New Jersey Administrative Code › Title 8 - HEALTH › Chapter 31B - HOSPITAL FINANCIAL REPORTING › Subchapter 4 - FINANCIAL ELEMENTS AND REPORTING › Part I - REPORTING PRINCIPLES AND CONCEPTS › Section 8:31B-4.14 - Matching of revenues and expenses

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Determination of net
				  income for a reporting period requires measurements of revenue, revenue deductions,
				  and expenses associated with the period. Hospital revenue must be recorded in the
				  period in which it is earned; that is, in the time period during which the services
				  are rendered to patients and a legal claim arises for the value of the
				  services.
(b) Once the revenue
				  determination is made, a measurement must be made of the amount of expense incurred
				  in rendering the services on which the revenue determination was based. Unless there
				  is such matching of revenue and expense, the reported gain or loss of a period is
				  meaningless.
(c) It is important that
				  revenue deductions be given reporting recognition in the same period that the
				  related revenues are recorded, even though certain of these revenue deductions
				  cannot be precisely determined until sometime after the end of the reporting
				  period.
(d) Expenses and revenues are to
				  be matched not only for the hospital as a whole, but also for each cost and revenue
				  center. The cost (revenue) center is an accounting device for accumulating items of
				  cost (revenue) that have common characteristics. A cost center may or may not be a
				  department within the hospital. A cost center such as utilities is an example where
				  the cost center would not be a department of the hospital. The costs of the
				  functions and activities included in each cost center description (see N.J.A.C.
				  8:31B-4 Part vi) are to be included in the cost center. Revenue relative to such
				  functions and activities must be included in the matching revenue center. For
				  example, expenses related to Laboratory are included in the Laboratory cost center
				  and related revenue is to be included in the Laboratory revenue center.
(e) Some hospitals record revenue on an
				  all-inclusive rate basis (a rate based on type of accommodation regardless of the
				  utilization of ancillary services). Utilization of an all-inclusive rate system
				  results only in a modification of the patient billing and revenue accounting system.
				  It does not eliminate the need to report expenses by proper cost center.
(f) Revenues are classified as either operating or
				  non-operating according to the following definitions:
1. Operating revenues and expenses include those
				  transactions which are a part of the normal day-to-day operation of the hospital.
				  They include but are not limited to those operations involved in the performance of
				  all patient care activities (i.e., Services Related to Patient Care, see
				  8:31B-4.32 ).
2. Non-operating revenues are defined to be all
				  transactions of the hospital which are not part of the normal day-to-day activities.
				  Non-operating revenues (or losses) are to be reported net of expenses incurred in
				  the transaction (for example, gain or sale of securities should be shown net of
				  brokerage fees, donations net of solicitation expenses, and rental income net of
				  rental expenses.) Included are:
i. Gains or losses
				  from investments and the operation of non-hospital related businesses usually run at
				  a site separate from facilities utilized for Services Related to Patient
				  Care;
ii. Donations and fund raising
				  activities;
iii. Interfund transactions
				  (see 8:31B-4.16(c) 
				  ).