In the healthcare industry, accounting plays a crucial role in financial management. There are two distinct categories of accounting functions, namely financial accounting and managerial accounting. The financial accounting function is responsible for creating and presenting financial reports, such as income statements, balance sheets, and cash flow statements, for external stakeholders. On the other hand, managerial accounting, on the other hand, provides information to internal stakeholders, such as managers and decision-makers, to assist in the planning, controlling, and evaluating of operations.
According to Ogunbodede et al. (2020), accounting functions play a significant role in operational oversight within the healthcare industry. They allow for the monitoring of financial resources, which enables healthcare organizations to allocate resources effectively and efficiently. Financial accounting provides a picture of the organization’s financial health, while managerial accounting allows for internal decision-making and the identification of areas where cost savings can be achieved.
The healthcare industry has unique features that affect its financial management. One such feature is the complexity of healthcare services and the associated costs. According to Al-Ali and Haddad (2019), effectivefinancial management in the healthcare industry necessitates a comprehensive comprehension of the cost framework of healthcare services to assign resources competently.
Additionally, the healthcare industry has a unique payment structure, with different types of payers and reimbursement mechanisms, including public and private insurance and out-of-pocket payments. The complex payment structure requires careful financial planning to ensure the organization’s financial stability.
Another unique feature of the healthcare industry is the regulatory environment, which includes various laws and regulations that govern healthcare services’ provision and financing. As a result, healthcare organizations need to stay up to date with regulatory changes that can affect their financial management.
References:
Al-Ali, A. R., & Haddad, S. S. (2019). Financial management in the healthcare industry: A systematic review. International Journal of Healthcare Management, 12(2), 124-138.
Ogunbodede, E. O., Adeyemo, D. A., Adeyemo, T. A., & Fadare, J. O. (2020). Accounting functions, financial management practices and organisational performance: A study of selected hospitals in Osun state, Nigeria. Journal of Financial Reporting and Accounting, 18(1), 86-102.
this is was qoustion
Unique Aspects of Health Services & Financial Management
There are a number of unique factors relating to the health services sector:
Compare the two types of accounting functions.
Describe how the accounting functions affect operational oversight.
How do these unique features affect the financial management of the sector?
Expert Solution Preview
Introduction:
Healthcare organizations require effective financial management to ensure proper allocation of resources and financial stability. Financial accounting and managerial accounting play significant roles in healthcare financial management. The unique features of the healthcare industry, including the complexity of healthcare services, the payment structure, and the regulatory environment, affect the financial management of the sector.
1. Compare the two types of accounting functions.
Financial accounting is responsible for creating and presenting financial reports, such as income statements, balance sheets, and cash flow statements, for external stakeholders. Conversely, managerial accounting provides information to internal stakeholders, such as managers and decision-makers, to assist in the planning, controlling, and evaluating of operations. While financial accounting focuses primarily on external reporting, managerial accounting focuses more on internal decision-making.
2. Describe how accounting functions affect operational oversight.
Accounting functions play a significant role in operational oversight within the healthcare industry. They allow for the effective monitoring of financial resources, which enables healthcare organizations to allocate resources competently. Financial accounting provides a picture of the organization’s financial health, while managerial accounting aids in internal decision-making and the identification of areas where cost savings can be achieved.
3. How do these unique features affect the financial management of the sector?
The unique features of the healthcare industry affect its financial management significantly. For instance, the complexity of healthcare services and their associated costs necessitates a comprehensive comprehension of the cost framework to allocate resources effectively. The payment structure, which includes different types of payers and reimbursement mechanisms, requires careful financial planning to ensure financial stability. The regulatory environment, which includes various laws and regulations that govern healthcare services are provided and financed. It is crucial for healthcare organizations to stay updated with the regulatory changes that can affect their financial management effectively.
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