The Health Care Industry in the Business World - Essay Example

The business world is a competitive environment in which companies must be able to work as a cohesive unit in order to achieve high levels of efficiency. All departments with in organization must help each other and provide support in order to achieve the long term goals of a company. The accounting department provides a critical service to the entire organization about the financial status of a firm. The finances of a company are extremely important since they enable management to make decision about the operation of the enterprise. Accounting provides support to management regarding operating decision, helps evaluate the performance of the company and it provides support to perform planning for the future. Among the different techniques utilized by a company’s accounting department are budgeting, benchmarking, accounting information systems, auditing, and variance analysis among other techniques. The organization for which the analysis will be performed is major hospital chain the UK called NHS. The health care industry is highly regulated industry in which profit margins are tight. The management team of company’s in this industry must find ways to lower cost and increase efficiency in order to survive. NHS is a company dedicated to offering health care services. Health care providers depend a lot on the insurance companies to provide payment for the services offered to patients. A company such as NHS which has many facilities needs to stay on top on collection issues to maintain a positive cash flow. Accounting auditing systems can help NHS determine if the company has lagging account receivable and precisely identify which health care plan is not paying on time and if there are particular type of health care service associated with late payment such as surgery procedures. The information that can reveal by good auditing system can help NHS make better decision about it operation. Collections are not the only area that can benefit from such system. The company can obtain valuable information about the different income generating actions of the company and determine if there is any segment that is not profitable for the company. If for example the internal auditing determine that the dentistry department is not producing enough income to cover cost then the information can help support a management decision to fully shut down that income generating operation. Auditing can also help the executive of the corporation determine weaknesses in a particular hospital of the NHS chain. Quality at the point of issue becomes a concept that does not lend itself for definition. In quality related literature, attempts to define the concept are rarely addressed. How then can we assure what we cannot define? The Oxford dictionary gives two simple definitions, Quality...the degree of excellence of a thing and Quality Control...a system of maintaining standards in manufactured products by testing a sample of the output against specification (The Concise Oxford Dictionary 1993). A frequently used quality assessment tool is audit, which provides a respected key role in quality assurance. Examples of audits carried out are; level of pain on discharge, overall waiting times, patients satisfaction of their attendance in the department and the number of missed fractures. Rarely is the quality of the journey and specific aspects examined in a qualitative manner, for example, exploring if practice and approaches were evidence based. Within health care we tend to measure what is measurable rather than the important (Anon 1998). Another valuable technique that can provide tremendous information that can be used by the decision makers of NHS in order to improve their planning for the near, medium and long term future is budgeting. Budgeting is the creation of formal written report that specifies the plans of the company for a specified period of time (Weygandt & Kieso & Kimmel, 982). A budget is created according to the specification and recommendations of the accounting staff which works in allieance with management to create the companies projection of economic activity for the future. The typical accounting cycle is a one year term. Other budgeting projections are sometimes created up to 5 to 10 years into the future (Garrison & Noreen, 637). The support providing by the accounting staff in regards to the company’s future is based on their expertise knowledge of the company’s operation and with insider’s information regarding the specific control mechanism within the company and knowledge about the income behavior of the company and the industry. A budgetary deficit may occur at the end of the accounting cycle which is track by the accountant and if it occurs the accountant provides support to the management team on how to deal with the situation to remedy the problem (Larsen, 2003, p.733). A health care provider such as NHS which has multiple health care facilities which are subsidiaries of the main corporation needs to have in place an integrated accounting system which is ultimately control by corporate headquarters needs accounting information system to allow the corporation to stay on top of the economic progress of each business unit. The accounting information system (AIS) is the information subsystem within a firm that accumulates information from the entity’s various subsystems and communicates the information to the organization’s processing subsystem (Moscove & Simkin & Bagranoff, 1999). An AIS can help support managerial decision because it provides a way for management to access the financial information of the company and manipulate the data to create reports that influence the decision made by management. The accounting information system is a gateway to satisfy the information demands of a company. The information provided by this technique is an automated support service for management which may access the subsystem at any time to upload and extract information needed to make important decisions (Kieso & Weygandt, 1998). Benchmarking is another technique which is very useful since it allows accounting information to serve as support to perform managerial analysis. Benchmarking is defined as the continuous process of measuring products, services, and activities against the best levels of performance (Horngren & Foster && Datar). In January 1993 the NHS executive supported the piloting of benchmarking in respect of The Patient’ Charter. The focus on measurable outputs needed to be balanced with action to secure improved practice and innovation in softer areas such as privacy and dignity. Benchmarking is applicable to service delivery, management and professional processes at strategic as well as operational levels. In February 1994 the NHS Executives supported the benchmarking initiative throughout England to encourage wider application. The NHS was encouraged to participate in benchmarking through the certain of local and specialist national networks. The goal of the initiative was to contribute to the development of better practice and innovation through encouragement of benchmarking activities. In the mid 1990’s NHS Estates undertook a major benchmarking initiative in which significant number of NHS trusts took part. As well as collecting and comparing data about estates ans facilities they encouraged broader benchmarking for example of the patient’s journey through the hospital, health center or other providing facilities. When the literature is explored to establish the efficacy of benchmarking as a quality assessment tool, evidence does exist to support its role in this field. Four pieces of literature give account of the process and principles of benchmarking based upon actual experience, three being descriptive in nature and the fourth research. Bland (2001) and Ellis (2000) both descriptive articles, outline the process and journey undertaken by pediatric nurses in the North West region of England in 1994. The third descriptive article relates to the adoption of the process within NHS, again in the north west