Since healthcare organizations provide care to several patients daily, transactional processing and accounting become crucial for better finance management.
Healthcare might be one of those sectors in the US that usually go through financial turbulence from time to time. As a result, many accountants, CFOs, and other financial professionals in healthcare are under pressure to manage financial transactions and information efficiently, improve transparency, ensure compliance, and deliver value care to patients while striving to minimize operating expenses.
This clearly makes accounting in healthcare businesses an essential aspect that can help optimize capital management, further helping to achieve cost-effectiveness. Considering this, the accounting department works as the backbone of any medical or healthcare organization.
The Scope & Role of Accounting in Healthcare: Explained
The utmost priority of any healthcare organization is to fulfill patients’ needs while taking care of their own financial management requirements, keeping treatment costs under the designated budget. This often comes up as a challenge; in order to operate a medical organization or facility smoothly and at its best, it must provide effective treatment in a cost-effective manner. In a nutshell, the medical team and finance staff need to work together to ease off the patients’ physical and financial pains.
Apart from that, the role of accounting in healthcare also covers meeting GAAP guidelines, which is essential to avoid a series of additional expenses incurred due to fines and penalties upon incompliant financials or reporting. This helps to save not only capital but also reputation in the market.
To manage everything we just discussed, healthcare organizations need skilled accountants as they can manage some of the most necessary healthcare accounting processes, which are mentioned below.
- Collecting all payments
- Recording all payments
- Collecting co-pay
- Ensuring codes are entered accurately
- Determining patient eligibility for claim
- Keeping track of claims under-process
- Following up on rejected claims
Apart from handling healthcare bookkeeping, entering financial data into systems, and maintaining comprehensive records of bills and payments, accounting holds a significant role in various other areas. However, medical organizations and facilities often face numerous challenges in managing accounting for several reasons that must be addressed.
Therefore, let’s discuss some healthcare accounting challenges.
1. A Complicated Framework for Accounting & Finance Management
Accountants in healthcare must keep track of and collect payments from patients. However, upon getting care or treatment, today’s patient is not the only payer as they and their insurer pay partial sums of the total healthcare fee. This increases the level of complications, especially when it comes to matching codes and transactions.
Adding to the complexity are systems that lack the ability to handle the entire process from recording to collection to reporting. In fact, many medical centers are still using outdated accounting systems, lacking integration capabilities, causing duplications and lack of control in this highly regulated sector.
2. Legacy Technology Raising Barriers
Legacy technology (spreadsheets) that medical organizations depend upon raise various challenges for their accounting teams, for example;
- Lack of control over data
- Absence of standards for financial processes
- Difficult to protect electronically stored information (ESI)
Besides, those using spreadsheets are more vulnerable to face compliance issues. Out of all spreadsheets, 90% contain errors, according to Forbes (Source). These errors can occur for several reasons, including human mistakes, system errors during data transfer, format compatibility issues, and to name a few. Such tiny-looking errors can turn into potential blunders that can be harmful to the reputation and future of healthcare organizations.
3. Hefty Workloads Causing Delays
When accountants manually handle various accounting chores, for instance, journal entries, it consumes a lot of their time, and the entire job becomes somewhat tedious. Apart from that, when errors are detected, they need to make changes in the data to eliminate inconsistencies, which takes additional time, delaying other processes.
Above all, like in any other organization, accountants in healthcare are obliged to close the books within a set duration; delays and outdated systems can make it challenging to meet those deadlines.
While there are several other challenges that accountants in medical centers face every day, there are solutions too.
Let’s get further and discuss a few in brief before we get to their benefits.
1. Embrace Modern Technology
Many accounting software available on the market offer a myriad of features, helping accountants manage tedious, time-consuming, and repetitive accounting chores. Not only this, major accounting applications can generate statements and reports automatically and way more accurately than any qualified accountant.
2. Leverage External Support When Needed
Healthcare organizations usually deal with a large number of patients on a daily basis. This significantly increases accounting work, adding to the burden on already busy accountants. In such situations, they can opt for healthcare accounting services provided by external firms. This can significantly ease their in-house accountants’ workload, enabling them to save a considerable amount of time and energy. In addition, they can simply utilize this saved time and energy on other strategic accounting responsibilities such as cash flow optimization, budgeting, etc.
Both the above-discussed solutions are practical and affordable, and one can choose as per their healthcare business’s size and needs.
Wondering what could be the benefits of these solutions? Here’s what you are looking for.
1. Data Integration becomes Easier & Better
Accounting software must be able to synchronize with other systems. For the fast-paced needs of today’s healthcare business, relying on paper-based data or human data entry can take a lot of transaction processing time. With so many aspects included, such as the hospital or health system, the health plan, government rules, and so on, automating the flow of data is a must.
Accounting software that can be integrated with other systems can help faster data integration and processing while saving costs significantly.
2. Get More of Valuable Insights
Large amounts of financial data that medical centers capture and store will generate no value if there’s no one to curate and analyze it. Having the right accounting solution in place can help with complete data utilization, bringing valuable insights essential to making informed business decisions.
3. Rest Assured about Compliance Assurance
For healthcare businesses, staying in compliance with government rules may be a costly deal. A competent accounting system, on the other hand, can assist healthcare businesses in ensuring compliance and lowering the risk of failure, all while reducing the cost of regulatory compliance.
Regardless of the present issues in the healthcare sector, a solid accounting application is the first and most critical step toward making the significant improvements required in accounting and finance management. Unfortunately, many medical centers are running short on human resources (especially amid the global pandemic) for back-office operations, including finance and accounting.
In some instances, they have the resources but not the expertise to utilize accounting software, and they are handling finance management functions manually. For all those who are somehow unable to use technology for accounting purposes, healthcare accounting services can be a great solution.