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Note on Statement 18: Public Disclosure of Financial and Operating Information by Healthcare Providers
The Principles and Practices Board undertook this project to identify the types of financial operating data that should be disclosed by healthcare providers on an ongoing basis. This statement seeks to improve the understanding between those who provide financial information and those who seek and use this information. An exposure draft of this statement was issued on August 1, 1993.
1.1 With increasing frequency, healthcare providers1 are being asked to disclose a great deal of financial and operating information. The requests come from Federal, state, and local governments; business coalitions, payers, and potential payers, such as insurance companies, Blue Cross plans, HMOs, and PPOs; researchers; patients; holders and purchasers of bonds; the media; and others.
2.1 The objective of this statement is to identify the types of financial and operating data that should be disclosed by healthcare providers. Considerations related to the provision of special additional financial and other information is described in this statement. This statement seeks to improve and balance the understanding between those who provide financial and operating information and those who seek and use this information.
3.1 Disclosure of information about healthcare provider organizations has been fostered by the industry. For example, the American Hospital Association (AHA) first issued a chart of accounts for hospitals in the 1920s and has since updated it periodically in order to provide a framework for reporting financial information in a consistent manner. The Principles and Practices (P&P) Board's Statement No. 3 concluded that supplementary reporting, to more fully meet the needs of financial statement users, is appropriate. In 1980, AHA issued guidelines titled the "Disclosure of Financial and Operating Information by Health Care Institutions." This AHA statement was updated in 1990 in a management advisory released by AHA's Institutional Practices Committee. AHA recommended that health care institutions prepare annual financial statements in accordance with generally accepted accounting principles. AHA also encouraged institutions to provide supplementary information in the form of an annual report to explain its financial statements.
3.2 There are various methods for collecting and disclosing financial and operating information about healthcare providers. Many Medicare and other cost information reports are publicly available and the data included in those reports are compiled by and available through commercial services. Publicly held investor-owned organizations, including investor-owned healthcare providers, disclose extensive financial and other information in conformity with the Securities and Exchange Commission (SEC) rules. Internal Revenue Service (IRS) filings by tax-exempt healthcare providers are available for public scrutiny and analysis. Most states have agencies that collect healthcare data. State and Federal agencies, payers, and others that collect data are using increasingly sophisticated methods to collect data and are striving to improve comprehensiveness, timeliness, accuracy, and comparability of information.
3.3 The disclosure demands in the current environment, however, are far more extensive than the information contained in general purpose, external financial statements, their supplemental schedules, or other publicly available sources of information. In view of the extensive data already provided, many healthcare providers question the demands for additional information, and consider such demands unreasonably burdensome and intrusive. Competition among healthcare providers also necessitates a degree of confidentiality. However, healthcare providers are recognizing that failure to fulfill demands for financial or operating information raises questions, fosters mistrust, and interferes with the positive, constructive relationship that should exist between healthcare providers and the various agencies, organizations, and individuals that seek data. While some confidentiality is necessary, it should not be used to justify a failure to make reasonable disclosure.
4.1 Healthcare providers, in general, have demonstrated a willingness to disclose financial and operating information which is reliable, timely, and useful. There are many considerations related to the disclosure of financial and operating information. They include, but are not limited to, the following:
4.2 The disclosures recommended in section 5 of this statement should be readily available. Healthcare organizations should have a specific process for fulfilling information requests.
5.1 In its Statement No. 3, the P&P Board described the financial reporting requirements of hospitals and recommended supplementary reporting that would help meet the needs of users of financial reports. This statement expands upon Statement No. 3 and recommends that healthcare providers prepare an annual (or more frequent) report, including financial and operating information that facilitates an understanding of the financial status of the organization. This report should consist of:
A. Financial Statements
B. Management Discussion and Analysis of Financial and Operating Information
5.2 Guidance as to the form and content of the financial statements is included in the American Institute of Certified Public Accountant's (AICPA's) audit and accounting guide, "Audits of Providers of Healthcare Services." In most instances it is appropriate to provide stakeholders with a complete set of comparative audited financial statements, including related notes.
