Healthcare managers perform a number of duties designed to help healthcare organizations run effectively and efficiently. For instance, health services managers are often tasked with developing goals for individual departments, recruiting and training staff, setting up work schedules, and representing the healthcare organization at meetings or by serving as a member on a board.
Healthcare managers also have several duties that can benefit from advanced education and training in accounting. Why is enhanced knowledge in effective accounting methods, theories, practices, and procedures so important in a healthcare manager’s role? For starters, it can impact a healthcare company’s day-to-day operations.
Day-to-Day Operational Impacts of Effective Accounting Practices
Imagine that you’re working in a hospital and a patient comes in with a gash on her leg. It’s not deep enough for stitches, but you do need to clean the wound and bandage it up to keep it from getting infected. So, you go to the supply closet to get all of the items you need. However, upon opening the door, you see that the shelves are bare. There are no cleaning solutions or gauze anywhere to be found. Would this impact your ability to do your job? Of course, the answer is yes.
If you don’t have the physical items you need to tend to your patients, your healthcare facility won’t be able to provide even the simplest level of care. While this relies in part on ensuring that all necessary items are always fully stocked, you won’t have them at all if they’re not provided for in the agency’s budget. Since healthcare managers are responsible for preparing and monitoring these budgets, the ability to perform this function effectively can majorly impact the day-to-day operations of these facilities.
Furthermore, preparing and monitoring a healthcare organization’s budget goes beyond having the necessary supplies and can also include how much a certain department has to spend on adequate staffing, state-of-the-art equipment, and more. Therefore, if a proper budget is not planned and maintained, each of these areas can be impacted. Ultimately, this can also impact patient satisfaction, causing them to go elsewhere for their necessary healthcare services.
For example, the American Academy of Family Physicians reports that one of the key factors that affect whether a patient is satisfied with his or her interaction with a healthcare provider is the amount of time spent with that provider. Specifically, the more time the patient is able to spend with the practitioner, the more satisfied he or she is with the visit.
Let’s say that, as a healthcare manager, you only budgeted for two healthcare providers on staff when you could really use three due to the number of people who walk in through your door on an average day. By making patients wait longer periods of time for services, you’re potentially lowering the satisfaction with the visit.
The reason this matters is because research has found that patient satisfaction levels impact how well patients do with their treatments (their outcomes) and whether they continue with their recommended treatment plans. Patient satisfaction level even impacts whether a patient may decide to file a medical malpractice claim. In this way, setting a proper budget can not only potentially keep the healthcare facility out of court, but it can also help improve patient’s health and wellness at the same time.
Proper Accounting Impacts the Life of the Facility
Another reason accounting is important in a healthcare manager’s role is because paying adequate attention to the company’s finances impacts the life of the business. Put another way, if a healthcare organization or agency doesn’t adequately monitor money coming in versus money going out and set a budget for specific expenses, it may not be in business for long.
The Healthcare Financial Management Association indicates that roughly $400 billion of the country’s $2.7 trillion dollars spent annually on healthcare “goes to claims processing, payments, billing, revenue cycle management, and bad debt, partially due to the inefficiency of payer-provider transactions.” Thus, a healthcare manager can help reduce these types of costs—therefore improving the organization’s bottom line—by creating an effective payment collections process.
This is just one of the duties of healthcare managers when it comes to managing the company’s finances. In part, this involves paying attention to patient billings to ensure the accounts are being paid in full and within a reasonable amount of time. With this in mind, some of the questions healthcare managers may ask could include:
- How many patients currently have outstanding balances on their accounts?
- What is the average balance amount due per patient?
- What is the total amount due in outstanding patient balances?
- How are we notifying patients of the monies they owe?
- How long does it typically take a patient to pay after notice is sent?
- What methods of payment are used most? Is there a cost to use these? If so, what is it?
All of these questions can help healthcare managers better determine whether the company has an effective payment collection process or if that process needs to be revised or reviewed so the organization continues to bring in enough revenues to support it long term.
Since healthcare managers may also represent their agencies or organizations at investor meetings, individuals in this role can also impact the life of the facility by assisting with the securing of any additional funding that the agency or organization requests. For instance, if the healthcare organization wants to expand its services, it may be up to the healthcare manager to convey why this expansion is necessary and/or how it could be beneficial to both the business and community.
By having the right numbers at hand—such as how much the expansion will cost (both short and long-term) and how much revenue it will generate—healthcare managers can use this data to help reinforce the organization’s stance with investors, potentially making their argument more persuasive.
Effective Accounting Practices Improves Compliance with Regulatory Agencies
Healthcare managers who are proficient in accounting can also help ensure their agency or facility’s compliance with any requirements as set forth by regulatory agencies, which is yet another responsibility of individuals in this type of role.
For example, the Internal Revenue Service (IRS) mandates that Form 990 (which is also known as Schedule H) must be filed by “a hospital organization that operated at any time during the tax year at least one hospital facility.” As a healthcare manager for a hospital then, it is your responsibility to know this. It is also your responsibility to ensure that this form is filed correctly so your agency is in full compliance with the IRS’s mandates. If these forms are not filed correctly or contain incorrect information, it can hurt a healthcare organization financially.
Case in point: for returns filed in 2020, businesses earning more than $5 million dollars annually that are also filing within 30 days of the filing due date face a penalty of $50 per incorrect return or statement, up to a maximum of $556,500 according to the IRS. Additionally, if these incorrect returns or statements are received after August 1st, the maximum penalty increases to more than $3.3 million.
And if the IRS feels that your healthcare company is intentionally disregarding these corrections, there is no limitation on the amount of penalty that can be assessed by the IRS. Even businesses with gross receipts under $5 million can be assessed penalties exceeding $1 million, so it’s important for healthcare managers to know how to avoid these types of situations.
Training Healthcare Managers in Effective Accounting Practices
The Bureau of Labor Statistics (BLS) shares that healthcare managers typically need a degree to work in this particular role. Additionally, this degree generally includes taking courses in accounting and budgeting, in addition to those designed to provide more information about effective health services management, human resources administration, strategic planning, and more.
If you’re interested in providing accounting services within the healthcare field, Ultimate Medical Academy (UMA) offers a Healthcare Accounting Associate Degree program that can help get you started. And if your ultimate goal is to someday become a healthcare manager, this course offers an educational foundation that can assist you as you pursue any additional education required to work in that particular role.
Contact UMA today to learn more about our Healthcare Accounting Associate Degree program. Our knowledgeable and helpful staff is here to answer any questions you may have, as well as to assist you with selecting the right healthcare training program for you!
Disclaimer: While UMA's Healthcare Accounting program does not prepare students to become certified public accountants or to take the Certified Public Accountant exam, but to work in the field as a healthcare accounting clerk or bookkeeper, we are committed to providing our students all of the information necessary to make an informed decision regarding their future in healthcare accounting. To learn more about how we can help you or the programs we have to offer, contact us today!