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Petitioners maintain the hospitals' books and records on a
functional accounting system which separates the various
functions of operating a hospital into general ledger cost
centers whether or not those functions represent separate
responsibility cost centers. Accordingly, revenues and expenses
for the same function are recorded in the related revenue and
expense centers9 shown in petitioners' chart of accounts.10 The
hospitals' revenue centers generally are classified into routine
services and ancillary services. Examples of routine service
revenue centers are Medical & Surgical Acute Care, Intensive
Care--Medical, and New Born Care. Examples of routine ancillary
revenue centers are Central Supply, Laboratory, and Blood Bank.
Additional details indicated in the accounting system are the
classification of the particular revenue within the revenue
center, such as inpatient or outpatient revenue, the type of
payment expected with respect to the patient, and the
9
For example, the central supply center would be credited or
charged with all direct revenues and expenses incurred in
preparing and issuing medical and surgical supplies and other
equipment to patients. Appropriate subaccounts would be
established to accumulate the expenses of the center under
classifications such as salaries and wages, professional fees,
supplies, etc.
10
A chart of accounts is a listing of account titles, with
numerical symbols, employed in the compilation of accounting data
concerning the assets, liabilities, capital, revenue, and
expenses of an enterprise. American Hospital Association, Chart
of Accounts for Hospitals 25 (1966 ed.).
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