NURS 6211: Finance and Economics in Health Care Delivery | Week 3

It is a typical day at Greenwood Hospital in upstate New York. A nurse enters the supply closet and takes out some bandages to replace old ones on a patient who was admitted from the surgical ward several hours ago. This is a simple event that happens thousands of times a day in thousands of hospitals, but have you ever stopped to consider how that task is reflected in the accounting records of the organization? How is money allocated to restock the supplies? How is the organization reimbursed for the cost of those bandages?

This week, you are introduced to basic accounting concepts that impact daily operations within health care organizations.

Learning Objectives

Students will:

• Distinguish between accrual accounting and cash accounting
• Analyze the role of cash in organizations
• Apply basic financial calculations using information found on an income sheet and balance statement

Learning Resources

Note: To access this Week’s required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

Required Readings

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and Bartlett Learning.

• Chapter 4, “Assets, Liabilities, and Net Worth” (pp. 33-36)In this chapter, you are introduced to the meaning of assets, liabilities, and net worth. You explore the relationship between the three and how they must be balanced if an organization is to be successful.
• Chapter 6, “Expenses (Outflows)” (pp. 47-54)The focus of this chapter is expenses and how they differ from costs. It highlights how costs should be reported and how expenses can be grouped for more effective planning and control.
• Chapter 9, “Understanding Inventory and Depreciation Concepts” (pp. 81-93)This chapter examines the relationship between inventory and the cost of goods. It demonstrates how to calculate inventory turnover and product depreciation.
• Chapter 11, “Reporting as a Tool” (pp. 119-125)This chapter describes the basic financial reports and how they are used in financial decision making. The four key financial statements are the balance sheet, the statement of revenue, and expense, the statement of fund balance or net worth, and the statement of cash flows.Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

Retrieved from the Walden Library databases.

• Chapter 2, “Health Care Financial Statements” (pp. 25–86)This chapter describes the shared four basic financial statements of all organizations. The authors relate the basics to business-oriented and non-for-profit health organizations.
• Chapter 3, “Principles and Practices of Health Care Accounting” (pp. 87–120)This chapter explores the accounting practices and principles of health care. The authors detail the rules for recording transactions and the process of recording and developing financial statements.
• Chapter 4, “Financial Statement Analysis” (pp. 121–186)This chapter goes into detail about the three types of analysis used in financial statements of health care organizations: horizontal analysis, vertical (common-size) analysis, and ratio analysis. This chapter also explains the categories of ratios and how to apply them.

Document: Week 3 Application Assignment Template (Excel spreadsheet)

Required Media

Laureate Education (Producer). (2012). Basic financial statements. Baltimore, MD: Author.

Note: The approximate length of this media piece is 10 minutes.

In this video, William Ward describes the basic financial statements with which nurse managers should be familiar. He highlights the key components for each statement and demonstrates how they are used.

Basic Financial Statements Transcript (PDF)

Laureate Education (Producer). (2015). Week 3 Application Assignment Tutorial: Ratio Calculations. Baltimore, MD: Author.

Optional Resources

Hurlock J. (2012). Get to know Excel 2010: Create your first spreadsheet. Retrieved from https://support.office.com/en-us/article/get-to-know-excel-2010-create-your-first-spreadsheet-3323c699-ca68-448e-ab44-12b8e348bbf5

Goodwill Community Foundation, Inc. (n.d.). Excel 2010. Retrieved from http://www.gcflearnfree.org/excel2010

Discussion: Foundational Accounting Concepts Paper

Although it is important to be familiar with foundational accounting concepts and to understand how they are calculated, it is equally important to recognize how the information from these calculations fits into the larger picture of daily actions in hospitals. Consider the simple task of taking patients their dinner trays. Think of all of the different costs that are involved. The dietitian must be paid, as well as the food handlers. The food has to be purchased as well as the trays and utensils. Trays must be delivered, picked up, and cleaned. A cost is incurred at each stage.

In this Discussion, you consider how the costs of the daily tasks performed by nurses are accounted for and impact cash flow.

To prepare:

• Review this week’s Learning Resources focusing on the difference between accrual accounting and cash accounting. Conduct additional research as needed until you are confident that you grasp the distinction between the two approaches.
• Consider why you would select one approach over the other and the effect it would have on financial decision making. Determine how you could explain these concepts to someone not familiar with accounting.
• Select a task you might perform daily, or an item that you might use daily in the workplace, and determine where the cost should appear on a balance sheet.
• Reflect on the role of cash in the financial operations of an organization. How could cash flow issues impact your own organization (or one with which you are familiar)?

By Day 3

Post an explanation of the difference between accrual accounting and cash accounting, and when each might be used. Then, describe a task you might perform or an item you might use daily, and explain where the cost should appear on a balance sheet, and why. Finally, assess how cash flow issues could impact your own organization (or one with which you are familiar).

Read a selection of your colleagues’ responses.

By Day 6 Discussion: Foundational Accounting Concepts Paper

Respond to at least two of your colleagues on two different days using one or more of the following approaches:

• Ask a probing question, substantiated with additional background information, evidence or research.
• Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives.
• Validate an idea with your own experience and additional research.
• Expand on your colleagues’ postings by providing additional insights or contrasting perspectives based on readings and evidence. Discussion: Foundational Accounting Concepts Paper

ADDITIONAL INFORMATION;

Finance and Economics in Healthcare

Introduction

Healthcare costs have been a hot topic in recent years, and it’s important to understand how healthcare is financed.

Introduction

In this section of the paper, you will be introduced to the topic of finance and economics in healthcare. You will learn that healthcare is an industry that has been growing rapidly over the past few decades. There are many benefits to this growth, but also some challenges for both patients and providers.

The purpose of this article is to provide background information about how these systems work so that you can better understand your own health care experience as well as how others’ experiences may differ from yours.

Who is covered?

Medicare and Medicaid are the two main public health insurance programs. They cover all Americans who meet certain requirements and live in the United States, or its territories and possessions, who are 65 years old or older.

Private insurance is provided by employers to employees who work for them and their dependents, including spouses and children under age 26 (if they’re covered by your parent’s plan). If you’re self-employed, you can buy private coverage through one of several options: an individual policy; a group plan with an insurer; or through a high-risk pool if you don’t qualify for standard coverage.

How is healthcare paid for in the U.S.?

Healthcare is financed by the government, employers, and individuals. The government pays for Medicare and Medicaid; employers pay for health insurance for their employees; individuals may also contribute to their employer’s plan or pay out-of-pocket.

The following is a brief overview of how healthcare is financed in the U.S.:

-Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and those with end-stage kidney disease. -Medicaid is the joint federal-state program that pays for medical services for certain low-income individuals and families. -Most Americans get their health insurance through an employer or purchase it directly from an insurance company.

Which groups are covered by Medicare?

Medicare is a federal health insurance program for people over 65, who have worked long enough to qualify. It provides coverage for inpatient hospital care and skilled nursing facility care (including hospice), outpatient therapy services such as doctor’s visits, lab tests and certain medical equipment. Medicare also covers most prescription drugs that are covered under Part D of the Affordable Care Act (ACA).

Medicare Part A covers hospital stays of 30 days or more; skilled nursing facility care for three days or more; hospice care at home for two weeks or longer; home health services provided by personal attendants through a home health aide network managed by each state’s Medicaid agency; ambulance transportation within 100 miles of a patient’s residence where medically necessary—not including air ambulance services—and durable medical equipment purchased from manufacturers approved by CMS

What is the difference between Medicaid & Medicare?

Medicaid is a state-run program, while Medicare is funded by the federal government. Medicaid covers low-income people with disabilities and their families (including children) who have little or no income and/or resources. In contrast, Medicare provides insurance for those over 65 years old who are not eligible for Social Security benefits.

Medicare was created in 1965 as part of President Lyndon B Johnson’s Great Society program to provide health coverage for Americans over age 65 with low incomes or limited assets due to physical disabilities or long periods without work due to chronic illness or disability; however its scope has expanded since then so now it also provides coverage for people under age 65 with certain medical conditions such as end stage renal disease requiring dialysis treatment; heart failure requiring hospitalization several times per year; serious cancer requiring chemotherapy treatment 3 times per week plus radiation therapy daily plus other medications as needed (elderly).

What is the Affordable Care Act (ACA)?

The Affordable Care Act is a federal law that aims to expand health insurance coverage. It was passed in 2010 and became effective in 2014. The ACA has two main goals:

• First, it requires all Americans to have health insurance coverage or pay a penalty. This includes most individuals who are self-employed or work for small businesses with fewer than 50 employees; households where one person is age 19-26 and living at home with parents; families with incomes above $97,000 if they don’t qualify for premium subsidies; Medicaid recipients who make less than 138% of poverty level (about $15,000 annually); undocumented immigrants whose income falls within certain limits (this group cannot apply online).

