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 – NURS 6211:Week 3: Foundational Accounting Concepts and Financial Statements

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 NURS 6211:Week 3: Foundational Accounting Concepts and Financial Statements

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

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

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. NURS 6211:Week 3: Foundational Accounting Concepts and Financial Statements.

 

MORE INFO 

Foundational Accounting Concepts and Financial Statements

Introduction

Accounting is the process of recording and reporting financial transactions, income and expenses. The accounts are reviewed by accountants to check for completeness and consistency, as well as to ensure that all transactions have been recorded correctly. This helps a business manage its financial resources more effectively.

Business activities are based on a system of financial statements.

The foundation of business activities is a system of financial statements. These financial statements are used to make decisions, communicate with others and assess performance. Financial statements provide a structured set of information about the company’s operations, including revenue, expenses and cash flows.

Accounting systems and information the accounting system produced has to be accurate and meaningful.

The accounting system produced by a company has to be reliable, accurate and complete. It also needs to be relevant and timely so that it can be used in the decision-making process of the business. A good accounting system should also be understandable by all employees as well as stakeholders within the organization.

Accounting systems are developed using various tools such as spreadsheets, databases etc., which help them achieve their objective of providing users with information about an entity’s financial health at any given point in time (e.g., month-end).

Governance and oversight requires that accountants and auditors adhere to strict standards for ethical practices.

Accountants and auditors have to adhere to strict standards for ethical practices. These are set by the profession, enforced by the profession and enforced by the public. The government also has an interest in ensuring that accountants and auditors adhere to these standards.

Accounting Data is constrained by assumptions, principles, and constraints.

You have to have something to work with.

You have to make assumptions, principles and constraints.

Accounting is a well defined discipline with clear governance applied to its processes.

Accounting is a well-defined discipline with clear governance applied to its processes. This means that accountants and auditors adhere to strict standards for ethical practices, including the following:

• The need for independence from management

• The requirement that disclosure be made in such a way as to ensure protection of confidential information and the protection of public trust in accounting systems

Conclusion

Accounting is an important part of finance and business. It helps to ensure that the financial information used by managers and investors is reliable, understandable, and as accurate as possible. Accounting also provides a foundation for understanding how businesses operate, which in turn can help companies improve their productivity or efficiency. By applying these concepts to your own career goals or professional interests, you will be well on track toward achieving them!