Identify one entity from each health care financial environment identified in the Financial Environments Worksheet.
Write a 1,050- to 1,400-word summary comparing the financial environments of these three entities.
Address the following for each environment:
Describe the financial structure.
Which policies are unique to the financial environment?
Which financial management practices are prevalent in the financial environment?
Explain why effective financial management is more difficult in health care than in other industries.
Format your assignment according to APA guidelines.
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Sample Healthcare Finance Comparative Essay Introduction:
In every country throughout the world, patients access medical services from three different types of health care organizations. These organizations are classified into nonprofit, governmental or profit health care organizations depending on the stakeholders in each of the three categories. It is common to find health care centers located in each society throughout the world although their efficiency and capabilities differ according to a country level of development. These health care organizations include nursing homes, hospitals, and even dispensaries. It is important to note that health insurance organizations common in the health sector department can either be governmental, nonprofit or profit-oriented organizations(Friedlander, 2016). Hospitals serve as good examples of governmental health organizations.
The main aim why the government established the governmental health organizations is to remove the profit aspect in these institutions so that each citizen can access medical services that are basic human rights. Governments across the world run their hospital organizations in order to cater for this basic human right to its citizens. However, the profit, governmental and nonprofit organizations operate under very distinct financial environments despite all of them dealing with public health services. This is because each organization has its own aspects that define each organization structure and mode of operation. It’s also good to note that the accounting techniques in each of the above organizations are influenced by the components of their structure and characteristics.
The government financial environment entity
In these government-owned entities, the stakeholders in these organizations, who partly own the organization, prepare the final financial statements. These organizations are not transferred or sold to potential investors since the organizations do not have the required stockholders who might be interested in any remaining assets when the organization is sold or dissolved. On the other hand, these organizations do not invest in assets such as cars and buildings that generate revenue that makes the organizations lack a concrete strategy of evaluating speculated cash flow in their financial environment.
In many countries, the government-owned organizations offer services at a reasonable fee that is usually agreed upon between the hospital and the patients seeking their services. They also offer services at low prices as compared to the nonprofit and profit oriented organizations in the health care sector. Mostly, an insurance company such as the national insurance fund pays the extra fee charged to the patients if they are already enrolled in the health insurance program. This eliminates monetary records when the patients make the small payment. This money is not regarded as revenue since the organizations do not receive the whole amount of money from the patients.
Profit oriented financial environment
There is a huge difference between the profit and nonprofit health organizations since the main objective of nonprofit organizations is to serve the general public. In the profit-oriented financial environment, the organizations involved are always looking at appropriate ways to maximize their profits given that this the main objective of their operation. They require the profit to cater for their operations and meet their core objective in the health sector. In this financial environment, the patients seeking their services are charged distinctly from the nonprofit and government health care entities.
Health professionals in these entities receive their salary from other sources rather than the patients they serve. These third parties mostly include the government programs as well as health insurance firms. Inside these entities, patients are supposed to pay for the medical services they get and the health professional must produce a bill when seeking payment from the customer. The health professionals in these entities operated under a well-designed platform whereby the services they offer come with different charges. They operate under rates they have already signed an agreement on with the government and other health care insurance firms so that they can serve the public(Bray, 2012). This means that they operate under rules and regulations set up by the government.
However, the charges to patients in these entities are not realized as revenues since full payment is not made since the charges are usually negotiated upon. These organizations also engage in investments aimed at producing extra revenue to the health care entity. The assessment of financial records is carried to determine whether the revenue balances with the cost of operation. However, these entities are not exempted from taxes and they are liable to tax deductions, which have an impact on their financial statements. The ownership of these entities is transferable which facilitates the preparation of stockholder’s financial reports so that they can monitor the performance of their organization.
The nonprofit oriented organizations
Nonprofit oriented organizations organizations are not interested in making profits but aim at offering low prices for the services they offer to patients. In these entities, sick people are only charged reasonable fees when they seek their services. The health insurance firms working hand in hand with these entities usually adjust the bill charges so that any contractual allowances are deducted first before the remaining amount is paid off(Kohn, 2011). Sometimes, the organizations operate on charity basis since this allows patients to pay any little amount they can afford when they seek their services. These entities also charge the patients small amounts of money so that they can remain operational and earn low profits but they are authorized to raise adequate operating revenue and offer their services appropriately. On the other hand, these organizations do not record the money they receive from the patients as revenue since their services are not fully paid for. It’s also good to note that the entities’ assets and other resources are not transferable in the event that the organizations are no longer operational. They are exempted from tax deductions in their financial statements if they file tax exemption status before they prepare their financial statements.
However, the basic financial practices commonly considered in the financial markets include taxation and revenue records. Taxes, expenditure and revenue determination are three practices are highly used in the financial market. On the other hand, effective financial management is more difficult in health care than other industries because most people can only access the nonprofit and government organizations where money received from the patients is not recorded. This is because part of the charges payment is done by the health insurance firms and the sector itself is not that profit oriented such that anybody can be treated despite having little money. The sensitivity of the health sector also prevents proper revenues recording, unlike other industries. A patient is treated without the required amount of money and makes payment later. These factors make financial management more difficult.