Debt Presentation Rules Change for Healthcare Companies
November 6, 2017
Hospitals, clinics and other healthcare organizations will calculate debt much differently under the new revenue rules put forth by the Financial Accounting Standards Board (“FASB”). Under the new rules, which public organizations have to comply with for fiscal years beginning after December 15, 2017, discounts that healthcare organizations regularly give for procedures will no longer be considered bad debt. Instead, total revenues will include an adjustment for the amount the organization doesn’t expect to collect.
For example, if a hospital charges $1,000 for a procedure but agrees to take $400 for the service from an uninsured patient, under the old rules, the $600 difference would be considered bad debt. Under the new rules, the $600 is treated as a discount, and $400 is recognized as revenue. The impact is on the presentation of gross verses net.