Health Care Finance Principles

Topics: Balance sheet, Asset, Finance Pages: 3 (859 words) Published: July 4, 2011
Health Care Finance Principles
The cost of health care continues to rise. The United States is a leader in health care spending according to Barkey (2008). The uninsured or underinsured population is rising. In 2003, an estimated 170,000 people did not have insurance in Montana (Barkey, 2008). Every dollar and every resource needs to be managed appropriately and accounted for accurately. The Financial Accounting Standards Board (FASB) established generally accepted accounting principles (GAAP) for businesses including those providing health care (Finkler, Kovner, & Jones, 2007). GAAP are the rules and requirements used to prepare the four primary financial statements according to Cleverly, Song, and Cleverly (2011). Common GAAP are: accounting entity, money measurement, duality, cost valuation, and stable monetary unit (Cleverly, Song, & Cleverly, 2011). The following is a discussion of the common GAAP in relation to heal care. The accounting entity is the owner of the financial information (Cleverly, Song, & Cleverly, 2011). The accounting entity is a specific name and perhaps part of a larger organization, like an oncology unit of ABC Hospital. A physician may be practicing alone or in a group. A hospital may be one of many hospitals in a large network. The hospital may be part of a university. The accounting entity must be specific to avoid confusion and errors in financial record keeping. When calculating the budget for a specific unit of the hospital that unit needs to be identified. Figures should come from the unit identified. Borrowing and sharing among separate cost centers can cause confusion and an unbalanced budget. Money measurement is the economic resources and obligations and their changing levels for the accounting entity (Cleverly, Song, & Cleverly, 2011). Economic resources are the assets needed for the entity to function. Buildings, equipment, and supplies are essential to the entity’s economic growth (Cleverly,...

References: Barkey, P. M. (Spring 2008). Challenges Ahead for Health Care Finance. Montana Business Quarterly, 46(1), 22-25.
Cleverly, W. O., Song, P. H., & Cleverly, J. O. (2011). Essentials of health care finance (7th ed.). Sudbury, MA: Jones and Bartlett Learning.
Finkler, S. A., Kovner, C. T., & Jones, C. B. (2007). Financial management for nurse managers and executives (3rd ed.). St. Louis, MO: Saunders Elsevier.
National Institutes of Health. (2011, May 19). NIH and the American Recovery & Reinvestment Act (ARRA). Retrieved from
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