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January 27, 2012 2:08:11 pm

S&P: New FASB Rule Will Not Affect Hospital Ratings

The new Financial Accounting Standards Board (FASB) ruling regarding the way nonprofit hospitals handle bad debt will likely impact hospital ratios, but not ratings, according to Standard & Poor’s Ratings Services (S & P). 

In the past, hospitals reported bad debt as an expense item to be subtracted from net revenue.  The new rule requires hospitals to deduct it from gross patient revenue, as part of the calculation of net patient revenue.  It is expected that the rule will impact operating margins, excess margins, EBIDA margins and some ratio calculations.

S & P indicated that the change does not alter the “underlying economics” of a business’s performance and therefore they do not expect to change any ratings.

For the report from Healthcare Financial Management Association, please click here.
 

Tags: Nonprofit, Healthcare

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