Most people associate healthcare with the work of doctors, nurses, lab technicians, and other professionals in the medical field. But the full continuum of healthcare also involves its business side, including financial matters. Hospitals and other healthcare facilities need to generate revenue, manage their financial resources, and maintain transparency and accountability within their administration systems so that the front liner can continue to do lifesaving work. This is where the practice of healthcare accounting and the work of healthcare accountants comes into play.
In this article, let’s review the particulars of accounting for hospitals and healthcare providers in the Philippines, what duties are expected of a healthcare accountant, and what tools and technologies are currently being employed in the healthcare accounting sector. This should give you a better understanding of what healthcare accounting is supposed to achieve and why the financial side of a healthcare business is vital to its mandate of saving human lives.
What Does Healthcare Accounting Entail?
In essence, healthcare accounting is the practice of accounting that deals with collecting, analyzing, and reporting financial information that comes from healthcare businesses. These include hospitals, clinics, specialist offices, dental offices, orthodontic offices, diagnostic laboratories, homes for the elderly, and outpatient care facilities, to name a few.
The practice of healthcare accounting exists so that healthcare providers can be accountable for the quality of their care, given how much money flows in and out of their businesses. In light of healthcare crises like the COVID-19 pandemic, it’s become all the more important for these businesses to be adept at managing their financial resources and making sure they meet the standards of their regulators.
What Distinguishes Healthcare Accounting from Regular Accounting?
First off, healthcare accounting entails all the traditional processes that are associated with businesses in any industry. Included among these processes are cash disbursement, bank reconciliation, management of a petty cash fund, management of receivables, substantiation of expenses, and monitoring of payables and expenses.
Like other types of businesses, healthcare businesses in the Philippines must also implement accounting practices that are in line with the Bangko Sentral ng Pilipinas’ (BSP) Philippine Financial Reporting Standards (PFRS)/Philippine Accounting Standards (PAS). These serve as the Philippine equivalent of the United States of America’s Generally Accepted Accounting Principles (GAAP).
That said, there are indeed a few things that set healthcare accounting apart from regular accounting, and many of those differences have to do with the complexity and volume of the work to be done. At its root, healthcare accounting comprises a wide network of stakeholders that goes beyond the home healthcare institution, and this network includes patients, private insurance companies, health maintenance organizations (HMOs), government agencies that handle medical assistance, and suppliers for medicines and medical equipment.
On top of a large network and complicated accounts, healthcare accountants must pay attention to some unique nuances in their work that won’t be found in other industries. One example is the need to keep track of payments from multiple stakeholders, like the patients themselves and the insurance companies they hold policies with.
What Are the Duties of a Healthcare Accountant?
There are a lot of important tasks that a healthcare accountant has to do for the business that employs them. Key tasks include the following:
The accounting model that’s most common among healthcare providers is accrual accounting or the recording of expenses and revenues even before receivables or payouts are made from hospital bills and other receivables. This method is a good fit for healthcare facilities that anticipate weeks or even months to finalize payments, and thus, it needs a strong system for tracking debit and credit within longer timeframes. The healthcare accountant oversees this system and keeps track of when payments are finalized.
In relation to the item above, healthcare accountants also need to monitor their home institution’s various accounts receivable (ARs). They will have to track ARs from a variety of channels. For example, some healthcare services charge per diem, or per day payments, while others will rely on capitation, or fixed amounts per month or year as agreed upon by insurers and healthcare providers.
Depreciation of Assets
Healthcare businesses possess assets like property and capital equipment, which depreciate as years go by. Healthcare accountants are obligated to calculate each asset’s cost, determine its useful life or how long its utility can last, and factor the healthcare business’s subsequent depreciation expenses into their financial records.
Lastly, healthcare accountants in the Philippines are responsible for reporting a healthcare institution’s fiscal performance to regulators like the Bureau of Internal Revenue (BIR). They must keep track of accounting ordinances that are specific to the medical sector and ensure that remittances and financial records are settled accurately and in a timely manner.
What Healthcare Accounting Solutions Are Currently Available in the Market?
The work of a healthcare accountant is not easy. But in today’s data-driven and tech-driven world, there are a lot of new solutions that they can use to perform their healthcare accounting duties to a high standard.
Today’s IT solutions have extensive automation capabilities and employ electronic health records (EHRs) that are easy to file and cull information from. Some also come with built-in data analytics features that can generate instant financial reports, which will definitely help an accounting team glean the full financial picture behind a healthcare business’s operations.
Healthcare accounting is a complex endeavor, and there are a lot of things on the line for healthcare accountants. But good healthcare accounting practices will improve a healthcare business’s bottom line while allowing it to retain the highest standards for patient care. For the good that it will do to the fiscal health of such a business—which, in turn, will allow it to serve patients in need—a robust healthcare accounting system is worth investing in.