New York Codes, Rules and Regulations › Title 10 - DEPARTMENT OF HEALTH › Chapter V - Medical Facilities › Subchapter A - Medical Facilities-minimum Standards › Article 8 - New York State Annual Hospital Report › Part 442 - Reporting Principles And Concepts › Reporting Principles › Section 442.12 - Matching of revenue and expenses

Current through Register Vol. 46, No. 28, July 10, 2024
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(a) Determination of the net income of an
						accounting 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 a matching of revenue and expense, the reported net
						income of a period is meaningless.
(c) The requirement that revenue deductions
						must also be matched properly against the gross revenues of the reporting
						period is sometimes overlooked. During the reporting period, patients' accounts
						receivable will be debited and revenue accounts will be credited, at the
						hospital's full established rates, for all services rendered to patients. Some
						of these accounts receivable will remain unpaid at the end of the reporting
						period. A majority of these accounts will be collected in cash from the
						patients or from their third-party payors, but the remainder eventually will be
						written off as deductions from revenue.
(d) It is important that these revenue
						deductions be given accounting recognition in the same period that the related
						revenues were recorded, even though certain of these revenue deductions cannot
						be precisely determined.
(e)
						Revenue and expenses are to be matched not only for the hospital as a whole,
						but also for each cost center. The cost center is an accounting device for
						accumulating items of cost or revenue that have common characteristics. A cost
						center may or may not be a department within the hospital. A cost center such
						as depreciation 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 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 the clinical laboratory functions
						(activities) are included in the Laboratory Services - Clinical cost center
						(account 7210) and related revenue are to be included in Laboratory Services
						-Clinical revenue center (account 4210).
(f) 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 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 in the proper cost
						center. Those institutions which record charges on an all-inclusive rate basis
						are not required to report gross patient revenue for each patient care services
						revenue center. An all-inclusive rate charging system is where the hospital's
						total charges consist of a rate based on type of accommodation multiplied by
						length of stay regardless of the utilization of ancillary services.