White Paper

Financial Reporting for Healthcare

Published on

September 17, 2018

By

by

Michelle Taylor

brandon cumby

 
When I tell a story, write, or teach something, part of my personal style is that I like to use analogies and/or metaphors to make the topic more relatable,
more memorable, or to make my point. I usually make my comparisons using things in my personal life, like running, vintage cars, or bicycles. I do
not have a good analogy, but I do have what I think is a great “AH HA!” story, and it involves running.

 I was out on a run with someone whom I did not know well, but at 5:30AM, anyone who will run 6 miles beside you counts as a new friend, so we started
chatting about what each of us did for a living and I was up first. I told her all about accounting, business consulting, some big projects I was working
on, and one in particular, Stat-Connect, piqued her interest. I explained how we were putting together a data set of statistical and financial data
for healthcare management practices to demonstrate and better understand and manage their business through different measurements and key performance
indicators, or KPIs. We proceeded to have an in-depth conversation about the lack of clarity, consistency, and timely data regarding the actual DRIVERS
of financial performance in the medical profession. Her comment was “I guess they are more comfortable coming back later to do a body count.” We both
laughed at the macabre aside. Her knowledge of the medical field was impressive and I was sure she was an accountant for a hospitalturns out
she is a PhD specializing in data analysis and modeling for predicting and improving patient outcomes. Her other comment left me almost speechless
– “I don’t think I have ever thought about developing a financial model based on doctor/patient KPIsI would like to take a look when you get
that finished.”

 As we finished our run in near silence I realized my analogy, the healthcare industry is suffering from an “illness” they are largely unaware of and
even if they are, really do not want to acknowledge. The industry as a whole is just does not do a very good job at analyzing true costs to deliver
services, proper allocation basis, etc. Even the guidance from the AICPA towards preparers of financial statements and auditors for the health care
industry center around revenue recognition methods for medical malpractice claims, patient receivables, fair value measurements, key issues from the
Health Care and Education Reconciliation Act of 2010 and the Protection and Affordable Care Act (ACA), and electronic health records (EHRs) and accounting
for Medicaid EHR incentive payments.

 Only a tiny percentage of the small/medium sized healthcare organizations have deployed enterprise performance management tools so management and
staff can monitor how their actions – individually and as a whole – affect the bottom line, quality of care, and patient satisfaction.

In an industry and marketplace that is becoming more and more regulated, on-demand financial reporting and analysis, along with accurate and efficient
profitability measures are not just “nice to haves,” they will be what separates failing businesses from long-term going concerns.

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