The document discusses different approaches to defining a healthcare provider's core operations when calculating operating income, including whether to include only patient care activities, patient care plus directly related activities like cafeterias and parking, or all of those plus government appropriations. The broader the definition used, the higher the reported operating income. It asks what activities should be considered core operations for hospitals and whether hospitals should be required to report multiple operating income measures using different definitions of core activities.

1. The problem in calculating operating income lies primarily in the definition of what constitutes a
providers operations (core activities). Here, there are at least three approaches: Operations
include (1) only patient care activities; (2) patient care and directly related activities, such as
cafeteria and parking garage operations; and (3) patient care, directly related activities, and
government appropriations. Each definition results in a different value of operating income. In
general, as the definition of core operations expands, the value calculated for operating income
increases.
What do you think? Consider the hospital industry. What activities should be considered part of
core operations? Should hospitals be required by GAAP to report multiple measures of operating
income, each using a different definition of core activities?