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.