A Reminder About HFMA Statement 15 and 990 Schedule H

For those fiscal year hospitals that are just now filing your first Schedule H here's a little reminder about answering the question "does the organization report bad debt expense in accordance with Healthcare Financial Management Association Statement 15?" Here are the basic things you need to consider when answering the question:

• HFMA Statement 15 provides guidelines for accounting and policies govering charity care and bad debt. HFMA guidelines suggest that the cost of charity care should be adjusted for any revenue received from patients receiving charity care. This differs from GAAP in that GAAP does not require the adjustment for revenue received, therefore allowing the reporting of charity care where there may actually be a profit on the services provided.
• While the IRS asks whether you are following HFMA Statement 15, they specifically state in the instructions that they do not require organizations to adopt Statement 15 or to use it to determine bad debt expense. They have also stated in other guidance that a 'no' response will not reflect poorly on the organization or otherwise cause an organization to be targeted for examination.
• It appears FASB is looking into the matter of the discrepancy between GAAP and the guidelines published by the HFMA Statement and are considering an update to the standards. We aren't aware of any recent movement on this issue but back in May 2010 they made public a letter from a consultant that into the issue. The letter can be found at the following link: http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176156965595

So, while the current guidance doesn't provide a conclusive answer that you must do it one way or the other, it does allow you the chance to continue to make the bad debt and charity care calculations as you always have with no negative consequences.