health care finance
Part I: Health Care Finance Overview
CHAPTER 2: FOUR THINGS THE HEALTH CARE MANAGER NEEDS TO KNOW ABOUT FINANCIAL MANAGEMENT
SYSTEMS
Four Segments that Make a Financial Management System Work
• Original Records — Provide evidence that some event has occurred.
• The Information System — Gathers this evidence.
• The Accounting System — Records the evidence.
• The Reporting System — Produces reports of the effects.
Four Segments That Make a Financial System Work
• The healthcare manager needs to know that these separate elements exist and that they work together for an end result.
Structure of the Information System
• Identify the inputs
• Identify the outputs
• Examine the Figure 2-1 diagram in the chapter
Function of Flow Sheets
• Flow sheets illustrate the flow of activities that capture information.
Flow Sheets are Useful Because
• They picture who is responsible for what piece of information as it enters the system
• Examine the two examples of patient information flows in the chapter
Figure 2-2: Flowsheets
Figure 2-3: Flowsheets
The Chart of Accounts
• Outlines the elements of your company in an organized manner.
• Maps out account titles with a method of numeric coding.
• Is designed to compile financial data in an uniform manner that can be decoded by the user.
The Chart of Accounts
• Every organization has differences in its Chart of Accounts that expresses the unique differences in its own organizational structure.
• Examine the three examples of different Chart of Accounts formats in Exhibits 2-1, 2-2 and 2- 3.
Exhibit 2–1 Chart of Accounts, Format I
Exhibit 2–2 Chart of Accounts, Format II
Exhibit 2–3 Chart of Accounts, Format III
Basic System Elements: Books and Records
• Capture transactions
• Figures 2-4 and 2-5 illustrate this concept.
Books and Records: The Sequence Is…
• Initial transaction to subsidiary journal to general ledger;
• Review, adjust, balance through the trial balance;
• Create reports (financial statements)
The Annual Management Cycle
• Affects the type and status of information the manager uses
The Annual Management Cycle
• The type and status of information used by the manager includes:
• Daily and Weekly Reports — Generally contain raw data
• Quarterly Reports and Statistics — Generally have been verified, adjusted and balanced. Called “interim” reports; often used as milestones by managers.
• Annual Year End Reports — Generally represents the closing out of a specific reporting period. Primarily intended for external (outside) use.
Communicating Financial Information to Others
• It is important to:
• Create a report.
• Use accepted terminology, standard formats, and executive summary.
• Organize in a logical flow.
• Place detail in an appendix.