Net patient service revenue question

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  • #193092 Reply
    Jasminekoko
    Participant

    Hi, I am a Becker user and there is no bad debt in calculation of net patient revenue, however, on Ninja MCQ, it deducts the BDE from PSR, can someone help? I think it is wrong. Thanks.

    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?

    665,000

    Incorrect B.

    $680,000

    C.

    $705,000

    D.

    $735,000

    You answered B. The correct answer is A.

    Nongovernmental not-for-profit hospitals deduct charity services, bad debt, contractual adjustments, and policy discounts from gross patient service revenues to determine net patient service revenues.

    •$775,000 – $25,000 – $15,000 – $70,000 = $665,000

    #1565302 Reply
    madcat
    Participant

    Hi, I know this is an old question but just decided to post my answer anyway so hopefully this will help someone who got the same problem like me.

    After researching, I learned that FASB updated(2011) on presentation of net patient service revenue with deduction of provision for bad debts. It was under operating expense before, but it should be separated line under patient service revenue after this amendment to give more transparency on presentation. Therefore, bad debt expenses or provision of bad debts should be deducted to calculate net patient service revenue.

    (https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176158037540&acceptedDisclaimer=true)

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