HFMA Updates Reporting Guidance for Bad Debt, Charity Care

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HFMA’s Principles & Practices Board updated Statement 15, which covers proper reporting of bad debt and charity care, in 2012. The updates were made to conform to changes in the current (2011) American Institute of Certified Public Accountants audit and accounting guide, recent FASB accounting standards updates (ASUs), and the Affordable Care Act.

Although there are a wide range of policy and business processes involved in the reporting of charity care and bad debt, the scope of Statement 15 is specifically to recommend best accounting and financial reporting practices for these types of uncompensated care. In line with the recommendations contained in Statement 15, the FASB issued ASUs to reduce the diversity of practice regarding the measurement basis used in the disclosure of charity care and to improve transparency regarding net patient service revenue and the related allowance for doubtful accounts.

Statement 15 provides useful guidance on the importance of properly reporting charity care and bad debt; criteria for charity care; timing of charity care eligibility determinations; and charity care record keeping, valuation, and disclosure, including receipts related to support of charity care services. Other key guidance includes record keeping, recognition, and disclosure of bad debts and classification of and disclosure of payment shortfalls.

Read the revised Statement 15.