Reporting Practices and Ethics
April 11, 2013
Financial reporting practices are an essential part of the health care process. Health care is a business and therefore needs to have a solid grasp on the four main elements of financial management of the organization, and an understanding of the ethical practices of health care finance as well.
According to Baker & Baker, the four main elements of financial management are planning, controlling, organizing and directing, and decision making (2011). The planning element is where the financial manager looks at the goals and objectives of the organization, and then plans out the best steps to get to their goals. Controlling means the financial manager takes those steps from the planning stage and makes sure they are being followed. If the organization is not successful in following the plans set forth, there may need to be changes made to the plan to make sure the necessary steps will lead to the financial success of the organization. Organizing and directing takes place in order for the financial manger to be making sure that the organization is using the most effective way to carry out the plans to ultimately get to their goals. The final aspect is the decision making, which takes place within the other aspects. The financial manager has to be very well informed about the situation in order to make solid decisions about the steps to take, what is working and what isn’t, and maybe a different approach to carry out the plan if it isn’t working. Decision making is an ongoing process, and it is not uncommon for decisions to have to be changed or adjusted depending on the success of the organization along the way (2011).
Generally Accepted Accounting Principles (or GAAP) provides a guideline of minimum standards of financial and accounting reporting (Paul, 2008). It is important for organizations to be aware of these guidelines in order to provide consistent and accurate information to their investors and stockholders in the company. It is not necessarily a law for all organizations, but government owned organizations definitely do have to adhere to the GAAP guidelines. It is a good baseline for all companies to have financial and accounting sheets that all follow the same rules, such as balance sheets, cash flow statements, income statements, etc. (2008).
It used to be in medicine that the doctors were more focused on treating the patients and getting healthy outcomes than making money in a “business”. This is no longer the case because health care is a business. With all of the new changes in health care reform, it is getting more and more difficult to receive the payment for service that the organizations need and deserve. This is causing some unethical behavior in some medical facilities. According to Elon, there are many physicians who are increasing their volume in order to create the revenue required to cover their expenses (2009). This is not necessarily unethical, but it does lead to patients feeling like they are being rushed or not taken care of in the way they deserve to be. Also, Medicare cannot keep up with the costs involved with taking care of an elderly person long term, so instead of being allowed to stay in a hospital or be moved to a long term care facility after an illness or surgery, they are being asked to go home too quickly in order to cut the cost since Medicare will not pay very much for the person to stay (2009). This is not an ethical practice because the patient should be the primary focus and be cared for as necessary, but many facilities cannot afford the costs associated with keeping them since they get hardly any reimbursement from Medicare and have to end up writing off a large portion of the person’s medical treatment.
Because of the way the health care industry has been changing over the last few decades, it may be tempting to “cheat the system” now and then to get more money for the services provided. Some organizations will charge more to patients with insurances that will pay more. Some might be tempted to use codes different from what they actually did in order to receive payment. Some might even charge a patient for something they did not have done to make up for another patient who they may not receive reimbursement for. All of these practices are unethical because it is not a clear and honest representation of where the money is going or what the patients are being treated for. In order to audit health care facilities for ethical behaviors, there is a method called the FARM method (Oetjen, Oetjen, & Rotarius, 2007). FARM stands for facility audit and review method and is in place to make sure the health care organizations are reporting and practicing ethical behaviors in reporting their financial information, the treatment of their patients and staff members, and so on. There are audits performed on the financial, management/performance, information systems, disaster, compliance and investigative procedures that take place in the facility (2007).
So even though it may be tempting to figure out a way to work the system in order to make more money as a health care business, it is not ethical and could result in major issues for the organization. It is important to keep in mind the GAAP and follow those standards in reporting financial information. Also, having a solid grasp on the four main elements of financial management will help to instill good ethical practices in the business to protect the overall ethics of the financial practices in a health care facility.
Baker, J.J., & Baker, R.W. (2011). Health care finance: Basic tools for nonfinancial managers (3rd ed.). Jones & Bartlett. Elon, R. D. (2009). The ethics of health care reform: Unintended consequences of payment schemes and regulatory mandates. Journal Of Health Care Law & Policy, 12(1), 63-80. Paul, S. (2008). Generally accepted accounting principles or GAAP: What does it mean?. Retrieved from http://www.legalzoom.com/business-management/running-your-business/general-accepted-accounting-principles-or Oetjen, D., Oetjen, R., & Rotarius, T. (2007). The facility audit and review method: Evaluating institutional ethics in health care organizations. The Health Care Manager, 26(4), 288.