A hospital had capitation agreements with several health maintenance organizations to provide services. The hospital received $12 million of capitation fees for the year
The hospital also calculated that: (a) its costs to provide these services were $11.8 million; and (b) the value of these services at established billing rates were $16 million. How should the hospital report this information on the face of its financial statements?
a. report $200,000 as a separate item of revenue, labeled net premium revenue.
b. add $16 million to Net patient service revenue, and deduct $4 million in a separate item labeled Adjustment for capitation premiums.
c. report Premium revenue of $12 million as a separate item of revenue, and report cost of serving HMO patients of $11.8 million as a separate item of expense.
d. report premium revenue of $12 million as a separate item of revenue, if significant.
d
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