The SEC notes that the "gain contingency" accounting model is the appropriate income recognition model for HITECH incentive payments. The new guidance could compel publicly owned provider organizations to adjust their financial reports.
For instance, Hospital Corp. of America has announced changes to its financial expectations that were made only a week earlier. HCA was using a model based on a consensus position of the American Institute of Certified Public Accountants' health care expert panel that recognized HITECH income sooner than the SEC now would permit.
Under the "gain contingency" income recognition model, HCA now will recognize HITECH income "when its eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the HITECH payment is available," according to a statement.
Hospital Corp. of America during its Nov. 1 third quarter earnings call expected to recognize HITECH income of $400 million to $430 million during calendar year 2011, including $310 million to $340 million in the fourth quarter.
Now, HCA projects HITECH income of $190 million to $220 million in 2011, with $100 million to $130 million of that in the fourth quarter. An estimated $210 million in HITECH income would be recognized as income during 2012. Consequently, expectations of 3 percent to 5 percent growth in adjusted income for 2011 now have been reduced to zero to 2 percent.
The new SEC guidance does not affect HCA's timing of meaningful use attestations, the amount of incentives it expects or the timing of receiving incentive payments, according to the company. It simply changes the timing of the ability to recognize the incentive payments.