The role of accounting in the health care industry is understated. In truth, it encompasses many areas of management to ensure that hospitals, clinics, speciality medical centres, and other health care institutions run smoothly.

Health care accounting solutions include various elements that are usually not applicable to the standard accounting needs of most business organisations. As health care settings, both big and small, handle complex, multi-layered economic components associated with patient payments, including private insurance and government-backed initiatives. These speciality accounting services run alongside routine accounting processes, such as cash flow and revenue tracking activities.

The rapid shift of most healthcare systems away from fee-for-service compensation to value-based reimbursements pushes healthcare providers to show accountability in delivering quality services to their patients. In addition, the implementation of advanced technological applications like data analytics and innovative electronic health records aims to simplify and streamline processes when combined with accounting services offered by professional accountants in Central London like those at The enhanced efficiency will directly impact the bottom line in many ways, from reduced operational costs to smoother patient billing facilitated by Central London Accountants hired by the management personnel of health care facilities.

These and many more complexities make accounting services for health care a challenging yet highly dynamic profession. Accountants who are specifically tasked to handle the needs of healthcare facilities such as hospitals, clinics, and speciality centres are required to learn and develop a greater understanding of the healthcare industry. These initiatives among accounting professionals help reduce the challenges and complexities over the long term.

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Health care accounting in the 21st century


Health care accounting shares similarities with accounting utilised in other professional settings. Accountants working for a health care facility routinely maintain financial records and regularly keep track of cash flow. What makes accounting for health care far more different from other accounting types is that it incorporates unique healthcare-related layers of functions. These distinct elements represent the various parties involved in delivering care to patients, insurance transactions, health care providers, pharmaceutical companies, government agencies, and private institutions, to name just a few. Each of these compartments carries its unique financial challenges, with some exhibiting interconnectedness. For example, monitoring payments involves keeping track of money from patients, insurance providers, and other third parties.

Accrual and cash accounting solutions

Accrual accounting follows an anticipatory model, enabling businesses to record expenses and revenues before receiving or paying out. In the health care setting, this accounting approach builds credits and debits into an organisation’s accounting system once it generates transactions, such as payables for hospital or clinic visits and prescribing medications.

The accrual accounting method allows health care institutions to gain a much clearer picture of transactions that may occur quarterly or annually. Its high degree of accuracy makes it the preferred accounting approach of tertiary and large hospitals and health care facilities.

On the other hand, cash accounting records expenses and revenues once transactions are finalised. It features a more straightforward method used in small to medium-sized settings that require less complex accounting requirements. While more straightforward to implement, it is less popular for many private hospitals as payments can take weeks or months to be finalised. In worse cases, payments may not ever be completed.

Account reporting in the health care setting


Like any other business organisation, healthcare facilities must produce financial reports that reflect their performance annually. Key decision-makers gain access to this information, as well as the general public and senior members of management.

Details included in accounting reports have integral variables, including cash flows, balance sheets, statement of operations, and changes to its net assets. In addition, hospitals and health care centres that are exempt from paying taxes need to itemise uncompensated benefits, such as charity care and many more.

Medical services-related payments and receivables

Hospitals can be reimbursed in various ways resulting in a more complicated accounting in the healthcare industry. First, they may receive capitation that involves a fixed amount per patient per month/year. In this approach, providers accept payments no matter the type of service obtained by a patient. Providers may receive payments on a per diem basis at a pre-determined amount by the payer.

Value-based payments are highly regulated and are an essential revenue consideration among health care providers, such as those who operate their own private practice. More popularly known as the pay for performance system, these alternative payments are based on the number of visits made by each patient.

Hospitals also receive payment from insurance companies, whose funds are usually only a small percentage of the value of services rendered, leaving the remainder under receivables. It is also common for many payers to have their own fee schedules, which means health care accountants are deemed to keep track of different billings, allowances, and receivables.

Credit balances and outstanding checks


A common situation that accountants in the health care industry typically deal with is the accumulation of credits under accounts receivable. This occurs when the collected amount from patients and payers for service is far greater than the total amount owed. Writing a check usually is the solution to the accumulation of credits. However, health care providers such as hospitals typically end up with numerous outstanding check dues because of recipients who have moved or passed away. In some cases, funds accumulated from uncollected checks are returned to the government.

Final thoughts

Every accounting decision made within a health care facility has a profound impact on the condition, health, and overall well-being of its patients. Accounting work in the health care industry usually involves finding alternatives and solutions to make comprehensive patient care services and strategies efficient without compromising excellence and quality. The roles that health care accountants play are considered a crucial component of an organisation’s primary goal of providing affordable care that effectively improves patient outcomes. Contributing to the health and well-being of patients makes health care accounting a highly satisfying branch of accounting.