ASC 954, Health Care Entities, prescribes the accounting specifically for entities whose principal operations consist of providing or agreeing to provide health care services and derive all or almost all of their revenues from the sale of health care services and related goods. Also within the scope of ASC 954 are entities whose primary activities are the planning, organization, and oversight of such entities, such as parent or holding companies of health care providers.

ASC 954-10-15-1B

The Health Care Entities Topic applies to the following types of health care entities:

  1. Clinics, medical group practices, individual practice associations, individual practitioners, emergency care facilities, laboratories, surgery centers, and other ambulatory care entities
  2. Continuing care retirement communities
  3. Health maintenance organizations and similar prepaid health care plans
  4. Home health agencies
  5. Hospitals
  6. Nursing homes that provide skilled, intermediate, and less intensive levels of health care
  7. Drug and alcohol rehabilitation centers and other rehabilitation facilities
  8. Integrated delivery systems that include one or more of the above types of entities.

Each of the entities within the scope of ASC 954 as described in ASC 954-10-15-1B provide health care services. Health care services are services provided to individuals by or under the direction of licensed medical professionals in connection with the diagnosis or treatment of an illness or injury. By extension, health care services also include the sale or rental of certain medical goods (such as medical devices, prosthetics, or durable medical equipment) that are prescribed and billed to patients or third-party payers in connection with medical treatment. Other types of entities that may be subject to ASC 954 also include laboratories that have no direct patient-facing activities or diversified companies where health care is one of several lines of business.
Health care entities in the private sector may be publicly held, privately held (e.g., by private equity investors), operated by religious organizations, or sponsored by local communities. In the public sector, they may operate under the auspices of federal, state, or local governmental authorities. Health care entities usually can be classified into one of the following categories based on their characteristics:
  • Investor-owned – Health care entities owned by investors that provide goods or services with the objective of making a profit.
  • Not-for-profit, business oriented – Health care entities which are characterized by no ownership interest and are essentially self-sustaining from fees charged for the sale and delivery of goods and services. The fees charged by such entities are intended to help the entity maintain its self-sustaining status, rather than to maximize profits.
  • Not-for-profit, non-business oriented – These are defined as voluntary health and welfare organizations; they derive the majority of their revenue from voluntary contributions from the general public to be used for general or specific purposes connected with health, welfare, or community services.
  • Governmental – Public corporations, which are organizations founded and owned in the public interest, supported by public funds and governed by those deriving their authority from the federal, state, or local government.
Depending on their ownership and organizational structure, health care entities may be subject to different accounting and financial reporting standards. Figure HC 1-1 provides a description of the underlying accounting framework a health care entity should follow:
Figure HC 1-1
Health care entities – accounting framework
Organization type
Accounting framework
Industry-specific GAAP
ASC 954: Health-care entities
Not-for-profit, business oriented
ASC 954: Health-care entities
Not-for-profit, non-business oriented
ASC 958: Not-for-profit entities
Governmental Accounting Standards Board (GASB) or
Federal Accounting Standards Advisory Board (FASAB)
Various, including AICPA AAG-HCO Ch 15
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