MU incentive income guidance could force hospitals to adjust financials

The U.S. Securities and Exchange Commission (SEC) has issued guidance regarding the type of accounting to be applied to income generated by meeting Meaningful Use under the electronic health record incentive program. This may affect how a number of healthcare organizations recognize income in their financial statements.           

The SEC notified the American Institute of Certified Public Accountants (AICPA) on Nov. 4 that the appropriate income recognition model for incentive payments earned under the HITECH Act is the "gain contingency" model, according to a statement made by Hospital Corporation of America (HCA) this week. HCA is the first company that has announced a change in income reporting in response to the new SEC guidance.

According to HCA, it originally recognized income from the incentive program based on consensus guidance from AICPA. "Under the gain contingency income recognition model, the company will recognize HITECH income when its eligible hospitals have demonstrated Meaningful Use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the HITECH payment is available," the announcement reads.

The change in accounting will not affect HCA's operations or the timing of the receipt of incentive payments, according to HCA; it only will affect the timing of the recognition of income. HCA originally expected to recognize HITECH income of $400 million to $430 million in 2011. It now expects income to be between $190 million and $220 million for 2011; the remainder of what will be earned in 2011 will be recognized as income in 2012.

To learn more:
- read HCA's announcement
- here's the Health Data Management article