Healthcare Financial Management HA 520 Unit 2 Assignment

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Financial Terminology and Health Care Finance
Lashunda Carter
Kaplan Univeristy

Due to the evolving health care industry, financial management is extremely important. Anyone pursuing financial management in the health care industry must have exceptional skills and knowledge. According to Brumley (2015), “The industry has been changing in big ways since long before the Affordable Care Act took effect. Medicare's coding system for billing and the advent of electronic medical records are examples of these changes” (para. 1). Financial management consist of many duties such as maintaining cash cushion for unforeseen costs, negotiating contracts, and also ensuring cash is available for payroll. On an executive level, financial management is the process of providing upper management with the data needed to make strategic plans for an organization’s future (Brumley 2015). In this paper I will discuss financial terminology and health care finance. After reviewing two recent healthcare industry related articles regarding financial terms, I will provide a brief summary on both articles, explaining the financial terms listed as well as how these terms are applied in healthcare.

Financial Terminology and Health Care Finance
Financial management plays a major role in the overall success of a business. According to Gapenski (2006), “The primary role of financial management is to plan for, acquire, and utilize funds (capital) to maximize the efficiency and value of the enterprise. Financial management can become very challenging in healthlcare due to the industry changing at a rapid pace. The Affordable Care Act is one of the many reasons healthcare providers and insurers had to recalculate their plans and premium structures (Brumley 2015). In addition to the Affordable Care Act, healthcare providers have also had to redesign their finance functions due to health care providers such as Medicare. Medicare has demanded healthcare providers to eliminate various reports, to ensure their organization is complying with the regulations and also to help maximize medicare revenues. The first article I reviewed gave me a better insight on financial balance sheets in the healthcare industry. According to Arnow & Xakellis (2008), “The Balance Sheet [BS] is one of four financial statements that report a medical practice or healthcare entities financial position in terms of its assets, liabilities, and shareholder/owner equity, at a specified point in time (para. 1). The article states every physician should have knowledge of how to read basic financial statements. The first financial statement should be a balance statement. A balance sheet consist of fixed assets, current assets, current liabilities, short term liabilities, and long term debt. According to Arnow & Xakellis (2008), “ A balance sheet shows the assets of a practice and the extent to which those assets were financed with borrowed money and with the owners’ money”. The article also stated, a little knowledge of accounting can asisst and help one better understand the information being provided from the company’s accountant or administrator.

The second article provided an overview on the Statement of Retained Earnings or Shareholder’s Equity. Marcinko (2008) stated, The Statement of Shareholder’s Equity is the newest statement that lists changes that occurred the previous year. The major elements of stockholders’ equity include capital stock, paid-in capital, retained earnings, treasury stock, unrealized loss on long-term investments, and foreign currency translation gains and losses. (para 1.) According to the article, Shareholders equity is sometimes known as capital or net worth. Shareholder’s equity represents the funds that would be left over if an organization decides to sell their assets and pay off their liabilities. The funds leftover will then belong to the owners of the hospital, health...
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