The following table identifies the changes made to this Subtopic.
This Subtopic provides guidance on accounting for contingencies for health care entities within the scope of this Topic.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
954-10-15.
A prepaid health care provider enters into contracts to provide members with specified health care services for specified periods in return for fixed periodic premiums. The premium revenue is expected to cover health care costs and other costs over the terms of the contracts. Only in unusual circumstances would a provider be able to increase premiums on contracts in force to cover expected losses. A provider may be able to control or reduce future health care delivery costs to avoid anticipated losses, but the ability to avoid losses under existing contracts may be difficult to measure or to demonstrate. Associated entities such as hospitals, medical groups, and individual practice associations may enter into similar contracts with prepaid health care providers in which they agree to deliver identified health care services to the providers' members for specified periods in return for fixed fees.
Estimated losses from asserted and unasserted medical malpractice claims shall be accrued either individually or on a group basis, based on the best estimates of the ultimate costs of the claims and the relationship of past reported incidents to eventual claims payments. All relevant information, including industry experience, the entity's own historical experience, the entity's existing asserted claims, and reported incidents, shall be used in estimating the expected amount of claims. The accrual includes an estimate of the losses that will result from unreported incidents, which are probable of having occurred before the end of the reporting period.
In estimating the probability that unreported incidents have occurred, some health care entities may develop a range of possible estimates of the number of unreported incidents, including zero. However, the greater the volume of a health care entity's operations, the greater the likelihood that the entity's minimum estimate of the number of probable unreported incidents will be greater than zero. In estimating losses from malpractice claims, a health care entity may need to modify data drawn from industry experience so it is relevant to developing an estimate that is specific to the entity. Various factors (such as the nature of operations, size, and the provider's past experience) shall be considered in assessing comparability. Further, industry data that are not current may not be relevant.
The estimated future health care costs and maintenance costs to be considered in determining whether a loss has been incurred shall include fixed and variable, direct and allocable indirect costs.
Estimated losses are reviewed and changed, if necessary, at each reporting date. The amounts of the changes are recognized currently as additional expense or as a reduction of expense.
Health care entities shall disclose their program of medical malpractice insurance coverages.
Health care entities that discount accrued malpractice claims shall disclose in the notes to the financial statements the carrying amount of accrued malpractice claims that are discounted in the financial statements and the interest rate or rates used to discount those claims.
Paragraph superseded on 06/18/2012 after the end of the transition period stated in Accounting Standards Update No. 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries.