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Perspectives: Revenue Recognition and Healthcare Organizations

Healthcare organizations face possibly the most daunting set of compliance issues of any industry. On top of the ongoing uncertainty regarding the ACA and the need to protect private patient information, healthcare organizations also have changes to accounting standards to absorb.

The topic of revenue recognition has been discussed for years, but the new standard announced by the Financial Accounting Standards Board goes into effect in 2018 for public companies and 2019 for non-public entities. Compliance may require changes to procedures and systems in different areas of your operations. While many aspects of healthcare regulation may evolve this year, revenue recognition is one area in which the new path is clear.

Healthcare organizations, even those not required to comply until 2019, should be evaluating the impact of the new revenue recognition standard. As a service to Frazier & Deeter’s healthcare clients, we’ve assembled a set of topics unique to healthcare that should be considered as part of a broader exercise to determine the impact of the new revenue recognition standard on your organization.

Among the many questions healthcare organizations should be prepared to answer are:

  • Contract acquisition – how do you track and account for the cost to acquire new contracts?
  • Financing – within a contract, how will you determine if a significant financing component exists?
  • Third-party settlements – how will you determine the transaction price when there is a settlement situation?
  • Assisted living communities – how will you determine performance obligations for future services as residents’ needs increase?
  • Continuing care providers – how will you recognize fees such as nonrefundable on-boarding fees and periodic fees for care?
  • Self-pay patients – how will you evaluate price concessions related to self-pay patients’ ability to pay for services?
  • Non-profit organizations – how will you account for government grants? Are there contributions that are not in the scope of the new revenue standard?

While this is by no means a comprehensive list of topics to consider as you prepare to adopt the new standard, these are the types of questions healthcare organizations should be considering with their accounting advisors.

If you have questions about revenue recognition, the CPAs at Frazier & Deeter are here to help. Contact us today to reach an advisor.

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