• Second, the Affordable Care Act expands access to affordable care by making it easier for people without jobs to get government help paying premiums on their own behalf—or through their employers if they work for large companies which offer health benefits through their payroll departments instead of directly administering them directly themselves.

How many uninsured are there in the U.S.?

The uninsured are more likely to go to the emergency room for care, which can be expensive and time-consuming. This is because they don’t have access to health insurance, which means that they may not have access to coverage at all.

Uninsured people also tend to be in poorer health than those with private insurance coverage or public programs like Medicare or Medicaid (the nongovernmental program that provides health care services). They’re more likely than others who get medical treatment from hospitals or clinics even if they have insurance to die within a year after being diagnosed with an illness or injury; this lack of timely treatment can cost lives by increasing mortality rates among uninsured patients who otherwise might’ve been saved had they received better care sooner.

What services are covered?

If you’re enrolled in a health plan through your employer, the ACA requires that it cover a list of services. These include:

• Mental health services (this includes counseling and therapy)

• Preventive care (i.e., screenings for cancer and diabetes)

Maternity services (this includes prenatal care and childbirth) Emergency care

The ACA also requires that insurance plans cover a list of preventative care services. These include:

Adults: -Wellness visits (such as annual physicals) -Screenings for cancer, diabetes and high cholesterol -Breastfeeding support.

Are there any costs to patients?

The patient is responsible for all costs associated with treatment. This includes the cost of doctors’ visits, medications and tests. Patients also have to pay for their own transportation when they travel to get care at an out-of-network provider.

The healthcare system in America is not free; however, it is not as expensive as many people believe it to be. In fact, according to a study by the Kaiser Family Foundation (KFF), only 3% of Americans spent more than 10% or 20% of their total household income on health care costs in 2017.*

What are out-of-pocket costs?

Out-of-pocket costs are the costs that patients pay directly to a healthcare provider. In addition to co-payments, deductibles and coinsurance (which is a percentage of your total bill), these may include copays for prescriptions and services like physical therapy or dental work.

Insurance companies and employers may also offer plans that cover some of the cost of prescription drugs, which is called a co-pay. Co-payments are fixed amounts that you pay each time you fill a prescription.

How much do consumers pay in out-of-pocket expenses?

How much do consumers pay in out-of-pocket expenses?

The average American household spends $1,505 annually on health care costs. The most common type of health plan is a high deductible plan like the one you have now or one that has a lower deductible but is more expensive because it includes more benefits. This means that if you have an annual medical bill larger than $5,000 (which happens often), then you will pay most of your deductible before insurance kicks in to cover anything extra. Other types include catastrophic coverage and non-catastrophic plans where there are no limits on how much people can be charged during any given year.

What happens if I don’t have health insurance coverage or can’t pay my medical bills?

If you don’t have health insurance, your employer may be required to provide coverage for you. In this case, you’ll pay a monthly premium and the cost of any uncovered services that are not covered by your plan.

If you can’t afford to pay for all of your medical bills at once and need help paying them off over time, hospitals will often allow patients with low income or who are uninsured to make payments on their bills through a payment bond (also known as an advance). This type of arrangement gives patients more time than they might otherwise have in order to pay their medical expenses while also giving hospitals a chance at recovery if they’re unable to recover all their money from these types of arrangements; however, some hospitals require high interest rates from borrowers before making loans available because they know that many people won’t be able manage such high rates without being able find another source for funding their debt obligations first!

Healthcare costs have been a hot topic in recent years, and it’s important to understand how healthcare is financed.

Healthcare costs have been a hot topic in recent years, and it’s important to understand how healthcare is financed. A big part of the problem is that healthcare is expensive and there are no easy solutions.

The healthcare industry is the largest in the United States, accounting for one-fifth of our economy. In fact, health care spending has doubled since 2000, and it’s projected to continue growing at an average rate of 5% per year through 2023.

Conclusion

Healthcare costs have been a hot topic in recent years, and it’s important to understand how healthcare is financed. The Affordable Care Act (ACA) has made it easier for Americans to get health insurance coverage through private insurance companies or Medicaid programs. However, as more people enroll in these plans there will be less money available for hospitals and other healthcare providers. This means that there will likely be fewer resources available for those who need them most – low-income individuals who don’t have access to coverage through their job or employer because they often have higher salaries than those covered under Medicare Part A or Medicaid programs