You may be wondering what the guidance on health care providers is all about. The definition of a health care provider is anyone employed by a physician’s office, health care center, or clinic. Other types of health care providers include a medical school, post-secondary educational institution, local health department, nursing facility, or similar facility. These services may be performed in a temporary or permanent location. You may also consider yourself a health care provider if you provide services in your home.
When determining whether to capitalize contract costs, health care providers must consider the impact on their financial statements. Some contracts may not qualify for a practical expedient, such as a full exemption from capitalization. Other contracts may require a health care provider to expense certain contract acquisition costs, such as sales commissions, even if they are expected to be recovered. Some contracts may require providers to expense certain contract acquisition costs, such as commissions, related to continuing care contracts or prepaid health care services.
Another area where the new ASU will affect health care providers is recognizing revenue from patient services. In some circumstances, an entity is required to provide services to a patient without first assessing whether the patient can pay for them. If that is the case, the entity may need to recognize a significant provision for bad debt expense. Further, a health care provider may be required to perform dual tracking of revenue balances during the retrospective period.