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Health Care Financial Accounting Essay

It is essential in any business, not just health care to understand how finances directly affect the growth, success and longevity of the business and all its parts. To truly understand how finance affects business it is important to gain knowledge and understanding of how the business generate revenue ,the cash flow of money that comes into the business, how bills are paid and money leaves the business and how investments are made in the business that can directly and indirectly impact the financial growth of the organization. In health care organizations there are different factors that come into play in the financial department but ultimately the process of generating revenue and paying debts are the same as any other business organization. The following items will be addressed in the review of Patton-Fuller financial statements: Annual report, including Patton-Fuller financial statements and relationship between revenue sources and expenses on Patton-Fuller’s financial performance.

How did the audited and unaudited financial statements differ? In general the audited reports are more formal than the unaudited reports. The audited report includes the company’s history, a CFO report, a message from the CEO, and a report of independent auditors. The audited and unaudited financial statements differ slightly in data in some areas for Patton- Fuller Community Hospital. Under the assets section in the numbers for patients accounts receivable numbers differ slightly from 2009. In 2009 on the unaudited report it provides the data of 59,787 and on the audited it has 58,787. This also leaves the total current assets and the total assets to differ slightly for 2009. On the audited report total current assets for 2009 are 127,867 and on the unaudited report it has 128,867. On the unaudited report the total assets for 2009 are 588,767 and 587,767 on the audited. Under the total liabilities calculations the retained earnings for 2009 differ slightly.

The data for 2009, on the unaudited report gives 126,564 while the audited report gives 125,564. What is the effect of revenue sources on financial reporting at the hospital? The effect of revenue sources on financial reporting at the hospital are that it is variable and could adjust as the reports get audited and could change year to year. Revenue comes from a few different sources and can be located on the financial statements and reports for the year. According to the information on the balance sheet, the sources of the “Other Revenue” are third party payers of patient bills. For the income statement, the revenue is used to calculate the operating income and ultimately the net income. The Net Income value is factored into our “Statement of Owners’ Equity” report to give us our end of the year value for retained earnings and stockholders’ equity. Net patient revenue is the first and foremost source of income for Patton-Fuller Hospital. Other sources of revenue come from borrowing monies, equity from stock or capital, and company assets. In 2008, the net patient revenue was $418,509 in the audited report.

The total other revenue for 2008 accounted for $2,805 in the audited report as well. These amounts did not change from the unaudited report. The net patient revenue for 2009 was $459,900, and other revenue was $3,082 for that year. For Patton-Fuller Hospital, the income statement shows the total revenues increased by $41,668 from 2008 ($421,314) to 2009 ($462,982 Upon further reading on the reports we find that the total expenses goes over the amount of revenue the hospital is bringing in. The total expenses for 2008 were $437,424 and for 2009 it was $463,293. ). However, since expenses continued to exceed the total revenues, our net income remained a net loss in 2009 ($373). So the overall effect of the sources on the hospital is that the hospital is going in debt because they cannot match revenue with expenses as part of the GAAP (Generally Accepted Accounting Principles). How are the hospital’s revenues and expenses grouped for planning and control?

The Patton Fuller Community Hospital’s statement of revenue and expense is grouped for planning and control as it is itemized out by the different types of income and expenses. Patton-Fuller Hospital groups all revenues into two categories for planning and control, the first category is net patient revenue, and the second is other revenue. Other revenue can be broken up into sub categories like revenue from assets, capital, and stock but I believe the idea of bunching them together is so it is easier to stay organized. This gives managers a clear picture as to what type of services are receiving the most income and causing the most expenses and designed to make it easier to calculate the total net revenue from the two main sources. Expenses are broken up a little further in the financial statements; expenses are broken up by salaries and benefits, supplies, physician and professional fees, utilities, other expenses, depreciation & amortization (“non-cash” expenses), interest, and provision for doubtful accounts. Provision for doubtful accounts would also include any changed due to being audited.

These are broken up further to show where the money goes each financial period for future planning and helping to predict future expenses; this information can assist a manager in planning future budgets and in making financial adjustments to increase revenue and decrease expenses. The total expenses for 2008 were $437,424, and for 2009 they were $463,293. In 2008 the difference between the revenue the hospital brought in versus what their expenses were was $16,110. The difference in 2009 was $311 from what there revenue was verses what their expenses were. The detailed way in which the expenses are laid out allows an individual to clearly see where finances are going and highlight any warning signs that a certain department or service is costing the hospital too much and needs to be re-evaluated.

Conclusion

After reviewing these statements it is a clear picture that Patton-Fuller Hospital had a undeniable difference in the 2008 versus the 2009 financial statements. The numbers and financial ratios show a decrease in revenue and no improvement for the overall growth of the hospital. A good practice for the hospital’s financial managers is to regularly review the financial reports and statements to help project and plan for the differences in the audited and unaudited reports for Patton-Fuller hospital.

References
Apollo Group. (2013). Patton-Fuller Community Hospital Virtual Organization [Multimedia]. Retrieved from Apollo Group, HCS405-Health Care Financial Accounting website.


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