The Healthcare Financial Management Association (HFMA) has issued a new white paper that discusses the appropriate accounting guidance for hospitals engaged in risk-sharing arrangements.
Experts expect such arrangements to reduce the cost of providing care as well as the variability of the care delivered. Many healthcare providers carefully weigh the financial risks of entering into such deals, such as accountable care organizations. And while the bottom line is closely scrutinized, how it is reported is another issue altogether.
The white paper delves into various esoteric accounting issues, such as when to book revenue (only after services have been delivered), and to determine the amount of consideration in a pay-for-performance or shared loss contract. Although data is available to calculate an estimated payment for shared loss, the white paper recommended that organizations consider that it is possible the data is incorrect or may be adjusted at a later time.
In addition, the white paper said, that ""relying on historical experience to estimate current experience may not be appropriate given that benchmarks and attributable beneficiaries change over time. Consideration should be given to whether revenue can be recognized in the arrangement."
The white paper advises that organizations evaluate how revenue is collected before they enter into the arrangement.
"Providers, payers, and other organizations are increasingly entering into contracts or assuming new payment models that expose the parties to the uncertainty of financial gain or loss," said HFMA Chief Executive Officer Joseph Fifer in a statement. "All organizations that are involved in risk-bearing arrangements must ensure that their accounting practices keep pace with their contractual obligations as they evolve."