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Healthcare Accounting Questions - Assignment Example

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I agree with the statement that the ethical behavior of superior leaders in an organization is responsible for successfully developing a culture of regulatory compliance. This is because leaders are the main individuals who are responsible for formulating a culture in an…
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Healthcare Accounting Questions
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Healthcare Accounting Questions Healthcare Accounting Questions Questions a) I agree with the ment that the ethical behavior of superior leaders in an organization is responsible for successfully developing a culture of regulatory compliance. This is because leaders are the main individuals who are responsible for formulating a culture in an organization. Leaders formulate cultures in companies by adopting acceptable behavior that they then pass on to employees (Brown, 2005). The leaders may dismiss workers who act against the acceptable ethical behavior of complying with regulations. The reason for this is that leaders have the power to recruit and dismiss. Therefore, the fact that employees are juniors in their duties indicates that they have to comply with any regulation that their superiors formulate and implement. However, if superiors fail to act ethically in their duties, workers may also do the same because of lack of efficient guidance (Busch, 2008). Leaders are also responsible for ensuring that there is compliance with regulations because they control undertaking in organizations. Brown (2005) argues that senior leaders are in charge of controlling databases that contain valuable information. This means that these leaders are in charge of ensuring that there is no interference with the database systems. The leaders do this by limiting the number of parties who have access to various databases, using unique passwords, and limiting the individuals who may access various critical stores (Busch, 2008). This means that it leaders are careful in the way they handle the critical factors that they control in organizations, there will be full compliance with regulations. 1 (b) According to Levinson (2011), organizations should exclude the perpetrators of fraud from their organizations to prevent further damage. Levinson pronounced this action when he was presenting a speech about how to prevent fraud in health to the US senate finance committee. In his speech, the then inspector general argued that the office of the inspector general excludes individuals and organizations who commit fraud from the overall health program. Levinson also pointed out that organizations and individuals who conduct business with others who have been excluded from health programs risk being excluded or being charged hefty penalties. Busch (2008) argues that individuals and organizations that commit fraud should also be penalized to compensate for the losses that occur because of their disparaging actions. The penalties charged to such individuals should be equal to the amount of loss that they cause. The Center for Medicare and Medicaid services recovered $4.2 billion that was pilfered from the department of health through fraud in 2012 (CMS, 2014). Questions 3 There are numerous techniques of valuing inventory in an organization and they include Last in First out (LIFO), weighted average, and First in First out (FIFO) (McVay, Kennedy, & Fullerton, 2013). The first method that is the LIFO is the one where organizations calculate inventory by assuming that they sell the latest stock first. This method gives rise to a current market rate of the value of sales and a closing inventory whose value is based on the prices that prevailed at the start of the year (Gapenski, & Pink, 2010). This technique is favorable for companies that aim at reducing the taxes that they pay because it minimizes net profit when there is inflation. Organizations that also aim at maximizing their cash flow may also use this method (Lewis, 2012). First in First out (FIFO) is another technique of valuing inventory. This method assumes that a company sells the oldest stock before the latest inventory. The value of closing inventory in an organization represents the current market value of the goods (Lewis, 2012). Therefore, during inflation, the cost of sales is at its lowest and this leads to high incomes for an organization. This means this technique is favorable for companies that aim at maximizing their incomes; however, the technique leads to high income taxes. The weighted average method of valuing inventory involves finding the average value of goods at the beginning and end of a financial year. This leads to an average cost of closing inventory and cost of sales (Gapenski, & Pink, 2010). Companies that aim at standardizing the value of goods, taxes, incomes, and cost of sales may use this method. This is because this technique yields average values of all factors. Hospitals use pre-dominant techniques to value inventory and they include perpetual and periodic inventory valuation. The perpetual inventory valuation method involves maintaining a ledger that is used to record transactions involving stock. This technique ensures that the management of a hospital knows the stock that the institution has in hand at all times (Gapenski, & Pink, 2010). The periodic method of valuing stock, on the other hand, requires organizations to maintain a sales ledger. This method, therefore, keeps track of sales unlike the perpetual technique that tracks inventories (McVay, Kennedy, & Fullerton, 2013). These methods enable hospitals to manage their finances efficiently and to maintain books of account that are up to date. Question 4 (a) The hospital billing process involves numerous participants who include physicians, patients, insurers, and accountants who maintain medical records. Patients provide their personal billing information when they receive treatment so that they may be able to pay for the services they receive. The customer care representatives of the hospital also play part because they are the ones who record the billing information of patients in the hospital’s books (Ferenc, 2011). The accountants of the hospital, on the other hand, play the main role of analyzing the information that the patients provide. After the analysis, the management of the institution then claims payment from the responsible parties who may be the patients through cash. The accountants also claim payments from insurers and the government in case these institutions provide insurance to the clients. The management of a hospital plays the ultimate role of ensuring that accountants and customer care representatives carry out the process efficiently (Richards, 2010). 