A new stan­dard ...

... aims to make char­ity-care re­port­ing more uni­form

Modern Healthcare - - The Week In Healthcare - Melanie Evans

The nation’s top ac­count­ing pol­icy body last week pro­posed new stan­dards for how hos­pi­tal and health sys­tem fi­nan­cial state­ments re­port free and dis­counted care for low­in­come pa­tients.

The Fi­nan­cial Ac­count­ing Stan­dards Board, whose stan­dards are rec­og­nized by the Se­cu­ri­ties and Ex­change Com­mis­sion and set the rules for au­di­tors, re­leased a draft of its stan­dard, which would mea­sure char­ity care us­ing di­rect and in­di­rect costs.

With the pro­posal, FASB joins the In­ter­nal Rev­enue Ser­vice in seek­ing uni­form dis­clo­sure of how much sub­si­dized care hos­pi­tals pro­vide, a fig­ure at the cen­ter of a de­bate over the tax-ex­empt sta­tus of not-for­profit hos­pi­tals.

Hos­pi­tal re­port­ing of char­ity care has var­ied widely, to the frus­tra­tion of Congress, state attorneys gen­eral and irate con­sumer watchdogs. The nation’s not-for­profit hos­pi­tals re­ceive tax breaks in ex­change for pro­vid­ing sub­si­dized care and other aid to com­mu­ni­ties.

If adopted, the ac­count­ing board’s pro­posal would re­place ex­ist­ing stan­dards that al­low hos­pi­tals to se­lect ei­ther costs, sta­tis­ti­cal mea­sures or the charges billed for char­ity care. No dead­line has been set for the switch, which would also be ap­plied to prior fi­nan­cial state­ments un­der the pro­posed stan­dard.

Martha Garner, a man­ag­ing di­rec­tor with ac­count­ing firm Price­wa­ter­house­Coop­ers, said many not-for-profit hos­pi­tals and health sys­tems mea­sure char­ity care us­ing rates charged for ser- vices, or the sticker price that hos­pi­tals bill be­fore any of the dis­counts ne­go­ti­ated or set by pub­lic and pri­vate in­sur­ers.

For that rea­son, Garner de­scribed charges as “a bit of an ar­ti­fi­cial num­ber.” Charges are also prob­lem­atic be­cause they vary from one hos­pi­tal to an­other.

Still, the switch to us­ing cost to mea­sure char­ity care likely won’t be sig­nif­i­cant for not­for-profit hos­pi­tals be­cause of new tax re­port­ing rules, said Garner, who is also on a health­care ex­pert panel for the Amer­i­can In­sti­tute of Cer­ti­fied Pub­lic Ac­coun­tants, which rec­om­mended the char­ity-care ac­count­ing switch pro­posed by FASB.

Garner said the in­sti­tute has sought FASB re­view of six health­care ac­count­ing stan­dards, in­clud­ing char­ity care, to re­vise the group’s au­dit guide for health­care or­ga­ni­za­tions.

FASB has moved to re­view two other is­sues, ac­cord­ing to a Fe­bru­ary re­port by the board’s emerg­ing is­sues task force. One is­sue ad­dresses how fi­nan­cial state­ments re­port care pro­vided to unin­sured, self-pay pa­tients and the sec­ond ad­dresses how med­i­cal mal­prac­tice, sim­i­lar claims and re­lated in­surance re­cov­er­ies should be recorded.

The IRS yearly tax form for not-for-prof­its, the Form 990, be­gan re­quir­ing dis­clo­sure of

Garner: Charges are “a bit of an ar­ti­fi­cial num­ber.”

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