SOURCE: Healthcare Financial Management Association

Healthcare Financial Management Association

January 29, 2016 11:29 ET

HFMA Issues Guidance on Accounting for Risk Arrangements

WESTCHESTER, IL--(Marketwired - January 29, 2016) - The Healthcare Financial Management Association (HFMA) published an issue analysis, Risk Accounting: What Are the Issues and Trends in These Revenue Arrangements? This analysis addresses the accounting by healthcare providers for recognizing revenues and expenses and accruing losses for risk contracts, an emerging area where both the types of contracts and applicable accounting guidance are changing rapidly.

The analysis, developed by HFMA's Principles & Practices Board, explores the following accounting considerations and the basis for determination: fee-for service and capitated arrangements; revenue, expense, and loss recognition; stop-loss insurance; and financial reporting and disclosures.

"Providers, payers, and other organizations are increasingly entering into contracts or assuming new payment models that expose the parties to the uncertainty of financial gain or loss," said HFMA President and CEO Joseph J. Fifer, FHFMA, CPA. "All organizations that are involved in risk-bearing arrangements must ensure that their accounting practices keep pace with their contractual obligations as they evolve."

Examples of payment models analyzed by HFMA's Principles & Practices Board, together with other industry experts, for the purposes of this issue analysis include the block grant model (e.g., Oregon's Coordinated Care Organizations); episode of care (e.g., Arkansas Health Care Payment Improvement Initiative); pay for performance (e.g., Wisconsin Medicaid's Hospital Pay for Performance); and the Center for Medicare & Medicaid Services Pioneer Accountable Care Organization (ACO) program as well as other ACOs.

HFMA's Principles & Practices Board publishes issue analyses to provide short-term practical assistance on emerging issues in healthcare financial management. It should be noted that only the Financial Accounting Standards Board (FASB) can establish generally accepted accounting principles (GAAP). In the absence of authoritative guidance from FASB, it is up to accountants and their auditors to determine whether a particular point of view is supportable under GAAP, based on their individual facts and circumstances, and to be prepared to justify it.

About HFMA

With more than 40,000 members, the Healthcare Financial Management Association (HFMA) is the nation's premier membership organization for healthcare finance leaders. HFMA builds and supports coalitions with other healthcare associations and industry groups to achieve consensus on solutions for the challenges the U.S. healthcare system faces today. Working with a broad cross-section of stakeholders, HFMA identifies gaps throughout the healthcare delivery system and bridges them through the establishment and sharing of knowledge and best practices. We help healthcare stakeholders achieve optimal results by creating and providing education, analysis, and practical tools and solutions. Our mission is to lead the financial management of health care. hfma.org

The following files are available for download:

Contact Information

  • Karen Thomas
    Healthcare Financial Management Association
    (708) 492-3377
    kthomas@hfma.org