Matakuliah
Tahun
: A1042/Accounting Software Package for
Services
: 2010
ACCOUNTING
FOR HEALTHCARE
Pertemuan 8-12
Healthcare Finance
• Health Service
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Medical practices
Hospitals
Clinics
Nursing homes
Home health care agencies
Health insurance
Managed care
Medical equipment and supplies
Pharmaceuticals and biotechnology
other
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The Role of Finane in Health Services
Organizations
• Planning and budgeting.
first and foremost, business finance involves evaluating
the financial effectiveness of current operations and
planning for the future. Budgets play an important role in
this process
• Financial reporting
for a variety of reasons, it is important for businesses to
record and report to outsiderss the results of operations
and current financial status. This is typically
accomplished by a set of financial statements.
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• Capital investment decisions
Although more important to senior management,
managers at all levels must be concerned with the
capital investment decision process. Such decisions,
which are called capital budgeting decisions, focus on
the acquisition of land, building, and equipment. They
are the primary means by which business implement
strategic plans, and hence they play a key role in a
business’s financial future.
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• Financing decisions
All organizations must raise capital to buy the assets
necessary to support operations. Such decisions involve
the choice between internal and external funds, the use
of debt versus equity capital, the use of long term versus
short term debt, and the use of lease versus
conventional financial. Although senior managers
typically make financing decisions, these decisions have
ramifications for managers at all levels.
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• Working capital management
an organization’s current, or short-term, assets, such as
cash marketable securities, receivables, and inventories,
must be properly managed both to ensure operational
effectiveness and to reduce costs. Generally, managers
at all levels are involved, to some extent, in short-term
asset management, which is often called working capital
management
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• Contract management
in today’s healthcare environment, health services
organizations must negotiate, sign, and monitor
contracts with managed care organizations and third
party players. The financial staff typically has primary
responsibility for these tasks, but managers at all levels
are involved in these activities and must be aware of
their effects on operating decisions
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• Financial risk management.
many financial transactions that take place to support the
operations of a business can, themselves increase the
business’s risk. Thus, an important finance activity is to
control financial risk.
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Health Service Settings
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Hospitals
Ambulatory (outpatient) care
Long term care
Integrated delivery systems
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Alternative Forms of Business Organizations
• Propritorship and Partnerships
• Corporation
• Hybrid forms of organization
– Limited liability partnership
– Limited liability company
– Professional corporation
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Alternative Forms of Ownership
• Investor Owned Corporations
• Non profit organization
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Third Party Payers
• Private Insurers
• Commercial health insurance
– Stock companies (shareholder owned and can raise capital by
selling shares of stock just like any other for profit company)
– Mutual company (no shareholder, its management is controlled
by a board of directors elected by the company’s policyholders)
• Self Insurers
• Public Insurers
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Alternative Reimbursement Methods
• Fee for Service Methods
– Cost based, the payer agrees to reimburse the provider for the
costs incurred in providing services to the insured population.
Reimbursement is limited to allowable costs, usually defined as
those costs directly related to the provision of healthcare
services. Nevertheless, for all practical purposes, cost based
reimbursement guarantees that a provider’s costs will be
covered by payments from the payer. Typically, the payer makes
periodic interim payments (PIPs) to the provider and a final
reconciliation is made after the contract period expires and all
costs have been processed through the provider managerigal
accounting system.
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– Charge Baed Reimbursement
when payers pay billed charges, they pay according to the
schedule of charge rates established by the provider. To a
certain extent, this reimbursement systems places payers at the
mercy of providers in regards to the cost of healthcare services,
especially in markets where competition is limited.
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– Prospective payment
the rates paid by payers are determined by the payer before the
services are provided. Furthermore, payments are not directly
related to either reimbursable costs or billed charges.
• Per procedure. Under per procedure reimbursement, a
separate payment is made for each procedure performed on
a patient. Because of the high administrative costs
associated with this method when applied to complex
diagnoses, per procedure reimburesement is more
commonly used in outpatient than in inpatient settings.
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• Per diagnosis. In the per diagnosis reimbursement
method, the provider is paid a rate that depends on
the patient’s diagnosis. Diagnoses that require
higher resource utilization, and hence are more
costly to treat, have higher reimbursement rates.
• Per day (per diem). If reimbursement is based on a
per diem rate, the provider is paid a fixed amount
for each day that service is provided, regardless of
the nature of the services. This tpye of
reimbursement is applicable only to inpatient
settings. Note that per diem rates can be stratified.
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• Global pricing. Under global pricing, payers pay a
single prospective payment that covers all services
delivered in a single episode, whether the services
are rendered by a single or by multiple providers.
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• Capitation Method
the prospective payment methods presented have been
fee for service methods – that is, providers are
reimbursed on the basis of the amount of services
provided.
Capitation, a form of prospective payment, is an entirely
different approach to reimbursement and hence
deserves to be treated as a separate cateogry.
Capitation payment, which is used primarily by managed
care plans, dramatically changes the financial
environment of healthcare providers.
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• Provider Incentives
under prospective payment reimbursement, provider
incentives are altered. First, under per procedure
reimbursement, the profitability of individual procedures
will vary depending on the relationship between the atual
costs incurred and the payment for that procedure.
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Accounts
• Permanent accounts include items that must be carried
form one accounting period to another
• Temporary accounts are for those items that will
automatically be closed at the end of each accounting
period
• Contra accounts are special accounts that convert the
gross value of some other account into a net value.
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