Question 1

The level of charity care should be disclosed in the notes to financial statements.

Accepted Answer

Disclosing the level of charity care in the notes to financial statements helps in providing transparency and accountability to the public by showing the extent of the organization's commitment to providing healthcare services to those in need. This information is important for stakeholders and regulators to evaluate the organization's financial performance and community benefit.

Question 2

For hospitals,contractual adjustments to 3^rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

Accepted Answer

Contractual Adjustment is a contra revenue account, not an expense.

Question 3

According to The AICPA Health Care Guide,Transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

Accepted Answer

The AICPA Health Care Guide states that transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

Question 4

Differences between actual and estimated contractual adjustments require restatement of prior periods.

Accepted Answer

Contractual adjustments are typically estimated and recorded in the period they occur. Differences between actual and estimated adjustments are usually accounted for in the current period, not by restating prior periods.

Question 5

Charity care is reported as both revenue and expense (bad debt)in the Statement of Operations.

Accepted Answer

Patient service revenue does not include charity care.

Question 6

Patient Service Revenue of hospitals is to be presented net of contractual adjustments in the Statement of Operations.

Accepted Answer

Patient Service Revenue, which represents the revenue earned by the hospital for its services, is presented net of contractual adjustments. These adjustments include discounts, deductions, and allowances granted by the hospital to third-party payers such as Medicare and private insurance companies. This is done to reflect the actual revenue earned by the hospital from its patients after accounting for these adjustments.

Question 7

Health care organizations that are privately owned and operated to provide a return to investors follow FASB standards excluding those standards specifically for not-for-profits.

Accepted Answer

This statement is true. Privately owned health care organizations that provide a return to investors are considered for-profit entities, and therefore follow Financial Accounting Standards Board (FASB) standards, with the exception of standards specifically for not-for-profit organizations.

Question 8

With respect to health care organizations,expenses must be reported using their natural classifications.

Accepted Answer

Expenses may be reported either by natural classification salaries, supplies, etc.) or functional classification professional care of patients, general services, etc.. Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

Question 9

The AICPA Health Care Guide requires a performance indicator in the financial statements of private sector not-for-profit health care providers.

Accepted Answer

The AICPA Health Care Guide requires a performance indicator in the financial statements of private sector not-for-profit health care providers.

Question 10

The AICPA Health Care Guide prescribes a separate Statement of Operations and Statement of Changes in Net Assets rather than a Statement of Activities.

Accepted Answer

The AICPA Health Care Guide does prescribe a separate Statement of Operations and Statement of Changes in Net Assets, rather than a Statement of Activities.

Question 11

The cash flow statements of private health care organizations,both not-for-profit and for-profit,may use the direct or indirect method.

Accepted Answer

Both not-for-profit and for-profit private health care organizations have the option to use either the direct or indirect method when preparing their cash flow statements.

Question 12

Health care organizations that are privately owned and operated to provide a return to investors report the same net asset classifications as private not-for-profit health care organizations.

Accepted Answer

Net asset classification for an investor-owned health care enterprise uses paid in capital and retained earnings. A not-for-profit business-oriented organization uses Unrestricted Net Assets, Temporarily Restricted Net Assets and Permanently Restricted Net Assets.

Question 13

Patient service revenue for a hospital does not include charges for charity care.

Accepted Answer

Charity care is provided free of cost, so it is not included in the patient service revenue for a hospital.

Question 14

Voluntary health and welfare organizations raise a significant amount or nearly all of their resources from contributions and grants,and are subject to the rules of the AICPA Not-for-Profit Guide.

Accepted Answer

Voluntary health and welfare organizations rely heavily on donations and grants for their funding, and are required to follow the guidelines set forth by the AICPA's Not-for-Profit Guide.

Question 15

According to The AICPA Health Care Guide,Transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

Accepted Answer

Transfers among affiliated organizations do not reflect the performance of the individual organization and therefore should not be included in the determination of a performance indicator.

Question 16

For hospitals,contractual adjustments to 3^rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustments (a contra-revenue account)and a credit to an allowance for contractual adjustments.

Accepted Answer

This statement is true. Contractual adjustments are reductions made by hospitals to the amount of billed charges based on agreements between the hospital and third-party payers. These adjustments are recorded as a debit to the contra-revenue account Contractual Adjustments and a credit to an allowance for contractual adjustments account.

Question 17

Contractual adjustments from insurance companies are reported as expenses in the Statement of Operations.

Accepted Answer

Patient service revenues are to be reported in the operating statement net of the provision for uncollectible accounts and estimated contractual adjustments with Medicare, Medicaid or insurance companies.

Question 18

The AICPA Audit and Accounting Guide:
 Health Care Organizations applies equally to private not-for-profit,governmentally owned,and investor-owned health care organizations.

Accepted Answer

The AICPA Audit and Accounting Guide: Health Care Organizations applies to all types of health care organizations, including private not-for-profit, governmentally owned, and investor-owned.

Question 19

Health care organizations that are privately owned and operated to provide a return to investors follow GASB standards.

Accepted Answer

Privately owned and operated health care organizations do not follow GASB standards. Instead, they follow Generally Accepted Accounting Principles (GAAP) established by the Financial Accounting Standards Board (FASB).

Question 20

With respect to health care organizations,private sector not-for-profit health care entities must disclose expenses by functional classifications.

Accepted Answer

Private sector not-for-profit health care entities are required to disclose their expenses by functional classifications as part of their financial reporting requirements. This is a common practice in financial reporting for health care organizations to ensure transparency and accountability in their financial management.

Quiz 12: Accounting for Hospitals and Other Health Care Providers

The level of charity care should be disclosed in the notes to financial statements.

For hospitals,contractual adjustments to 3rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

According to The AICPA Health Care Guide,Transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

Differences between actual and estimated contractual adjustments require restatement of prior periods.

Charity care is reported as both revenue and expense (bad debt)in the Statement of Operations.

Patient Service Revenue of hospitals is to be presented net of contractual adjustments in the Statement of Operations.

Health care organizations that are privately owned and operated to provide a return to investors follow FASB standards excluding those standards specifically for not-for-profits.

With respect to health care organizations,expenses must be reported using their natural classifications.

The AICPA Health Care Guide requires a performance indicator in the financial statements of private sector not-for-profit health care providers.

The AICPA Health Care Guide prescribes a separate Statement of Operations and Statement of Changes in Net Assets rather than a Statement of Activities.

The cash flow statements of private health care organizations,both not-for-profit and for-profit,may use the direct or indirect method.

Health care organizations that are privately owned and operated to provide a return to investors report the same net asset classifications as private not-for-profit health care organizations.

Patient service revenue for a hospital does not include charges for charity care.

Voluntary health and welfare organizations raise a significant amount or nearly all of their resources from contributions and grants,and are subject to the rules of the AICPA Not-for-Profit Guide.

According to The AICPA Health Care Guide,Transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

For hospitals,contractual adjustments to 3rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustments (a contra-revenue account)and a credit to an allowance for contractual adjustments.

Contractual adjustments from insurance companies are reported as expenses in the Statement of Operations.

The AICPA Audit and Accounting Guide: Health Care Organizations applies equally to private not-for-profit,governmentally owned,and investor-owned health care organizations.

Health care organizations that are privately owned and operated to provide a return to investors follow GASB standards.

With respect to health care organizations,private sector not-for-profit health care entities must disclose expenses by functional classifications.

For hospitals,contractual adjustments to 3^rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

For hospitals,contractual adjustments to 3^rd party payers,such as insurance companies,are recorded with a debit to Contractual Adjustments (a contra-revenue account)and a credit to an allowance for contractual adjustments.