Question

St. Mary’s Hospital is a private not-for-profit entity that provides health care services to citizens of the small rural community in which the hospital is located. The most recent construction at the hospital was financed using Hill-Burton funds. During the current month, St. Mary’s engaged in the following transactions. Make the appropriate journal entries for St. Mary’s for the current month.

a. Based on the hospital’s established billing rate, services rendered to patients amounted to $1.5 million. Of this amount $1,100,000 will be billed to Zeta Medical Group; a third-party payor that insures many state employees; $190,000 will be billed to uninsured patients; $150,000 is provided to indigents and will be considered charity care; and $60,000 was for services rendered to hospital employees.

b. Zeta Medical Group pays for services rendered to its insurees on a rate schedule based on types of procedures rendered. For the services rendered during the current month to Zeta insurees, Zeta will reimburse the hospital $975,000. Part of the agreement between St. Mary’s and Zeta is that Zeta insurees will not be billed for the difference between the amount that the hospital bills and the amount that Zeta pays.

c. Based on prior experience with uninsured patients, the Hospital estimates that $35,000 of the $190,000 will be uncollectible.

Answer 1