Hospital Organization

Topics: Health care, Hospital, Patient Pages: 12 (3111 words) Published: December 8, 2010

Hospitals continue to be the largest segment of the health care industry, measured by economic volume and delivery of a wide range of professional services.


The different segments of the health care delivery system provide various combinations of services. The specific combination offered depends on a variety factors that prevail in a location, including state and local licensing laws, reimbursement structures, availability of medical personnel and facilities, and the demographic details (such as age and industrial distribution) of the potential patient population. The unique aspect of the health care industry from an audit perspective is the health care delivery system – the revenue cycle. The other cycles are essentially similar to those in manufacturing or selling enterprises.

Services are generally described by a six-level classification. Those levels indicate, but do not strictly define, the type of organization, the level of medical treatment involved, or the severity of, or prognosis for, the medical situation. The levels are:

Preventive – Health education and prevention programs provided by business and other organizations, such as schools and family planning clinics.

Primary – Early detection and routine treatment of health problems, such as are often provided by physicians’ offices, industrial and school health units, and hospital outpatient and emergency departments.

Secondary – Acute care services, typically provided by medical personnel, through hospitals, using elaborate diagnostic and treatment procedures.

Tertiary – Highly technical services, such as for psychiatric and chronic diseases, provided through specialty facilities and teaching hospitals.

Restorative – Rehabilitative and follow-up acre, typically provided by home health agencies, nursing homes, and halfway houses.

Continuing – Long-term, chronic care, typically provided by geriatric day care centers and nursing homes.

The growing economic magnitude of the health care system has led to increased regulatory activities focusing on health care. This increase in regulation interacts with a growing demand for more health care and for increasingly technical and complex methods of providing it. The largest and most evident regulatory activity involves reimbursement by state governments. Other regulatory activities are concerned in varying degrees with the availability and quality of health care. There are continued initiatives by state government to link such regulations to reimbursement in order to enforce compliance.

The presence of multiple regulatory systems influences the demand for and the nature of professional accounting services required by health care institutions. Those systems often emphasize reporting requirements, and health care institutions tend to view compliance reporting as a major use of accounting data. Auditing services in particular are affected because the regulatory agencies rely heavily on the attest activities of the health care institution’s independent accountant.


Patient care is the essential function of a hospital. Other vital roles include medical education and research. Recently, many larger general hospitals have become total community health centers, providing a wide range of outpatient services in addition to traditional impatient care. One characteristic of the growth of the health center concept is the emergence of such diverse related organizations as real estate holding companies and medical management companies. These organizations are a response to changes in the reimbursement, regulatory, tax and financial environment facing hospital management. Such nontraditional organizational structures and patterns of activity are needed to provide adequate financial resources to support the delivery of health care by hospitals. Some observers see these changes as leading to major...
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