Accounting and Financial Reporting

P&P Board Statement 18: Public Disclosure of Financial and Operating Information

October 17, 2012 5:23 pm


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.

Statement 18: Public Disclosure of Financial and Operating Information by Healthcare Providers


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.

Disclosure Considerations

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:

  • Full disclosure fosters better understanding and trust. Providers have a responsibility to disclose useful information to stakeholders2 on a regular basis.
  • Data must be defined consistently over time and changes in definitions must allow ample time for necessary changes to be made in collection and reporting procedures.
  • The usefulness of data depends on clear definitions and a mutual understanding of the purpose of the information. Reports should be used within the context in which they were prepared and for the purpose that was intended.
  • Due to the relatively large amount of public data, users first should assess how their needs might be met with information already available instead of requesting customized reports.
  • Providers and users have an obligation to cooperate. Cost of preparation of reports must be considered by both the provider and user. Providers should facilitate the fulfillment of reasonable data requests. Users should communicate clearly a responsible purpose for their request and establish reasonable time frames and formats. Standard formats should be used when possible.
  • The confidentiality of individual patient data and competitive management data should be respected in all instances.

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.

Recommended Disclosures

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. 


Appendix – Items To Consider In Management’s Discussion and Analysis

The following items are not intended to be all inclusive nor will all items be relevant in each provider’s circumstance.

I. General

  1. Sponsorship/ownership
  2. Services provider
  3. Major “product” lines (“Product” lines should be based on the facts and circumstances of the organization.)
  4. Facilities
  5. Combined, consolidated, and other affiliated entities
  6. Major influences on the organization

II. Trends in operating results and key financial ratios

  1. Profitability
  2. Liquidity
  3. Capital structure

III. Employees, medical staff and governing board

  1. Number of employees

    1. Union representation
    2. Size of employer in local market 


  2. Composition and size of medical staff
  3. Composition and role of governing board

    1. Manner of appointment
    2. Standing committees


IV. Regulatory environment

  1. Federal
  2. State
  3. Health planning
  4. Other significant laws/regulations enacted or proposed

V. Risks and uncertainties

  1. Insurance program
  2. Significant litigation

VI. Statistical data

  1. Patient volume

    1. Inpatient
    2. Outpatient
    3. Significant or unique services


  2. Occupancy
  3. Covered lives
  4. Other relevant data

VII. Major sources of revenues

  1. Medicare
  2. Medicaid
  3. Negotiated arrangements
  4. Capitation
  5. Other

VIII. Plans for the future

  1. Construction
  2. New programs/services
  3. Curtailment of programs/services
  4. Acquisitions or disposals
  5. Technological developments
  6. Capital financing

1993-1994 Principles and Practices Board Members

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 

HFMA Staff

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.




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