Add to favorites
Purchase accounting issues. If the PPM is required to consolidate the physician practice, the transaction is a business combination accounted for in accordance with ASC 805.
If the criteria for consolidation are not met, the transaction is accounted for as a purchase of intangible assets. In evaluating the appropriate amortization period, the PPM uses the contract term as a starting point, but also considers factors inherent in the nature of the business that would point towards use of shorter amortization periods. Those factors include (a) the unproven ability of a PPM and its new medical practice to perform under the terms of the services arrangement over an extended period; (b) the uncertain continuity of revenues upon departure of key owner/physicians of the practice; (c) the existence of short-term employment contracts with key owner/physicians; and (d) the uncertain ability to withstand legal challenges related to the corporate practice of medicine. When these factors are given appropriate consideration, it is difficult to assert that the management arrangement with medical practices will survive and provide a competitive advantage throughout over the period of time indicated by the contract term. Therefore, use of a relatively short amortization period for the MSA intangible is generally appropriate.
"Employee" status for stock compensation. ASC 718-10-55-85A provides guidance on whether an employee of a physician practice should be considered an employee of the PPM for purposes of determining the appropriate method of accounting for that employee's stock-based compensation. An employee of a practice that is consolidated by the PPM should be considered an employee of the PPM for stock compensation purposes; an employee of a practice that is not consolidated by the PPM is not considered an employee of the PPM.
Financial statement display. PPMs that consolidate the medical practices characterize their primary business as providing medical care. The top line of the income statement will be the revenue derived by the medical practices from patient care. A PPM that does not consolidate the medical practice characterizes its operations as a management company to whom the physicians are outsourcing the business functions associated with running the practice. Consequently, the income statement begins with the amount of fees earned under the MSA contracts.
A comparison of the income statement presentation formats is as follows:
FORMAT A -- CONSOLIDATED PRESENTATION
FORMAT B -- UNCONSOLIDATED PRESENTATION
Net medical practice revenue
$85,000
Management services revenue
$52,000
Expenses:
Physician salaries
(30,000)
Provision for uncollectible accounts
(3,000)
Clinic costs
(49,000)
Clinic costs
(49,000)
Net Income
$ 3,000
Net Income
$ 3,000
View table
Expand

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

Your session has expired

Please use the button below to sign in again.
If this problem persists please contact support.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide