Hospital Audit Checklist — Billing, Pharmacy, TPA, GST Exemption
HOSPITAL / CLINIC AUDIT CHECKLIST
Entity: {{client_name}} · Registration (clinical establishment / state Act): · Year ended: {{period_end}} · Prepared by: __________ · Reviewed by: __________
Purpose: an audit programme for hospitals, nursing homes and clinics — patient-billing and package-rate revenue, consultant revenue-share reconciliation, pharmacy inventory, TPA/insurance receivables, medical-equipment AMC and depreciation, statutory registrations, and the GST exemption/ITC interplay peculiar to healthcare.
Part A — Patient billing and revenue recognition
| Item | Tested (Y/N) | Observation |
|---|
| Billing masters (tariff card) approved and version-controlled; sample bills recomputed against the tariff | | |
| PACKAGE-RATE cases (fixed-price surgeries/procedures): revenue recognised on discharge/completion; part-completed packages at year-end evaluated for unbilled/deferred revenue | | |
| IPD: admitted, undischarged patients at year-end — unbilled revenue for services rendered estimated and recognised consistently | | |
| Discounts/waivers on bills authorised per the delegation matrix; concentration by doctor/desk reviewed for override risk | | |
| OPD/casualty cash collections reconciled daily to the HIS (hospital information system) and banked intact | | |
| Advances from patients held as liabilities and adjusted on final billing; unadjusted old advances reviewed | | |
Part B — Consultant revenue-share reconciliation
- ☐ Consultant agreements on file: share percentages by department/procedure, minimum guarantees, and whether the consultant is on retainership (professional fee) or employment.
- ☐ Consultant-wise revenue-share statements recomputed from the HIS billing data for a sample of months — shares paid agree with agreement terms.
- ☐ TDS classification tested: Sec 194J for independent consultants vs Sec 192 where the relationship is employment in substance (fixed hours, exclusivity, supervision) — a routinely litigated line; document the basis.
- ☐ Payments to consultants reconciled with their 26AS-visible credits; GST on consultant services considered where the consultant is not covered by the healthcare exemption.
Part C — Pharmacy stock and expiry
| Item | Tested (Y/N) | Observation |
|---|
| Pharmacy inventory records (batch-wise, expiry-dated) maintained; physical verification performed and shortages investigated | | |
| Near-expiry and expired stock identified, segregated, and provided for / written off; purchase-return claims to suppliers tracked | | |
| In-patient pharmacy issues captured on the patient bill (issue-to-billing reconciliation) — leakage between store issue and billing is the classic hospital revenue gap | | |
| Outpatient pharmacy sales (taxable supply) separately identifiable from exempt healthcare — feeds the GST working in Part F | | |
| Narcotic / Schedule-drug registers maintained per the Drugs and Cosmetics framework; drug licences valid | | |
Part D — Insurance / TPA receivables
| Item | Tested (Y/N) | Observation |
|---|
| TPA/insurer-wise receivables ageing prepared; claims outstanding beyond the credit period followed up | | |
| Claim deductions/disallowances by TPAs analysed — recurring disallowance reasons reported to management; short-payments written off only with approval | | |
| Pre-authorisation vs final-approval differences reconciled to the patient bill | | |
| TDS deducted by TPAs on payments to the hospital (Sec 194J) reconciled to Form 26AS/AIS | | |
| Government-scheme empanelment receivables (state schemes / PM-JAY) aged and tested for recoverability | | |
Part E — Medical equipment: AMC and depreciation
- ☐ Equipment register maintained (asset, supplier, warranty, AMC/CMC vendor, calibration due dates); AMC/CMC contracts current for critical equipment.
- ☐ AMC charges expensed over the contract period; prepaid portion carried correctly.
- ☐ Depreciation on high-value equipment (CT/MRI/cath-lab) at appropriate useful lives; impairment considered for idle or obsolete machines.
- ☐ Equipment bought on finance/lease arrangements accounted per the applicable framework; supplier buy-back or upgrade clauses reviewed.
- ☐ Radiation-equipment approvals (AERB) current where applicable.
Part F — Statutory and GST
| Item | Tested (Y/N) | Observation |
|---|
| Registration under the Clinical Establishments (Registration and Regulation) Act, 2010 where the state has adopted it, or the state's own nursing-home/clinical Act — verify which regime applies and that registration is current | | |
| Biomedical waste: authorisation under the Bio-Medical Waste Management Rules, 2016, agreement with a common treatment facility, and annual returns filed | | |
| Fire NOC, lift licences, DG-set consent and other municipal/utility permissions current | | |
| PNDT registration and records where ultrasound/sonography is performed | | |
| Payroll statutory (PF/ESI/professional tax) for nursing and support staff tested | | |
GST note — the exemption/ITC interplay: healthcare services by a clinical establishment are EXEMPT (entry 74, Notification 12/2017-Central Tax (Rate)). Because output is exempt, input tax credit attributable to those services is not available — the restriction flows from Sec 17(2) read with Rules 42/43 (proportionate reversal for common credits), with the Sec 17(5) blocked-credit list applying on top of it. Taxable streams sit alongside: outpatient pharmacy sales, room rent above ₹5,000/day for non-ICU rooms (taxable at 5% WITHOUT ITC, w.e.f. 18 July 2022), cosmetic procedures, and rentals to in-house commercial outlets. Test that: (1) taxable vs exempt turnover is segregated, (2) common ITC is reversed per Rules 42/43, and (3) no ITC has been taken against the 5% room-rent levy.
Part G — Conclusion
Overall conclusion, including revenue-leakage findings and statutory-registration gaps: ____________________________________________
| Prepared by | Reviewed by | Engagement partner |
|---|
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