenues versus Gains Some hospitals prefer to distinguish between revenues and gains Revenues are _____ from delivering goods, providing services, or other activities that constitute the hospital's ongoing _____ ( or central) ______. Gains are increases in ______ from a hospital's _____ or ______ transactions An activity peripheral to one hospital might be a normal, ongoing activity of another

inflows / major / operations. net assets / peripheral / incidental

Implicit price concessions are based on hospital management's________ : for example, a hospital that has a policy or practice of not performing ______ checks on uninsured patients before providing services implicitly offers those services at a price the uninsured patient can pay.

intentions credit

Reporting Operating Expenses, Journal entries based on functions might look like this: To record certain operating expenses Dr. Patient care expense. 750,000 Dr. Dietary services expense. 50,000 Dr. General services expense 200,000 Dr. Administrative services expense. 145,000 Dr. I______ expense. 155,000 Cr. Cash 1,100,000 Cr. Accounts payable, salaries payable, and so on 200,000

interest

Governmental hospitals must report on 3 categories of net position: 1. Net ______ in capital assets 2. ______ net assets (representing donor, governmental and contractual restrictions) 3. _______ net assets

investment Restricted Unrestricted

Reporting on a Range of Estimates If it is probable that a loss has occurred but the estimated loss is within a range of amounts: The _____ amount within the range should be accrued as an expense If no amount in the range is more likely than any other, the _______ amount in the range should be accrued and the potential additional loss should be______ if a reasonable possibility of a loss greater than the amount accrued exists.

most likely minimum disclosed

Reporting Nonprofit Hospital Changes in Net Assets Nonprofits report on ______ with and without donor restrictions using two separate statements: A. _______ statement B. Statement of changes in ________ Nonprofits are ______ to combine the two statements.

net assets Operating net assets permitted

Nonprofit hospitals are required to report ______ and changes in net assets in one of two classes, just like all nonprofits: Net assets ______ donor restrictions Net assets ______ donor restrictions. BUT, most nonprofit hospitals report using 4 basic financial statements: (看书 5 or 4??) 1.Balance sheet 2.Statement of operations 3.Statement of changes in equity 4.Statement of cash flows

net assets with / without

Charity Care defined based on hospital's policy— consisting of factors that allow a patient to qualify for charity care, based on income level and assets level. Qualifying as charity care removes the amounts from _____, therefore, charity care amounts reported only in the_______ to financial statements

notes revenue

Governmental Operating Statement Governmental hospital present a single statement of revenues, expenses, and changes in net position Must distinguish between _____ and ______ revenues and expenses Governments generally do present, but are not required to present, a ______ indicator.

operating / nonoperating performance

Nonprofits report using two statements The first nonprofit ______ statement covers only changes in net assets ______ donor restrictions. A second, ___________ focuses on changes in net assets _____ donor restrictions

operating / without statement of changes in net assets / with

Medical Malpractice Claims If risk of loss has not been transferred to an external third party, expenses must be recognized and liabilities reported if: It is [______] that a loss has been incurred and the amount of the loss can be [________ _________ ].

probable reasonably estimated

Explicit price concession are contractual adjustments or _____ that agreed on with third party payers, and they include both ________ and ______ adjustments. They also include ______ granted to various persons, such as employees or members of clergy.

prospective / retrospective / discounts 明确的价格优惠是与第三方付款人达成的合同调整或减少，包括预期调整和追溯调整。 它们还包括授予员工或神职人员等各种人员的折扣

Third party payers establish what they will pay for services either ______ or ________ Prospective payments = Amounts agreed on _______ . Medicare and Medicaid make their payments based on the patient's diagnostic related group (DRG). Most private ______ companies make payments based on _____ rates: For example, Blue Cross may agree to pay 70% of established rates based on its contract with the hospital

prospectively / retrospectively (fixed) in advance insurance pre-negotiated

GASB Eligibility Requirements 1. Required characteristics of recipient — set forth by the ______ 2. Time requirements — grant is for use ____ a specific period or at the _____ of a specific period 3. Reimbursement — for example, a government must "_____" the contribution by ____ a specific amount of its own money 4. Contingencies — for example, a government may be required to raise a specific amount of resources from third parties_______ it can receive a grant or contribution

provider during / start earn / spending before (突发事件）

Reporting Nonprofit Investment Income Nonprofits hospitals must report a performance measure—such as excess of revenues over expenses. Only ______ investment gains and losses (and income) can be included in the. performance measure. ______ gains and losses must be reported after excess of revenues over expenses Some nonprofits use separate accounts for realized gains and losses and for unrealized gains and losses

realized / Unrealized

The nonprofit Statement of Operations reports ______ and _____ by presenting only changes in net assets _____ donor restrictions. This statement must include a performance indicator—revenue over expenses

revenues expenses without

Nonprofit Hospital has ______ (unique) sources of GAAP which is _______ Accounting Standards Codification (ASC). FASB ASC Topic 958 applies only to ______ organizations. FASB ASC has separate Codification Topics for Nonprofits and Nonprofit ______. FASB Accounting Standards Update (ASU) 2016-14, "Not-for-Profit Entities" issued in August _____ and effective beginning with _____ calendar years

single FASB nonprofits Hospitals 2016 2018

Medical Malpractice Claims 医疗事故 Nonprofit and governmental hospitals are required to use similar standards for reporting medical malpractice claims and other claims and judgments. Reporting depends on whether risk has been transferred: for nonprofit hospital - to _______ companies or for governmental hospitals—to public entity risk _______.

third-party insurance pools

The most difficult step for nonprofit hospitals is Step 3—Determine the transaction price. Only the most likely amount is reported in the financial statements, which is called the "________ ". Patient service revenue is recognized based on ______ contract's (or a portfolio of contracts') transaction price—the estimated amount of consideration a nonprofit hospital believes to be ______ of receipt.

transaction price each probable

Contributions to governmental hospitals are accounted for as _____ non-exchange transactions Recognition depends on whether 4 eligibility requirements have been met: 1. Required characteristics of _____ 2. _______ requirements 3. R_________ 4. C________

voluntary 1. Required characteristics of recipient 2. Time requirements 3. Reimbursement 4. Contingencies

There are many similarities in the financial statements prepared by nonprofit and governmental hospitals, but there are also some differences: The financial statements of both nonprofit and governmental hospitals focus on the hospital as a ______ , rather than on _____ funds. Differences result from the differing standards of the ____ and the _____.

whole / individual FASB / GASB