Although most hospitals could immediately move to a financial reporting system in which they report their charity care based on the actual cost of the services, hospitals will still use different methods of accurately doing so, according to an influential industry association.
Charity reporting methods can vary: HFMA
The Financial Accounting Standards Board is proposing to eliminate much of the variation that exists today in how hospitals report the free care they give to needy patients by requiring that the healthcare providers report the true cost of providing charity care, instead of tallying the retail charges for the care, as is widely done today.
Responding to FASB's proposal, the Healthcare Financial Management Association said in a May 12 letter that it agreed with the idea in principle. However even reporting the true cost of such care can done multiple ways, making it vital for hospitals to disclose not only their charity-care costs, but the method they used to estimate those cost, whether through a cost-accounting system, a cost-to-charge ratio, or other means.
“The method of estimation should be clearly disclosed in a footnote,” wrote Mary Connick, chairwoman of the HFMA's Principles and Practices Board, in the letter to FASB.
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