Question

Which of the following statements concerning the income statement of health services organizations is most correct?

                        a.         GAAP specifies a single format for the income statement of health services organizations, so they all look exactly the same.

                        b.         The income statements of most hospitals report only one measure of profitability.

                        c.         The income statement has three expense sections: operating expenses, financial expenses, and frivolous expenses.

                        d.         The premium revenue entry reports revenues collected that exceed the prices listed on the organization’s chargemaster.

                        e.         The income statements of most hospitals report two measures of profitability: operating income and net income.

Answer 1

d  The premium revenue entry reports revenues collected that exceed the prices listed on the organization’s chargemaster.

When it comes to what providers actually charge these payers, transparency is a major concern, and one in which accountants are often involved. Some hospitals use a chargemaster, fee-for-service list or bundled set of payments like MS-DRGs to determine prices. These are all complex systems designed to link the financing of services to how they’re paid for. A side effect is that patients and the public often don’t know what to expect in terms of care costs and may be surprised by practices such as balance billing.