Are unbilled charges and discharged not final billed (DNFB) charges included in the total outstanding accounts receivable (A/R) amount used to calculate net days in A/R? Is there a reference that supports the answer?
Answer 1: Net days in A/R is calculated by using the total amount of net patient receivables on the balance sheet. This total includes in-house as well as DNFB.
The formula per HFMA’s MAP Keys can be found at http://www.hfma.org/MAP/MapKeys/ under “MAP Keys for Hospitals and Health Systems,” “Financial Management.”
This question was answered by: Christoph Stauder, FHFMA, CPA, president, Stauder Consulting, LLC, Beaverton, Ore., and a member of HFMA’s Oregon Chapter.
Answer 2: Based upon the revenue recognition found in paragraph 83 of Financial Accounting Standards Board Statement of Financial Accounting Concepts No. 5, revenue is earned when an entity has substantially accomplished what it must do to be entitled to that revenue. That interpretation lends to the assumption both DNFB and unbilled revenue should be included when calculating net accounts receivable. Thus a contractual should be set on the revenue to bring the amount to net realizable value. Further details on revenue recognition can be found in the AICPA audit and accounting guide for healthcare entities.
Keep in mind this is on revenue in the traditional patient service revenue arrangements and does not include premium or capitation revenue arrangements.
This question was answered by: David A. Williams, FHFMA, CPA, partner, healthcare reimbursement and advisory services, Horne LLP, and a member of HFMA’s Mississippi Chapter.