Are you wondering what healthcare accounting is? Perhaps you’ve heard someone mentioning healthcare accounting, and you’re unsure what it is all about. In this blog, you’re about to learn all you need to know about health accounting and why it matters to healthcare centers today. But let’s kickstart this topic by answering this crucial question:
Why Does Healthcare Accounting matter?
Today healthcare accounting matters more than anytime ever. All healthcare care systems need someone to assess costs, draft budgets, organize financial reports, and help healthcare centers provide services without incurring costs. And only a healthcare accountant can do that.
As doctors work hard to save lives, they sometimes forget that taxes, salaries, and other expenses need to be paid on time. And guess who can handle that for them? A healthcare accountant! Here is what you need to know about healthcare accounting:
1. Healthcare accounting is unique
One major thing that makes healthcare accounting unique is dealing with intricate layers within the healthcare center. For instance, most healthcare centers work with government programs, research centers, insurances, and law enforcement. They all have cost implications that must be recorded, calculated, and balanced regularly.
2. It is An Accounting for Health Care Organizations
Another factor distinguishing healthcare accounting from conventional accounting is that it follows generally accepted accounting principles (GAAP). You may ask, what is GAAP? GAAP is the adopted accounting framework of the U.S. Securities and Exchange Commission and the Internal Revenue Service.
3. GAAP uses Accrual and Cash Accounting
A healthcare accountant can record revenue and expenses with this model before receiving or paying out. For instance, in a hospital delivery situation, GAAP will enable a health accountant to create credits and debits into the system once a hospital has the financial means to pay for medication.
The only similarity between entities and healthcare centers is that healthcare accountants also have to produce annual financial reports. Those reports will indicate the fiscal performance of the healthcare center.
Such reports will include financial statements, cash flows, balance sheets, statements of operations, and changes in net assets. If a private healthcare center needs to pay tax, an accountant will calculate that tax and file annual tax. However, if the healthcare is tax-exempted, the heath accountant will itemize it as ‘uncompensated’ community care benefits, such as charity care. Healthcare accounting has other similarities with traditional accounting; the other differences are that it focuses more on all the layers of healthcare itself. That said, healthcare accountants are still expected to do what accountants do, mainly recording transactions accurately.