Reference no: EM132628031

Question - Please help with the following scenario exercise:

Hospitals and other health care organizations are in a unique position relative to other types of businesses. That is because they are ethically and may also be legally required to provide services to uninsured patients while being aware that they will collect none of the amounts to be billed. Past statistics show that services provided by these organizations as "charity care" amounted to 2% of their patient service billings, although that amount has plunged by almost half since implementation of the Affordable Care Act. As an accounting student, imagine operating a business knowing that 1-2% of your customers will never pay their bills and you must continue to provide services to these customers.

But wait, there's more! Like many things in real life, this issue is not always so clear cut. Hospitals and health care organizations may provide services to some uninsured patients believing that they may collect a portion of their billings, rather than none at all.

What is a hospital accountant to do? What kind of guidance can these organizations rely on to distinguish between charity care versus bad debt expense for reporting purposes and what does it say? And - what kind of information is required in their financial reports, if any, regarding services provided as charity care?