Fiannce Health

Financial statements are accounting reports prepared by the health care organization that represent a historical record of finances over a specified time period. These reports are used by investors as the basis for investment. The statements are prepared internally and checked by the company's auditors, the outside accountants used by the organization.

What is a balance sheet? Pretend that you go to the bank asking to borrow money; the loan officer insists that you provide a list of your current finances. You write down everything of value, such as your checking and savings accounts, investments, house, and cars. You also write down your current debt, such as mortgage, car payments, and student loans. Next, subtract everything you owe from what you own. Now you have a figure called net worth. At the end of this process, you have created a balance sheet. Health care entities do the same thing to evaluate their credit worthiness. Companies typically create a balance sheet for a specific time period at the end of a year. The balance sheet shows the value of the items the company owns, the amount of debt, how much inventory is on hand, and how much money the company has to work with on a short-term basis. The income statement is a financial summary that shows the operating results of a company over a specified period of time, usually one year. The statement shows a company’s revenues, costs and expenses, and profits, which are obtained by subtracting all costs, expenses, and taxes from revenues. The statement of cash flow details the exchange of cash between an organization and the outside world. The cash flow statement has to reconcile the net effect of these flows with the difference in its cash holdings at the beginning and end dates of the reporting period.

In health care, most revenue is earned from services rendered to patients. The organization receives payment after services are delivered. The payments come from various sources, including governmental sources such as Medicare and Medicaid or managed care sources. In managing a health care organization’s finances, the financial manager also must manage the organization’s expenses. Many expenses derive from salaries, payroll taxes, utilities, and so forth. The statement of revenue and expenses is the financial report that summarizes the revenue and expense transactions. The government programs are one source of revenue in health care organizations. These use a prospective payment system, in which a provider receives reimbursement based on a contractual agreement between the provider and payer. A third payment system is managed care, which may include a prospective payment system-like payment or a capitation arrangement.

What are some other funding options available for health care organizations? Why is effectively managing the accounts receivables of a health care organization important? What may you do as a health care financial manager to monitor the accounts receivables?

2. What grouping of revenue do you believe your organization uses (revenue centers, care settings, service lines, other)? From your perspective, would there be a better grouping possible? If so, why do you think it is not used?

3. What are the largest expense categories incurred by health care service organizations?

4. Facilities operate on an accrual accounting methodology (Baker & Baker, 2014). In simple terms, this means that the facility identifies the projected revenue that will be paid for services and accrues it against the expense. The expenses are generated when the service is provided. So when a service is not paid for we do not count the expenses again. Instead, it becomes what is known as a contra-revenue item - a fancy accounting term meaning "negative" revenue. 

Let's say that your brother approaches you asking that you pay his credit card bill (expense) this month in exchange for an IOU. Being an excellent sibling you say yes and accept the IOU (accrual of revenue). When the IOU comes due your brother does not pay you. Since you have already paid the bill your expenses do not increase but your revenue is decreased by the amount of the IOU you thought that you were receiving. Does this help to clarify why unpaid services are not an expense?

 4. Chp 5. Do you believe that grouping expenses by diagnoses and procedures (based on type of services provided) is better to use for control and planning than grouping expenses by care setting (based on location of service provided)? . If so, why? What grouping of expenses do you believe your organization uses (traditional cost centers, diagnoses/procedures, care settings, other)?

5. In your own workplace, can you give a good example of a direct cost and indirect cost? What is the difference? Does your organization use responsibility centers?

6. What are the titles and functions of the four financial statements usually included in an audited financial report?

7. Chp 6. Does the concept of revenue less expense equaling an increase in equity or fund balance make sense to you? If not, why not? Are you familiar with the current maturity of long-term debt? What example of it can you give in your own life (either at work or at home)?

8. Please submit/ upload different: Find two or three articles that address financial reporting practices and ethical standards in health care finance, including the following topics:

· Generally accepted accounting principles

· Corporate compliance, ethics, or fraud and abuse

Write a 700- to 1,050-word paper on the financial management of health care organizations, integrating your research articles.

· Include a summary of the four elements of financial management.

· Include a summary of generally accepted accounting principles and general financial ethical standards.

· Provide examples from the articles that reflect ethical standards of conduct and financial reporting practices.

· Explain the significance of each example.

Format your paper consistent with APA guidelines.

9. Please see attached worksheet: Week Two Health Care Financial Terms Worksheet