Establishing reserves for capitation contracts
Sulger, J.F.
Healthcare Financial Management Journal of the Healthcare Financial Management Association 50(7): 52
1996
ISSN/ISBN: 0735-0732 PMID: 10158695 Document Number: 458313
Capitation introduces a number of significant considerations to financial reporting that normally are associated with insurance. These considerations arise for two reasons: (1) because providers receive revenue before services are rendered and (2) because providers assume the risk that the expenses they incur in delivering contracted services may exceed revenue. Both factors should be accounted for on financial statements by creating reserves representing actual and potential liabilities associated with capitation contracts as of the statement date. Continuous review of these reserves is necessary to ensure they remain adequate and are allocated appropriately.