region but not directly related to the pediatric-benchmarking group as previously sited (Greenidge 1998). The fourth article relates to a randomized controlled trial (RCT) in America focusing on 70 community physicians (Kiefe et al 2001). When the three descriptive articles are critiqued, emerging themes are identified regarding the efficacy and benefits of the tool. These being the positive affects of the internal culture to effect practice development which was based upon external practice, and using and generating sound clinical evidence, which is department specific. An advantage of benchmarking is an acknowledgement of accessing this source of evidence. If an action research approach were formally used, this would then generate evidence with a higher rate of credibility. It should also be considered that the quantitative and qualitative data generated is by design, open to comparison to other NHS settings thereby increasing the generated evidences reliability. Variance analysis can be performed to determine if the current performance of the company in different operating and financial activities is doing with respect to the metrics in another period of time. For example the manager can utilized the variance report created by the accountant to determine if a company is improving its productivity or if there are inefficiencies in the company. A further concern of benchmarking as a quality assessment tool, as already stated, is the lack of higher levels of evidence to underpin practice development. The data and clinical evidence produced could be questioned for its reliability and academic structure. The descriptive work of Ellis (2000) and Bland (2001) identify the involvement of university lecturers and highlight the importance of using this group would concur that this is an important element in the process for the following reasons. First, this involvement makes inroads in the theory/practice divide, which the government acknowledges in Making a Difference (DoH 1999). Second, involvement from such academics may be used in the search, critique and application of academic papers and research. Finally, gaps in the theory and research required to support practice may be taken further to generate clinically required research. A technique that privides a way for management to optain valueble information regarding the performance of the company and its relative position in comparison with the industry is ratio analysis. There are companies such as Brad & Bradstreet the provide informaition grouped in in different equity size groups of firms in an industry which provide the induustry average for a number of profitability, leverage, efficiecy and productivity ratios. This information along with the financial ratio analysis perform by accounting and finance of NHS current performance can be used to analyze the competitive position of the company withing the industry. Management obtain from this financial technique information that can be used to support strategic managerial decision for improvement of weakness identified by the analisis and it can also be used for planning purposes. Example of a magerial applicatio use of a business ratio based on the accountant information is the debt to equity ratio. Based on the result of a high debt to equity ratio of 3:1 then the company has to make adjutemtn and reduce the level of debt since there is only one dollar of equity for every 3 dollars of debt. The financial statement of a company creating by the accounting staff the one of the most useful information provided to management. Other reports which are outstanding information to support decision are the code of ethics, the annual report, the corporate responsibility reports and the independent auditor report. The informaiton contained in these reports summarized most aspects of the operation to a company. A technique that privides a way for management to optain valueble information regarding the performance of the company and its relative position in comparison with the industry is ratio analysis. There are companies such as Brad & Bradstreet the provide informaition grouped in in different equity size groups of firms in an industry which provide the induustry average for a number of profitability, leverage, efficiecy and productivity ratios. This information along with the financial ratio analysis perform by accounting and finance of NHS current performance can be used to analyze the competitive position of the company withing the industry. Management obtain from this financial technique information that can be used to support strategic managerial decision for improvement of weakness identified by the analisis and it can also be used for planning purposes. Example of a magerial applicatio use of a business ratio based on the accountant information is the debt to equity ratio. Based on the result of a high debt to equity ratio of 3:1 then the company has to make adjutemtn and reduce the level of debt since there is only one dollar of equity for every 3 dollars of debt. The financial statement of a company creating by the accounting staff the one of the most useful information provided to management. Other reports which are outstanding information to support decision are the code of ethics, the annual report, the corporate responsibility reports and the independent auditor report. The informaiton contained in these reports summarized most aspects of the operation to a company. A cost analysis is a tool utilized in the accounting field that provides the development of data about the expenses related with different items and the precise cost of purchases, labor, machinary, depreciation and other overhead cost associated with an income generation activity. An application of accounting information to support a decision in a company is a cost structure analylis of the direct labor and indirect labor expenses of a company. A good report can influence the determination to terminate certain employee in different department in order to reduce costs, create a strealine workforce and optimize the profits NHS achieves in its business operations. NHS is a company that has to improve its communication and intergration of accounting techniques and procedures to improve their level of understanding of how different variables can affect the financial bottom line of a company and how these techniques are able to measure precisely the performance of a company in different operational areas. A conglomarate health care organization which has many units performing different and similar type services has to receice support from all business departments to produce information that enables a company to support the decision making process of the company which is perform by the executive managerial staff of NHS. It is difficult for a company to succedd if teamwork and productive synergies are not developed about the varios business units and operation departmetn of a company. Providing supporting services is the responsibility of professionals who work as business adminitrators. Within an organization one of the most influenctial deparments that prepares information regarding the economic activity in a company is the accounting staff. There are many techniques that manipulate information to convert raw data into valuable business reports and information that provides a compilation of the internal financial behavior of an organization as well as other information regarding the industry in which a company operates. References Anon (1998) Managing Personal and Team Effectiveness. Book 5 Buckingham, Open University. Bland M (2001) North West Clinical Practice Benchmarking Group: Principles processes and evaluation. Nursing times Research 6, 2, 581-593. Department of Health (1997) The New NHS, Modern, Dependable London, DoH. Ellis J (2000) Sharing the Evidence: Clinical practice benchmarking to improve continuously the quality of care. Journal of Advanced Nursing 3, 1, 215-225. Garrison, R. and Eric N. (2003).Managerial Accounting: Instructor’s Edition (10th ed.). 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