FASB and the Budget Control Act: Two New Items Potentially Impacting the Revenue Cycle
The first week in August provided two new items healthcare providers need to consider: the Financial Accounting Standards Board’s (FASB) amendments to its healthcare accounting standards, and the Budget Control Act of 2011’s impact on Medicare reimbursement.
FASB’s amendments are targeted at enhancing metrics comparisons. Operating margins, reported growth in revenue, and revenue per admission are all items that are included. Equally as important, bad debt, which includes patient service revenue, will be presented as a contra-revenue instead of an operating expense. In keeping with the disclosure trends of Sarbanes Oxley and Dodd Frank, greater reporting and specificity is required for revenue recognition and bad debt assessment policies.
Coming into effect December 15, 2011, greater disclosure is also required doubtful accounts. In this instance, disclosure is not confined to quantitative information, but also includes qualitative assessment items.
As part of the Budget Control Act of 2011, another item for consideration is the potential for a 2% across-the-board reduction in payments to Medicare provider beginning in 2013 if a plan to reduce the deficit by at least $1.5 trillion is not met. (See Title IV, §401). As set forth in §302, inserting §251A – Enforcement of Budget Goal, amends the Balanced Budget and Emergency Deficit Control Act of 1985.
In essence, the Act sets forth two phases of budget cuts. During the first phase, Medicare will not be affected. In the second phase, however, the Joint Select Committee on Deficit Reduction must find a way to meet the $1.5 trillion reduction for fiscal years 2012-2021. The Committee is required to relay their majority-approved recommendations to Congress by November 23, 2011. Then, Congress is required to act on the recommendations without amendment by December 23, 2011. If the savings, which can be derived from program spending reductions, loophole closures and tax increases, amounts to between $1.2 and $1.5 trillion, the debt ceiling will be raised again.
If this goal is not met, then the automatic cuts or “sequestration” are triggered. While Social Security, Medicaid and VA benefits are some of the exempted programs, Medicare is not. This is when the 2% automatic Medicare cuts would be triggered.
The main take-away is that healthcare providers are going to have to be more streamlined and more adaptable as they navigate the elements of increased disclosure and uncertain payment reductions. The CliniNotes™ program can help with the disclosure requirements and revenue cycle management through our reporting mechanism and dashboard. BCE Healthcare Advisors can also mitigate the impact of reduction in payments through proven increases in CMI after our physician-physician education model is implemented to provide physicians with the tools to accurately document and in turn receive accurate reimbursement.
For more information, visit our website at http://www.bcehealthcareadvisors.com.
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