When are bad debts typically reported by healthcare organizations?

Bad debts in healthcare organizations are typically reported upon the accrual of services because this approach aligns with the accrual basis of accounting. Under this accounting method, revenues and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

When healthcare services are provided to patients, the organization recognizes the revenue at that time, regardless of whether payment will eventually be received. If a patient is unable or unwilling to pay for the services rendered, the amount is ultimately classified as bad debt. This reflects the financial reality of the organization's operations, as it accurately portrays the revenue earned from services rendered, allowing for better financial analysis and decision-making.

In contrast, options focusing on when cash is received or on a cash basis accounting would not provide an accurate representation of financial performance, as they disregard the recognition of revenue at the time services are delivered. Additionally, reporting bad debts only when services are denied does not consider the complete picture of revenue recognition and may lead to misstatements in financial reporting.