ASC

ASC 310-954

Health Care Entities

310 Receivables

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In brief

IntermediateRecognitionInitial measurementPresentationIndustry-specific

ASC 310-954 governs how health care entities recognize, measure, present, and disclose receivables, principally amounts due from patients and third-party payors (Blue Cross, Medicare, Medicaid, HMOs, workers' compensation). Contractual adjustments and discounts are treated as variable consideration under ASC 606 (606-10-32-5 through 32-14 and 32-42 through 32-45), while an allowance for credit losses is measured under Topic 326. Charity care is never recognized as a receivable, and amounts due from third-party payors for retroactive adjustments such as final settlements or appeals must be reported separately.

Key points (7)
  • Charity care does not qualify for recognition as a receivable (310-954-25-1), while uncollected premiums and amounts recoverable from stop-loss insurers, net of appropriate valuation allowances, are included in receivables (310-954-25-2).
  • Contractual adjustments and discounts are variable consideration measured initially and subsequently under 606-10-32-5 through 32-14 and 606-10-32-42 through 32-45 (310-954-30-1; 310-954-35-1).
  • An allowance for credit losses is recorded and subsequently measured under Topic 326 (310-954-30-1; 310-954-35-1).
  • Loans or advances to a related entity are recorded as a receivable/payable if repayment is reasonably assured (310-954-25-3); if repayment will not occur or the related entity is perceived unable to repay, the write-off may be recognized as an equity transfer, reducing the transferor's net assets and increasing the transferee's (310-954-40-1).
  • Receivables are reported net of an allowance for doubtful accounts, but amounts due from third-party payors for retroactive adjustments such as final settlements or appeals must be reported separately (310-954-45-1).
  • Estimated amounts receivable relating to contractual adjustments and third-party settlements must be identified and explained in the disclosures (310-954-50-1).
  • Under Section 825-10-50, concentrations of credit risk must be disclosed, including the primary geographic sources of patients, an issue more acute for standalone facility statements than for consolidated system statements (310-954-50-2).

For students. The key exam trap is treating contractual adjustments as bad debt: after ASU 2014-09, price concessions and contractual allowances are variable consideration that reduces the transaction price under Topic 606, whereas only true credit deterioration goes through the Topic 326 credit loss allowance. Also remember charity care never becomes a receivable, and retroactive third-party settlements must be shown separately on the face of the statements.

third-party payor receivablescontractual adjustments and discountsvariable considerationcharity careretrospective rate settlementsstop-loss insurance recoverableallowance for credit lossesconcentration of credit risk

Machine-generated study aid for ASC 310-954. Check the source paragraphs below.

310-954-00Status

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310-954-05Overview and Background

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310-954-05-1
This Subtopic provides guidance on receivables for health care entities within the scope of this Topic.
310-954-05-2
Amounts due from third-party payors for health care services are usually less than the provider's full established rates for those services. The receivable amounts may be determined by any of the following:
  1. a
    Contractual agreement with others (such as Blue Cross plans, Medicare, Medicaid, or health maintenance organizations)
  2. b
    Legislation or regulation (such as workers' compensation or no-fault insurance)
  3. c
    Provider policy or practice (such as courtesy discounts to medical staff members and employees or other administrative adjustments).

Third-Party Settlements

310-954-05-3
Some third-party payors retrospectively determine final amounts reimbursable for services rendered to their beneficiaries based on allowable costs. These payors reimburse the health care entity on the basis of interim payment rates until the retrospective determination of allowable costs can be made. In most instances, the accumulation and allocation of allowable costs and other factors result in final settlements different from the interim payment rates. Final settlements are determined after the close of the fiscal periods to which they apply and may affect materially the health care entity's financial position and results of operations.

Stop-Loss Insurance Receivables

310-954-05-4
Some health care entities, for example, providers of prepaid health care services, contract to provide comprehensive health care services for a fixed period in return for fixed periodic premiums. Many of those entities may transfer a portion of their financial risks under the contract to another entity by purchasing stop-loss insurance. Receivables of those entities may include uncollected premiums and amounts recoverable from stop-loss insurers, reduced by appropriate valuation allowances.

310-954-15Scope and Scope Exceptions

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Overall Guidance

310-954-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 954-10-15.

310-954-25Recognition

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310-954-25-1
The provision of charity care does not qualify for recognition as receivables in the financial statements.

Stop-Loss Insurance Receivables

310-954-25-2
Any uncollected premiums and amounts recoverable from stop-loss insurers reduced by appropriate valuation allowances shall be included in receivables. See also paragraph 954-720-45-1.

Receivables from Related Entities

310-954-25-3
A health care entity may loan or advance resources to a related entity. If repayment is reasonably assured, a receivable or payable should be recorded by the entities.

310-954-30Initial Measurement

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310-954-30-1
Contractual adjustments and discounts are variable consideration and shall be measured in accordance with paragraphs
606-10-32-5 through 32-14
. An allowance for credit losses shall be recorded in accordance with Topic 326 on measurement of credit losses.

310-954-35Subsequent Measurement

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310-954-35-1
Contractual adjustments and discounts shall be subsequently measured in accordance with paragraphs
606-10-32-5 through 32-14
and paragraphs
606-10-32-42 through 32-45
. An allowance for credit losses shall be subsequently recorded in accordance with Topic 326 on measurement of credit losses.

310-954-40Derecognition

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Receivables from Related Entities

310-954-40-1
If a receivable from a related entity is not to be repaid, or if the related entity is perceived as unable to repay, the write-off of the receivable may be recognized as an equity transfer (see paragraph 954-220-45-2) with the transferor reducing net assets and the transferee increasing net assets at the date such determination is made.

310-954-45Other Presentation Matters

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Accounts Receivable

310-954-45-1
Receivables shall be reported net of an allowance for doubtful accounts. (See also the guidance in paragraphs
606-10-45-1 through 45-5
on presenting receivables, contract assets, and contract liabilities). Although the aggregate amount of receivables may include balances due from patients and third-party payors (including final settlements and appeals), the amounts due from third-party payors for retroactive adjustments of items such as final settlements or appeals shall be reported separately in the financial statements.

310-954-50Disclosure

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310-954-50-1
With regard to contractual adjustments and third-party settlements, identification and explanation of the estimated amounts that are receivable by the entity shall be disclosed.
310-954-50-2
Section 825-10-50 provides guidance on the required disclosures about significant concentrations of credit risk arising from all financial instruments, including trade accounts receivable. Concentration of credit risk frequently is an issue because most health care entities generally tend to treat patients from their local or surrounding communities. Accordingly, disclosure shall be made of the primary geographic sources of patients. It should be noted that concentration of credit risk may be a significant issue in standalone financial statements issued for a member hospital of a large national multihospital system but may not be an issue for financial statements prepared for the hospital system. When the individual facilities' financial statements are consolidated into statements prepared for the entire system, the credit risk is dispersed over a much larger base of health plans, patients, and geographies and, therefore, is not as concentrated.

310-954-55Implementation Guidance and Illustrations

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