Happy Hospital Accounting Fundamentals

Happy Hospital can use its existing budgets to verify accurate predictions against performance reports. If their budgeting has been accurate, it concludes the accounting and financial systems in place are reliable. The importance of this information is that an organization may “perform financial analysis to improve decisions that affect the wealth of the organization (Finkler & Ward, 2006, p. 2).

High quality health care and the ethics around taking care of patients is often the underlying principle of a health care organization. Whereas financial viability is crucial, an organization may choose to incur a sustainable loss on a program because it contributes to society. The organization may seek to make up the loss on another more profitable program to meet patient needs.

Ethics are an important element in running any health care organizations. According to Gallup “While proper medical care is your paramount concern when visiting a medical clinic or hospital, you also expect to receive fair and ethical treatment from the staff. The accounting staff is responsible for coding and billing the products and services you receive during your visit. According to the American Institute of CPAs, ethics are made up of three components: independence, integrity and objectivity.” Ethics are important throughout the health care system, whether it is with patient care, record keeping, or reporting.

Accounting information relevant for Happy Hospital to consider when making decisions are “financial statements, in particular the operating statement (or income or activity statement or statement of revenues and expenses), the balance sheet (or statement of financial position), the cashflow statement, and the statement of changes in net assets (or statement of changes in owner’s equity)” (Finkler & Ward, 2007, p. 4).

According to Kaplan and Porter (2011) “But few acknowledge a more fundamental source of escalating costs: the system by which those costs are measured. To put it...