Cleveland Clinic Health System Obligated Group - FMSbonds.com

Cleveland Clinic Health SystemNotes to Consolidated Financial Statements (continued)3. Accounting Policies (continued)International Contract Revenue RecognitionThe System has management agreements with international organizations to provide consultingservices for various healthcare ventures. These scope of services range from managing currenthealthcare operations to managing the construction, training, organizational infrastructure andoperational management of future foreign healthcare entities. The management fees are receivedin advance and are deferred until the services have been provided. The System has recordeddeferred revenue related to international management agreements, included in other currentliabilities, of $32.4 million and $15.5 million at December 31, 2007 and 2006, respectively.Charity CareThe System provides care to patients who do not have the ability to pay and who qualify forcharity services pursuant to established policies of the System. Charity services are defined asthose for which patients have the obligation and willingness to pay but do not have the ability todo so. Charity care provided in 2007 and 2006, measured at established rates and includingdiscontinued operations, approximated $385 million and $324 million, respectively, and is notincluded in net patient service revenue.Concentration of Credit RiskThe System’s concentration of credit risk relating to accounts receivable is limited due to thediversity of patients and payors. Accounts receivable consist of amounts due from governmentprograms, commercial insurance companies, private pay patients and other group insuranceprograms. Revenues from the Medicare and Medicaid programs and one commercial payoraccount for approximately 30%, 2%, and 21% in 2007 and 29%, 5%, and 20% in 2006,respectively, of the System’s net patient service revenue. Excluding these payors, no one payorrepresents more than 10% of the System’s accounts receivable or net patient service revenue.10