4 (b) The reports that enable management to receive payments from clients include the charge capture, patient care form, and the patient statement and invoice. The patient care form is the record where physicians record the services that they offer to patients while they are in a hospital (Ferenc, 2011). The charge report then enables the management to determine the cost of each service that they offer to customers. The charge form helps in formulating patient invoices and statements. The next report is the claim form that is addressed to third parties who are required to pay for the client. These third parties include insurers and the government (Richards, 2010). When these institutions pay the amount that is required, the account receivable ceases to exist. 4 (c) Knudson (2012) argues that internal auditors help in managing the revenue cycle by helping to close the gap that exists between clinical and financial activities. The auditors do this by understanding how every clinical activity may be translated financially. These individuals then check all the medical and financial records to ensure that they are properly recorded. The auditors also check for suspicious activities in the records such as fraud (Busch, 2008). For example, the auditor ensures that all services provided are recorded and billed. Internal auditors also check records to ensure that the hospital does not bill third parties for services that clients did not receive. Question 6 There are numerous users of hospital accounting information and they include investors, supporters, managers, the government, and creditors (Nowicki, 2008). Creditors are the organizations that provide hospitals with goods and services on credit. These users look for information such as paid and outstanding debts so that they may find out whether the debts they have not been paid are recorded accurately. Lewis (2012) argues that creditors also check the liquidity of the hospital to determine whether the company will fully settle their debt. The government also uses financial information of hospitals to find out the amount of income that they earn. The income then helps the state to determine the amount of tax to expect from hospitals. The government may also generally analyze financial information of hospitals when it wants to introduce new regulations (Nowicki, 2008). This is because the analysis helps the state to determine whether hospitals will be able to comply with the intended rules. Managers and investors also use hospital accounting information to determine the performance of the organizations. Investors analyze the information to determine whether it is viable to invest in the organization. The management uses the information to determine whether to continue running the business if it was created with an aim of making profits (McVay, Kennedy, & Fullerton, 2010). Other uses of the information include employees and the public. Employees analyze the growth of the company to determine whether there is opportunity for growing in their career. The public, on the other hand, may use the information for research and education (Gapenski, & Pink, 2010). The letter of attestation usually accompanies financial statements of hospitals. This letter aims at informing users of the information that the reports have been written based on the standards of attestation (Nowicki, 2008). This means that the information on the reports is based on real evidence. The letter of attestation contains phrases such as American Institute of Certified Public Accountants; this is because this organization formulated the standards of preparing financial records. Other phrases include attestation, standards, report, compilation, assurance, and update (Ferenc, 2011). These phrases are used to explain how the organization was limited in scope, may not be able to update the reports with activities that take place after the balance sheet date, and that the organization may not form an opinion about the report because of limitation of scope. References Brown, M. T. (2005). Corporate integrity: Rethinking organizational ethics, and leadership. New York: Cambridge University Press. Busch, R. S. (2008). Healthcare fraud: Auditing and detection guide. Hoboken, N.J: John Wiley & Sons. Cms, 2014. Fraud prevention toolkit. Centers for medicare and Medicaid services. retrieved from http://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/FraudPreventionToolkit.html Ferenc, D. P. (2011). Understanding hospital billing and coding. St. Louis, Mo: Elsevier Saunders. Gapenski, L. C., & Pink, G. H. (2010). Cases in healthcare finance. Chicago: Health Administration Press. Knudson, J. (2012). There’s no “I” in revenue cycle management. For the record. Retrieved from http://www.fortherecordmag.com/archives/061812p10.shtml Levinson, R.D., 2011. Preventing healthcare fraud; new tools and approaches to combat old challenges. US department of health and human services. retrieved from http://www.hhs.gov/asl/testify/2011/03/t20110302i.html Lewis, C. (2012). Demand Forecasting and Inventory Control. Hoboken: Taylor and Francis. McVay, G., Kennedy, F., & Fullerton, R. (2013). Accounting in the lean enterprise: Providing simple, practical, and decision-relevant information. Boca Raton: CRC Press. Nowicki, M. (2008). The financial management of hospitals and healthcare organizations. Chicago, IL: Health Administration Press. Richards, C. A. (2010). Coding basics: Medical billing and reimbursement fundamentals. Australia: Delmar Cengage Learning. Read More
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