Health Care Financial
Importance of legislation on health care accounting practices
The financial viability of health care organization comes from various decisions made by different people. They include health practitioners, boards, administrators, the community and political leaders. The decisions made result in the healthcare organization getting and utilizing resources to provide services, to incur roles, and to create revenues. The major role of accounting is to record all the transactions and provide a report to interested parties. The report should produce four major financial statements for the non profitable business oriented organization - health institutions.
According to Zelman( 2003), there are various issues in cost accounting for health care organizations. Focusing on the cost of product, rather than cost of the department, the value added costs instead of considering cost of department or product and the horizontal accounting considered in the hospital setting focusing on issue of providing quality services without spending money on things that have no value to the customer. These therefore require laws on accounting in health institutions.
With the increase of concern over health care costs, decision makers are paying attention to the facilitys‘operating expenses. The AICPS's health care committee in 1981 issued SOP to homogenized growth of diversified ways of healthcare financial reporting. The amended 1972 hospital audit guide provided guidance to determine when nonprofit organizations will be considered related to a health institution for financial statement purposes. This set forth the disclosure requirements for financial statement hospitals.
The availability of various ways of accounting for healthcare and the rapid development of new other ways of reporting the financial statements in health organizations, the laws put in place help prevent fraud activities thus reducing the burden on the third party payer i.e. the consumer.
Report provided by the general accounting office in US (1987) indicated that there were observed effect of major legislative changes on Medicare and Medicaid programs costs and cost to the beneficiary. Out of the 30 laws enacted by congress (1980 - 1986) 5 showed great effects on costs of the two programs, they contributed to slowdown in Medicare cost growth. (Medicare and Medicaid, 1987)
Some legislative changes led to increase of the costs by expanding program services. Although the changes in Medicaid recipient out-of-pocket costs couldn't be measured, it was observed that many states expanded their cost sharing requirements because certain legislations had been enacted.
There are two motives observed in he formation of local multihospital system; this is according to a study done by David and Mark in 1992. Cost reduction and reputation enhancement. The system may eliminate redundancies and reduce administrative costs. Integration may also lower the costs but have no reputation benefits.
References
Dranove, D., and Shanley, M. (1995): Cost Reduction or Reputation Enhancement as motives for Merger. Strategic management journal: Vol. 16, pages 55 -74.
Medicare and medic ail: (1987): Effects of Resent Legislation on Program and Beneficiary cost. Washington D C.
Steven, A.F. and David, M. W. (1999): Issue of accounting for health care. Jones & Bartlett publishers. Spain
William, N.Z, Maccue, M. and Milikan, A.R. (2003): 2nd ed. Financial Management of Health Care Organizations. Barlett Publishers.
William, O.C. (1989): Handbook of Health Care Accounting and Finance. Jones & Bartlett publishers.
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