People hardly co-relate accounting with the healthcare industry. As a matter of fact, the accounting department is an integral part of any organization or practice setup where transactions are involved in terms of collections and expenses.
Like in any other industry, revenue cycle is the lifeblood of a healthcare setting as well. Hospitals and clinics also need to pay their bills, meet payroll requirements, and boost financial performance to be able to continue providing healthcare services to the patients. So, it all boils down to a sound financial management, which is essential for the smooth running and cost-effectiveness of your practice’s operations.
Let’s dig deep into the details and take a closer look at the importance of accounting in the healthcare industry.
The function of Revenue Cycle Management best explains the importance of and need for accounting in a healthcare setting. No hospital, whether for-profit or non-profit, can continue to exist without funds. Steps to reduce expenses, ensure higher savings, streamline accounts receivables management and claims approvals are only but a few critical functions that help medical facilities to run their operations and processes smoothly.
This is where accounting in the healthcare industry comes in that enables doctors to manage the patients’ claims, payments, bills, expenses, income, cash flow, tax planning, and budget requirements. The probability of errors and inaccuracy in bookkeeping and financial reporting becomes high without an organized and systematic healthcare accounting framework and procedures.
The technological disruption and regulatory requirements have found numerous applications in healthcare. The frequency with which the changes occur in Medicare coding and how electronic medical records are being increasingly adopted, a solid understanding of medical accounting services, procedures, and practices are very much called for in the health sector.
Besides, the Affordable Care Act’s time-to-time additions of new provisions end up establishing new health insurance rules, impacting the insurance plans’ calculations and their premium structures. Furthermore, the accounting department within a medical facility needs to keep itself abreast of and follow the changes in the guidelines by Generally Accepted Accounting Principles to avoid fines and charges.
To date, most healthcare services are addressing the medical cost trends or focusing on increasing effectiveness and efficiency in administrative functions (e.g., revenue cycle management) for optimized clinical solutions and better health and wellness administration. Cost-effectiveness is also crucial from the viewpoint of a health insurer. Avoiding higher costs, they make sure the physicians follow their guidelines with respect to cost-effective medical tests and drugs. Here is where the role of the accounting department becomes crucial. A robust healthcare accounting system can help produce the desired result with proper budgeting, reporting, and analysis that paves the way for informed decisions.
Inadequate medical accounting services can make a muck of the hospital’s revenue cycle management. Some missed entries of the payments received from patients or paid by insurance companies can land a hospital in deep trouble. Such blunders can result in costly delays in generating the medical facility’s revenues to pay for its bills. Such is the importance of accurate and timely bookkeeping and accounting in the healthcare industry – leaving a trail of breadcrumbs for each payment received or to be received on a regular basis. Only a trained and competent accounting staff would be able to stay on top of your bookkeeping on the go.
Crunching numbers can become a guessing game if different departments do not share the relevant information. Consequently, this can leave a lot of room for errors to occur, the worst scenario being the blind-sighted decisions based on one-dimensional view. The best-informed decisions cannot be made in a vacuum.
An appropriate healthcare accounting framework in the healthcare settings tends to break the information silos and get a 360-degree view of the business by pulling in all the staff members’ contributions. Frequent interactions of all the major stakeholders involved ensure accurate and comprehensive financial reporting, allowing the accountants to stay on top of their reporting in collections, expenses, and accounts receivables.
A medical facility needs to follow a specific workflow function seamlessly and smoothly. From claims’ processing to tallying and tracking the records and to falling behind on follow-up of the claims, the entire process needs an efficient and robust workflow mechanism among the staff. Any error or oversight in any step of the process can cost the medical facility substantial losses in terms of time and money. No wonder such a well-coordinated workflow system asks for sound knowledge and proficiency in accounts and a proper healthcare accounting department in place.
See Also: How to Hire An Accountant for Your Business?
To sum up, the accounting function within the healthcare facilities work more or less on the same structure and model as business organizations. Hence, the significance of accounting in the healthcare industry to meet financial performance goals and staying afloat cannot be overlooked. For making their entire operations viable, medical practitioners must make sure that the healthcare accounting practices and operations in their medical office are right on the mark, ensuring accuracy, timeliness, and efficiency.
Having said that, doctors running relatively small healthcare setups or clinics prefer to oversee and supervise their personnel, including their accounting staff. Not trained in the financial aspects of running a medical facility, the healthcare providers find the practice to be a hard nut to crack.
At Monily, we offer quality healthcare accounting and bookkeeping services to help your practice setup reduce operational costs and optimize financial performance, thus saving you time and helping you manage your healthcare operations optimally with ease.
Book a timeslot with our consultant today to learn more about our medical accounting services at Monily.
Farwah is the Product Owner of Monily. She has an MBA from Alliance Manchester Business School, UK. She is passionate about helping businesses overcome challenges that hamper their growth, which is why she is working at Monily to facilitate entrepreneurs to efficiently manage business finances and stay focused on growth.