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Statutory Accounting Principles Working Group
Maintenance Agenda Submission Form
Form A
Issue: ASU 2010-23 – Health Care Entities, Measuring Charity Care
Check (applicable entity):
P/C
Life
Health
Modification of existing SSAP
New Issue or SSAP
Description of Issue:
ASU 2010-23, Health Care Entities, Measuring Charity Care (ASU 2010-23), effective under GAAP on a
retrospective basis for fiscal years beginning after Dec. 15, 2010, requires that “cost” be used as the
measurement basis for charity care disclosure purposes and that “cost” be identified as the direct and
indirect costs of providing the charity care. ASU 2010-23 also requires disclosure of the method used to
determine the costs. This GAAP update was issued to reduce the diversity in practice regarding the
measurement basis used in the disclosure of charity care as some entities have determined charity cost
disclosures on a cost measurement, whereas others have used a revenue measurement.
GAAP Disclosure - Charity Care
954-605-50-3 Management’s policy for providing charity care, as well as the level of charity care
provided, shall be disclosed in the financial statements. Such disclosure generally is made in the
notes to financial statements and is shall be measured based on the provider’s rates, direct and
indirect costs, units of service, or other statistical measure. of providing charity care services. If
costs cannot be specifically attributed to services provided to charity care patients (for example,
based on a cost accounting system), management may estimate the costs of those services
using reasonable techniques. For example, one such estimation technique might involve
calculating a ratio of cost to gross charges, and then multiplying that ratio by the gross
uncompensated charges associated with providing care to charity patients. Other reasonable
techniques also are permitted. The method used to identify or estimate such costs shall be
disclosed. Funds received to offset or subsidize charity services provided, for example, from gifts
or grants restricted for charity care or from an uncompensated care fund, also shall be separately
disclosed.
Charity care as defined in the FASB’s Accounting Standards Codification is:
Charity care represents health care services that are provided but are never expected to result in
cash flows. Charity care is provided to a patient with demonstrated inability to pay. Each entity
establishes its own criteria for charity care consistent with its mission statement and financial
ability.
Existing Authoritative Literature:
AICPA Audit and Accounting Guide – Health Care Organizations was rejected in SSAP No. 73—Health
Care Delivery Assets – Supplies, Pharmaceuticals and Surgical Supplies, Durable Medical Equipment,
Furniture, Medical Equipment and Fixtures, and Leasehold Improvements in Health Care Facilities
(SSAP No. 73).
Previous GAAP guidance specific to Health Care Entities in the related AICPA Audit and Accounting
Guide has been rejected for statutory accounting. The provisions within ASU 2010-23 are specific to
Health Care Entities as defined:
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Pursuant to ASC 954, the Health Care Entities topic applies to health care entities, which are the
following types of entities: a) Entities whose principal operations consist of providing or agreeing
to provide health care services and that derive all or almost all of their revenues from the sale of
goods or services, and b) Entities whose primary activities are the planning, organization, and
oversight of such entities, such as parent or holding companies of health care providers.
The Health Care Entities Topic applies to the following types of health care entities:
a.
Clinics, medical group practices, individual practice associations, individual
practitioners, emergency care facilities, laboratories, surgery centers, and other
ambulatory care entities
b.
Continuing care retirement communities
c.
Health maintenance organizations and similar prepaid health care plans
d.
Home health agencies
e.
Hospitals
f.
Nursing homes that provide skilled, intermediate, and less intensive levels of
health care
g.
Drug and alcohol rehabilitation centers and other rehabilitation facilities
h.
Integrated delivery systems that include one or more of the above types of
entities
Activity to Date (issues previously addressed by SAPWG, Emerging Accounting Issues WG, SEC,
FASB, other State Departments of Insurance or other NAIC groups): None
Information or issues (included in Description of Issue) not previously contemplated by the
SAPWG: None
Convergence with IFRS:
IFRS does not provide any specific guidance on the disclosure of charity care.
Staff Recommendation:
Staff recommends that the Working Group move this item to the nonsubstantive active listing and
expose nonsubstantive revisions to SSAP No. 54—Individual and Group Accident and Health
Contracts to adopt the ASU 2010-23 definition of charity care, and adopt with modification the
charity care disclosure within ASU 2010-23:
37.
Management’s policy for providing charity care1, as well as the level of charity care
provided, shall be disclosed in the financial statements. Such disclosure shall be measured based
on the provider’s direct and indirect costs of providing charity care services. If costs cannot be
specifically attributed to services provided to charity care patients (for example, based on a cost
accounting system), management may estimate the costs of those services using reasonable
techniques, with the method used to identify or estimate such costs disclosed. Funds received to
1
Charity care represents health care services that are provided but are never expected to result in cash flows.
Charity care is provided to a patient with demonstrated inability to pay. Each entity establishes its own criteria for
charity care consistent with its mission statement and financial ability.
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offset or subsidize charity services provided, for example, from gifts or grants restricted for charity
care or from an uncompensated care fund, also shall be disclosed.
38.
Refer to the preamble for further discussion regarding disclosure requirements.
Relevant Literature
39.
This statement adopts the definition of charity care, and adopts with modification the
disclosure within ASU 2010-23, Health Care Entities, Measuring Charity Care, as applicable.
40.
This statement incorporates the requirements of Appendices A-010, A-225, A-641, A820, A-822 (as applicable), the Actuarial Standards Board Actuarial Standards of Practice and the
actuarial guidelines found in Appendix C of this manual (as applicable).
41.
This statement rejects FASB Statement No. 60, Accounting and Reporting by Insurance
Enterprises relating to accounting and reporting for individual and group accident and health
contracts.
Effective Date and Transition
40.
This statement is effective for years beginning January 1, 2001. Contracts issued prior to
January 1, 2001 shall be accounted for based on the laws and regulations of the domiciliary state.
State laws and regulations shall be understood to include anything considered authoritative by
the domiciliary state under the individual state’s statutory authority and due process procedures.
A change resulting from the adoption of this statement shall be accounted for as a change in
accounting principle in accordance with SSAP No. 3. The disclosure related to charity care shall
be applied prospectively beginning (adopted date).
Staff Review Completed by:
Linda Hunsucker – November 2014
Status:
On March 28, 2015, the Statutory Accounting Principles (E) Working Group moved this item to the
nonsubstantive active listing and exposed nonsubstantive revisions to adopt with modification ASU 201023, Health Care Entities, Measuring Charity Care. The exposed statutory accounting revisions adopt the
charity care definition from ASU 2010-23, and adopt with modification the charity care disclosure.
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