Health Care Case Study: Financial Statements Essay

Custom Student Mr. Teacher ENG 1001-04 11 June 2016

Health Care Case Study: Financial Statements


“An empowered organization is one in which individuals have the knowledge, skill, desire, and opportunity to personally succeed in a way that leads to collective organizational success,” (Covey. 2011). Financial management within a health care organization is crucial to the success and stability of the organization. In this summary financial information on Patten Fuller Hospital will be revealed. Specifically, the differences between audited and unaudited statements and reporting on the hospital’s ratios will be included. Information related to the relationship on revenue sources and expenses will include how the hospital revenues and expenses are grouped for planning and control.

Audited and Unaudited Differences

During the years of 2008 and 2009 the Patton-Fuller Community Hospital’s balance sheet had some differences with the patient accounts of about $1,000,000. The discrepancies between the two amounted to $1,000,000; these discrepancies would be the audited statement that equaled to $58,787,000 and the unaudited statement in 2009 that amounted to $59,787,000 (Patton-Fuller Community Hospital, 2011). Then there were discrepancies on the Statement of Revenue and Expenses of about 1,000,000 during 2009. The discrepancies between the two that amounted to $1,000,000 would be the audited statement that equaled to $14,797,000 and the unaudited statement in 2009 that amounted to $13,797,000 (Patton-Fuller Community Hospital, 2011). The net income for the audited statement is 373,000 and, the unaudited is 627,000.

Effect’s of Revenue Sources on Financial Reporting

A company’s revenue comes from a variety of sources, including the sales of goods interests on loans, and income from renting or leasing. Accountant’s first record revenue in informal accounting ledgers to track capital as it comes into the company. Information ledgers are transferred to more formal, official financial statements. The income statements, balance sheets, retained earnings statements and statements of cash flows are the four basic types of financial statements affected by revenue sources.

Revenues and Expenses Grouped for Planning and Control

The hospitals revenues and expenditures are plans and cohesively to track revenues and expenditures efficiently. The two main categories of revenue are, nonrevenue producing, and revenue producing. The nonrevenue producing services have two subdivisions, general services, and support services. General services are services, such as maintenance, and dietary. The support services are administrative costs relate to employee services, such as salaries, and employee welfare services. Revenue producing has two groups: nursing services and other professional services. Nursing services has five cost centers ranging from the intensive care units to the operating room. Professional services have 15 cost centers, such as emergency room and pharmacy. These cost centers correlate to specific expenditure categories.

Expenditure grouping is separate into two categories, diagnoses, and procedures. Most revenue in health care organizations is either diagnoses or procedures. Major diagnostic categories (MDCs) group costs with a 27-classification system for diagnosis-related groups (DRGs). Each DRG represents a category of the services for patients. This classification assigns procedures provided to patients with current procedural terminology (CPT) codes. “CPT codes represent a listing of descriptive terms and identifying codes for identifying medical services and procedures performed” (Baker & Baker, 2011, p. 44).


Discrepancies were found in three areas between the audited and unaudited statements. The differences between the statements were vast with patient accounts showing a $1,000,000 difference, the statement of revenue and expenses showing a $1,000,000 difference, and a net income difference of $254,000. Corporate revenue comes from many sources. Revenue is reported on various financial forms like income statements, balance sheets, retained earnings statements, and cash flow statements, which are the four basic types of financial statements affected by revenue. Different categories and services exist to group revenues and expenditures into cost centers that correlate to different DRG’s. DRG’s break down the procedures into CPT codes identifying the services and procedures for compensation.


Baker, J.J., & Baker, R.W. (2011). Health care finance: Basic tools for nonfinancial managers (3rd ed.).Jones & Bartlett.

Covey, S. (2011). Inspirational Quotes for Business: Empowerment and Delegation. Retrieved from

Patton-Fuller Community Hospital, (2011). Annual Report 2009. Virtual Organization Portal. Retrieved May 27, 2011 from University of Phoenix

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