If you’re considering a career in healthcare accounting, you may be wondering why bookkeeping and accounting are so important to health and wellness facilities. Specifically, what makes the role of healthcare accountant so critical to the medical provider or healthcare organization’s success that they would decide to hire someone to handle these duties?
This is a fair question to ask because the more you understand about why a particular role is necessary, the greater your understanding of why certain duties or functions within that role are necessary as well. Also, the more important the role is to the function of a business, the better the future outlook for that particular position.
However, to answer the question about the importance of bookkeeping and accounting in healthcare efficiently requires that you first understand that, though healthcare professionals are ultimately in the business of saving lives, at the end of the day, they are still businesses. Therefore, they rely on a process called revenue cycle management.
What Is Revenue Cycle Management?
The Healthcare Business Management Association (HBMA) explains that revenue cycle management, or RCM as it is often referred to in short, “is the administration of financial transactions that result from the medical encounters between a patient and a provider, facility, and/or supplier.” The HBMA further adds that these transactions include everything from payment billing and collections to data coding, analytics, and compliance.
To make this concept easier to understand, imagine that you own a store that sells furniture. In order to stay in business, you need to make sales, right? By default, then, you need to develop a way to create invoices for the items your customers want to purchase. You also need a system in place to collect their payments, as well as a way to pursue any monies that are past due in the event that they don’t pay as promised. But your revenue-related needs don’t stop there.
If you don’t have the materials to manufacture your furniture, you won’t have anything to sell. Thus, you’ll also need a way to effectively communicate with your suppliers, ensuring that you are able to order all of the parts and pieces you need to make your goods. This means providing the correct codes for the products you need so you always get the right ones.
On top of that, you’ll also have to account for all of your day-to-day business expenses, such as your rent or mortgage, electric bill, gas payments, phone charges, and internet. Basically, any money that is coming and or going out of your business needs to be kept track of so you can be assured to have enough cash to keep your doors open.
All of this is part of revenue cycle management. It involves developing a process or set of processes for anything that is related to the finances of your business, such as invoicing and billing, accounts receivable, and recording of expense-related payments.
Now, transfer these same types of needs to healthcare agencies. Not only do these facilities need a way to invoice patients for services rendered and to collect monies due, but they also need to know how to properly code the services in their computer system so the insurance companies pay their portion of the expense.
And, like other businesses, healthcare companies also have day-to-day expenses related to utilities, payroll, supplies, and everything else required to provide efficient patient services. This is where bookkeepers and accountants come into play.
These financial professionals are often tasked with helping the healthcare company keep track of and better manage their incoming and outgoing transactions, ensuring that the revenue cycle is properly managed from the first interaction with the patient until the final payment is made in full.
Good Bookkeeping and Accounting Practices Means Fewer Errors
Once you understand this process, it becomes easier to see why bookkeeping and accounting play such a critical role for healthcare businesses. If these companies do not pay attention to their numbers and always know where they stand financially, they won’t be open long enough to actually help their patients.
But good bookkeeping and accounting practices offer another advantage as well. Fewer errors.
If you’ve ever forgotten to record a payment you made from your checking account, you’ve already experienced the angst that having erroneous accounts can cost. On a personal level, they can lead to overdraft charges, utilities being shut down short-term, and a little bit of shame as you call your creditors and explain what happened. However, for a business, the impact can be much worse.
If you’re not keeping accurate track of your monies coming in versus your monies going out, causing your gas or electric company to stop your service, patients aren’t going to be happy. If patients aren’t happy, they aren’t going to return.
Worse yet, if the errors cause your agency’s administrators to make the wrong decision, you may have to answer to the shareholders as well. This can quickly take the situation from bad to worse.
Thus, hiring someone to keep your books and maintain your financial forms decreases the likelihood that your healthcare agency will have to deal with these types of situations. This is especially important when dealing with patient health. And with patient satisfaction.
Playing a Role in Patient Satisfaction
Another reason bookkeeping and accounting are important in healthcare is because the manner in which the facility is run can either positively or negatively impact patient satisfaction.
According to the American Academy of Family Physicians, there are five factors that can affect whether a patient feels content with a specific healthcare professional or business. Two that bookkeepers and accountants can play a positive role are:
- Having expectations met; and
- Positive communication.
When a healthcare business establishes an effective bookkeeping and financial recording processes, patient’s payments are handled in a timely and professional manner, meeting their expectations. This keeps positive dialogue open with the patient since there are fewer issues or concerns, impacting the second factor as well.
On the surface, increased satisfaction means that the patient is more likely to continue to choose that specific healthcare company or provider. They may even refer their friends, helping the healthcare company grow.
Research also indicates that patient satisfaction has other impacts as well. For instance, a study published in the Journal of Cutaneous and Aesthetic Surgery indicates that, in addition to affecting patient retention, patient satisfaction also plays a role in clinical outcomes and medical malpractice claims.
Put another way, whether or not a patient is satisfied with a particular healthcare provider can impact his or her treatment outcome. It can also be a deciding factor in whether to file a claim against the company if things don’t turn out as expected.
Since bookkeeping and accounting practices are all part of the doctor-patient or provider-patient interaction, these practices can have an indirect impact on patient satisfaction levels. They can either further that satisfaction or they can hinder it.
Think back to a time when you have dealt with a healthcare company. If that company had an efficient payment and billing process, how did that make you feel? Conversely, if their process was disorganized and difficult to work with, how did you feel then?
While bookkeeping and accounting processes may seem unimportant, mainly because they are done behind the scenes, your own interactions with healthcare companies highlight how their efficiency ultimately affects your experience, thus impacting these other factors as well.
But when does a healthcare professional or facility decide to hire a bookkeeper over an accountant or vice versa?
Bookkeeping Duties vs Accounting Duties
Sometimes the titles of bookkeeper and accountant are used interchangeably, but each type of professional is often responsible for different things. For instance, Fundera explains that a bookkeeper is responsible for “managing the day-to-day financial transactions of the business” whereas an accounting professional “is more about financial supervision.”
In other words, bookkeepers are individuals responsible for compiling, organizing, and maintaining the healthcare business’s financial records. Conversely, accounting professionals are generally more advisory in nature in that they use the healthcare company’s financial information to help it ascertain where it stands financially as well as to advise the company about the actions it can afford to take in an effort to grow the business.
Freshbooks adds that each of these roles typically has different job functions. For instance, a few of the most common bookkeeping tasks include:
- Creating invoices
- Paying expenses
- Managing the company’s payroll
- Tracking monies owed to the business
- Maintaining a ledger of all financial transactions
Accounting professionals, on the other hand, are generally tasked with other job duties, some of which include:
- Preparing balance sheets, income statements, and other financial statements businesses are required to maintain and file
- Analyzing financial ledgers, making changes to those ledgers if necessary
- Preparing tax forms and providing tax advice
- Offering basic financial advice
Working in Bookkeeping and Healthcare Accounting
Both bookkeeping and accounting are critical to keeping healthcare companies running efficiently and smoothly. And both offer the ability to enter their respective professions with just an associate’s degree.
So, if you’re ready to play an important part in the healthcare process by providing services related to bookkeeping and accounting, Ultimate Medical Academy offers a Healthcare Accounting Associate Degree. This 2-year program provides the education necessary to work within these types of roles.
Contact us today to learn more. We’re here to answer any questions you may have, or to help you decide which role is right for you.
Disclaimer: While UMA’s Healthcare Accounting program does not prepare students to earn the certified bookkeeper designtation, we do prepare our students to work in the field as a healthcare accounting clerk or bookkeeper. We are committed to providing our readers 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!