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Revenue recognition and healthcare: Well begun is half done

September 26, 2017 / 5 min read

Healthcare providers face unique challenges when implementing the new principles-based revenue recognition standard. With the deadline approaching, these best practices can help support a smooth transition.

As organizations have prepared to implement the new revenue recognition standard set forth by the FASB, some efforts have gained recognition as best practices while others have, through a process of trial and error, proven to be somewhat less effective. For those in the healthcare field, these successes and missteps can offer valuable insight into making sure that the process runs smoothly as the deadline for implementation draws near.

A quick review of the steps to implementation
The major steps organizations should take to implement the new standard include:
  1. Assign staff to be experts and organize a project team.
  2. Learn about the new standard and teach those affected.
  3. Determine areas of judgment.
  4. Inventory revenue streams and related contracts.
  5. Determine the GAAP change.
  6. Evaluate the impact of the GAAP change on financials, processes and systems, and operational/performance metrics.
  7. Determine the transition approach.
  8. Develop interim disclosures (if required).
  9. Educate key stakeholders.
  10. Execute necessary changes.

No matter where an organization is among these steps, it seems as though the executives feel like they aren’t as far along as they “should” be. However, they often aren’t giving themselves enough credit for what they’ve completed, and they usually aren’t aware of lessons learned from earlier adopters that can make it much easier to catch up.

First, understand that your financial statements are going to look different.

Best practices by implementation phase
Let’s start with a look at the different phases of the implementation process and how some early adopters have overcome some of the challenges encountered to date:Best practices: Staffing
On top of identifying additional revenue streams that may track through their department, your IT team will also need to be looped in early. You’ll need them to make sure that historical data is available to support portfolios that are established to determine collectability and transaction prices. Chances are that your system already captures the information needed, but it’s also likely that no one has built a report that combines all of the relevant data in a form that flows easily into the new reports you might need.

The closer you are to your deadline in either 2018 or 2019, the greater the demand this transition will place on your people who can figure out these answers. If you’re behind on the process and you need to reflect the new standard in your first-quarter interim financials in 2018, you’ll almost certainly be devoting your staff to this process full time. You will undoubtedly have to rely heavily on the people who have full-time jobs in your organization to support the transition process with the institutional knowledge they have regarding your specific contracts and processes. That may cause a need for temporary support to keep the day-to-day administration of the facility running smoothly. Plan for temporary support to perform administrative tasks that might be common among other healthcare providers so that you can free the employees with specific knowledge of your systems to focus on the transition.

It’s certainly possible to get on top of this new standard and get things implemented on deadline, but there’s no time left to delay.

Best practices: Going liveOther best practices“Well begun is half done…”
Of all the advice we could offer to healthcare providers about implementing the new standard, perhaps the most important tidbit can be attributed to famed fictional nanny Mary Poppins: “Well begun is half done.”

It’s certainly possible to get on top of this new standard and get things implemented on deadline, but there’s no time left to delay. So get going. And if you run into challenges, we’re here to help.

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