Reporting Practices and Ethics Paper Essay Example
FINANCIAL MANAGEMENT OF HEALTHCARE ORGANIZATIONS 7
Financial management of health care organizations
Financial Management of Healthcare Organizations
Like any other business, health care service delivery requires application of succinct concept of financial management, which plays a critical role in balancing resources inflows and outflows, a phenomenon common in every business. The concept of financial management entails four elements including planning, controlling, organizing and directing, and decision-making. However, some organizations may emphasize on the planning, controlling, and decision making as the key elements with organizing and directing forming part of the controlling component. One of the crucial parts of financial management in health care include financial reporting as part of management accounting that deals with external reporting to third parties in the sector including government entities and the public. An unincorporated healthcare provider may have to report to stockholders while taxing district hospitals have report to taxpayers among others. Therefore, financial reporting for external purpose must follow certain generally acceptable principles of accounting and general financial ethical standards.
The work before hand will give a summary of the four elements of financial management, the generally acceptable accounting principles and general financial ethical standards as well as detailing articles that address the financial reporting practices and ethical standards in healthcare finance.
Four Elements of Financial Management
The four elements of financial management include planning, controlling, organizing and directing, and decision-making (Baker & Baker, 2011). Planning entails identification of the various organizational objectives and establishment of the necessary strategies for accomplishing such objectives. The financial managers must devise strategies capable of leading the organization to achieve the set goals. Financial managers at healthcare facilities also ensure that every area in the organization follows the established strategies in accordance with the controlling element of financial management. One of the effective methods of fostering control in such organizations involves the evaluation of the feedback mechanism such as study of reports to ensure strict adherence to the set plans in the entire organization. In organizing and directing, the managers decide on how to use the organization’s resources for effective implementation of the established plans as well as supervision of the day-to-day activities. Decision making in financial management involves making of choices among the available alternatives with the primary tasks as analysis and evaluation of available information.
Generally Acceptable Standards
In financial reporting, the information communicated to external stakeholders is based on standards that establish generally accepted accounting principles. These principles entail guidelines, procedures, and practices that the healthcare facilities must use in recording and reporting the accounting information in its audited financial statements. In summary, the accounting principles include the basic accounting assumptions such as the economic entity, monetary unit, and time scale. The other accounting principles encompass the cost principle, full disclosure, going concern, matching, and revenue recognition principles, materiality and conservatism (Juan, 2007). Financial management has established codes of ethics which guide the whole process to ensure that high ethical standards. All financial managers must comply with the stipulated accounting principles as well as maintain professional competence, integrity, confidentiality, and objectivity. The code of ethics in accounting profession demands that accounting information be disclosed to outsiders. Other ethical standards revolve around antitrust laws, laws prohibiting insider trading, and honesty. Transparency and accountability form a major part of the ethical issues or standards in financial reporting.
Articles that Reflect Ethical Standards of Conduct and Financial Reporting Practices
“Responsibility-based A/R reporting. Healthcare Financial Management,” a scholarly article by Powel, Hindman and McMillian (2009) features application of the A/R reporting package in healthcare financial management. A/R reporting enables managers to monitor the various billing departments in the health sector to determine their performance. This method is in line with the element of financial management involving control that enables managers to determine the key areas in the organization that require attention in order to foster achievement of the organizational objectives. Calculation capability of A/R facilitates identification of the payer responsible for the increase in returns as well as showing potential problems related to cash flows. This enables transparency in keeping the track of the organizational financial performance.
Kodjababian, (2011), in his work, “Developing a management reporting package.” reflects various financial reporting packages used by managers in healthcare financial management that detail the various principles of accounting. Some reports featured in this article that can assist healthcare managers in reflecting the accurate performance of the organizations include gross and net collection rates, and total A/R, and days in A/R trends by major payer. These reports ensure that managers reflect the true financial performance of the organization in line with the principles of accounting and ethical standards.
The article “The disclosure of financial information via the internet by the 100 most wired healthcare system,” by Styles and Koprowski (n.d), features the accounting principle of disclosure. This principle provides that accounting information must be identified and explained in the financial statements so that the financial record will provide better information without misleading the users of the financial information. In addition, the article features the demand for accountability and transparency, which comprise some of the ethical standards in financial management. In this article, U.S. hospitals out of pressure from regulators, and professional bodies, have embraced internet as a way of fostering transparency and wider dissemination of financial information to all stakeholders. The significance of this move entails promotion of the application of the generally accepted principles of accounting and upholding of the ethical standards of financial management.
The article by Clarke (2005) emphasizes on ethical standards in financial management revolving around transparency and accountability. It outlines the importance of upholding accountability and transparency in healthcare organization as a way to remain in line with ethical standards of financial reporting.
The concept of financial management entails four elements including planning, controlling, organizing and directing, decision-making. Planning entails identification of the various organizational objectives and establishment of the necessary steps for accomplishing such objectives. Financial managers also ensure that every area in the healthcare institution follows the established strategy in accordance with the controlling element of financial management. In organizing and directing, the manager decides on how to use the organization’s resources for effective implementation of the established plans as well as supervision of the day-to-day activities. In summary, the accounting principles include the basic accounting assumptions such as the economic entity, monetary unit, and time period. Other accounting principles encompass the cost principle, full disclosure, going concern, matching, and revenue recognition principles, materiality and conservatism. The ethical standards in financial management revolve around issues of accountability, transparency, integrity, confidentiality, and honesty among others. The various articles featured in this assay emphasize on transparency and accountability in financial reporting and other methods such as A/R that facilitate adherence to the various accounting principles and ethical standards.
Baker, J., & Baker, R. (2011). Health care finance: Basic tools for nonfinancial managers (3rd ed.). Sudbury, MA: Jones & Bartlett Publishers.
Clarke, R. L. (2005). Transparency and accountability. Healthcare Financial Management Powell, L., Hindman, A., & McMillian, B. (2009). Responsibility-based A/R reporting.
, 59(8), 160. Healthcare Financial Management, 63(9), 54-60.
Juan, D. (2007). Fundamentals of accounting: Basic accounting principles simplified for accounting students. Bloomington, IN: AuthorHouse.
Kodjababian, J. (2011). Developing a management reporting package. American Thoracic Society. Retrieved from http://www-archive.thoracic.org/sections/career- development/practitioners-page/practice-tips/articles/tip16.html
Styles, A., & Koprowski, W. (n.d). The disclosure of financial information via the internet by the 100 “Most Wired” healthcare systems. Retrieved from http:// www. aaahq.org/GNP/…/Styles_Koprowski_MidGNP_2006.pdf
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