5.3 A management discussion and analysis should accompany the financial statements. Items to consider in management's discussion and analysis are outlined in the Appendix and should include both financial and operating data. Trends and changes should be discussed, and may require the presentation of information covering more than two years of operations.
The following items are not intended to be all inclusive nor will all items be relevant in each provider's circumstance.
II. Trends in operating results and key financial ratios
III. Employees, medical staff and governing board
IV. Regulatory environment
V. Risks and uncertainties
VI. Statistical data
VII. Major sources of revenues
VIII. Plans for the future
John T. Bigalke, FHFMA, CPA
Eugene R. Curcio, FHFMA, CPA
Richard J. Donoghue, CPA
Daniel F. Governile, CPA
Robbin R. Grill, CPA
Manfred Heinzeller, CPA
Catherine A. Jacobson, CPA
Maribess L. Miller, CPA
Bonnie L. Phipps, FHFMA, CPA
Kenneth C. Robinson, FHFMA, CPA
John J. Sheehan, CPA
Kirby O. Smith, FHFMA, CMPA
Patricia Hlavinka, CPA
1. The term healthcare providers is used to reference organizations that provide healthcare services. Examples include hospitals, continuing care retirement communities, skilled nursing facilities, subacute care facilities, multispecialty clinics, freestanding ambulatory centers, home health agencies, and HMOs.
2. An organization's stakeholders are those with an interest in the financial and operating performance of the organization. Stockholders are stakeholders of an investor-owned healthcare provider. Elected representatives are stakeholders of governmental healthcare providers. A Catholic order may be the stakeholder of a Catholic healthcare provider. The citizens of a community are stakeholders of a community healthcare provider. Other stakeholders may include brokers, bondholders, employees, employers, insurance companies, investment analysts, lenders, regulators, and suppliers.
Publication Date: Monday, August 01, 1994
Tom Myers, chief strategy officer, The SSI Group, discusses the shifting payment environment and how it affects providers' patient access and claims management processes.
Jeff Chester, senior vice president and chief revenue officer at Availity, shares his thoughts on "Revenue Cycle 2.0" and how to best meet its challenges.
Mitch Morris, vice chair and global leader, healthcare, Deloitte, and Michael O'Rourke, senior vice president and chief information officer, Catholic Health Initiatives (CHI), share perspectives on the need for transformational IT in health care today.
Brian Kueppers, founder and CEO, Apex, discusses the importance of a robust patient payment strategy in boosting organization revenue and enhancing patient satisfaction.
Brian Grazzini, CFO, HealthPort, describes the importance of efficient and compliant information exchange and audit management in helping HIM staff spend less time on paperwork and more on mission-critical projects.
Cindy Matthews, executive vice president, Community Hospital Corporation, discusses how rural and community hospitals can use collaborative partnering to position for success through tough market conditions.
Rick Heise, senior vice president, revenue cycle, at Cerner Corporation, discusses the importance of integrating clinical and financial data to excel in health care’s changing payment environment.
Russ Graney, founder and CEO for Aidin, and John Laursen, head of business development for Aidin, share insights on how to improve care transitions between acute and post-acute care settings and incentivize high-quality patient outcomes.
Scott Elston, strategic accounts manager, GE Healthcare Services, describes how substantial cost reduction in health care requires rethinking business strategy and asset use.
Robert Williams, MD, director, Deloitte Consulting LLP, and Arielle Freiberger, product strategist, ConvergeHEALTH by Deloitte, explain how sophisticated retrospective, real-time, and predictive data analytics can inform decision making to reduce costs and improve care.
Stuart Hanson, director of business development (healthcare solutions) at Citi Retail Services, discusses how improving the payment experience can benefit consumers and healthcare providers.
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Of all the transformations reshaping American health care, none is more profound than the shift toward value. Access HFMA’s Value Project to discover how healthcare finance leaders are joining this transformation.
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