Question

Where would a capitation fee be reported on a health care entity's financial statements?

Question 73 options:

A)	Short-term liability.

B)	Other revenue.

C)	Other professional expense.

D)	Service revenue

Answer 1

The capitation fee should be reported under Service Revenue on a health care entity's financial statements. Answer D.

A capitation arrangement is a healthcare plan that allows payment for each patient at a flat fee. The organization pays a fixed amount to the healthcare provider for its members. This fixed amount is capitation fees. Since the question has been asked from healthcare financial statement's perspective, it will be a service revenue for the entity.

Analysing other options here-

the cost of capitation arrangements are recorded are reported as health care expenses. Answer C doesn't good hold.

It is not a liability either since there is no obligation undertaken. That eliminates Answer A.

since it is entity's main source of income hence it won't be categorized as other revenue but a service revenue. Answer B cancel out as well.