[EDM1204]

Hospital, Inc., a not-for-profit entity with no governmental affiliation, reported the following in its accounts for the current year ended December 31:

Gross patient service revenue from all services provided

at the established billing rates of the hospital (note

that this figure includes charity care of $25,000) $775,000

Provision for bad debts 15,000

Difference between established billing rates and fees

negotiated with third-party payers (contractual adjustments) 70,000

What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31?

A. $665,000

B. $680,000

C. $705,000

D. $735,000

The correct answer from NINJA MCQ’s is A, but when looking in my Roger CPA Review Book it says that bad debt expense is not included in the calculation of Net Patient Service Revenue, which would make the correct answer B. Roger says that it should be deducted after. Any light on this situation would be appreciated

Roger Formula:

Patient Service Revenue (hotel type, medical, lab)

– Provision for contractual adjustments (medicare, employee discounts, not charity)

=Net Patient Service Revenue

+Other operating revenues, gains & losses (earned)

– Operating Expenses (Bad Debts, drugs, doctors, G&A, Department, Interest

=Results from Operations

+Non-Operating Revenues (unearned)

=Performance Indicator

AUD - NINJA in Training
BEC - 76
FAR - 78
REG - 81

FAR- Passed first try
AUD- Failed 5 times....
REG- Failed 2 times, Passed 3rd time
BEC- Passed first try

F- 78
A- 70, 69, 74, 70
R- 68, 70
B- 76

[vvSPAZvv]

Someone correct me if I am wrong please but….

Yes, bad debt is removed from patient service revenue if it is associated with services prior to the patient's ability to pay. It can be treated in two different ways depending on the characterization of the bad debt.

FAR - 76! 10/15; (65) 7/15
BEC - 82! 11/15; (74) 8/15
AUD - 01/16
REG - TBA

[Author]

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