According to Fitch Ratings, the benefit for hospitals via enrollment in plans offered on the state health insurance exchanges starting Oct. 1 is uncertain, since participant numbers have yet to be disclosed. However, it is anticipated that as enrollment increases, hospitals’ ability to reduce bad debt will also increase and that would clearly be a credit positive.
1. What GAAP methods are used to account for bad debt?
2. What is the direct write-off method of accounting for bad debts? Explain why it typically is not considered to be a GAAP method.
3. Explain why the Affordable Healthcare Act has been in the news so much lately.
Neuburger, M. (2013). ACA Exchange Enrollment Could Ease Hospital Bad Debt. Fitch Ratings.com, Oct. 2 (Retrievable online at http://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/ACA-Exchange-Enrollment?pr_id=803902)