Financial Management of Health Systems

Financial Management of Health Systems

Health Plan Activities

Four major activities of a health plan include eligibility assessment, utilization review, claim administration, and marketing. A health plan must assess the customer’s eligibility to receive a care plan. In exchange for a premium, a health plan assumes risk by taking on a prospective customer. Utilization review activity occurs when a customer makes a claim; healthcare professionals review the application and provides a comprehensive assessment that allows or denies the request based on the treatment requirements and the health plan parameters. Administration of the allegations involves reception, reviewing, and processing the client’s claims. A health plan must verify the existence of a cover that the claims made are under the cover, and then the claim must be processed, meaning that it denies or allows the use of the plan depending on the terms of the cover. A Health plan also must undertake serious marketing activities. Marketing a health plan involves showing the need for the plan and how the plan addresses the health requirements of prospective customers.

Forces That Led To Development Of IDSs

Healthcare facilities are allowed to form a network that provides a continuum of health services. Such a  network is known as the Integrated Delivery System (IDS). IDSs were forced in place by the desire for improved care at a reduced cost. In efforts to provide quality care at a lower cost, the government can consolidate health care services in IDS. Through the integration of the systems, the available resources would use the available resources, thus minimizing expenditure (Al-Saddique, 2018). Seekers of healthcare services find it convenient when it is easy to acquire a group of services in one place. IDSs were also forced in place by the demand for a broad range of care services by clients. Health seekers demand health services in one location, which led to the development of the IDSs.

Difference Between Financial And Managerial Accounting

Financial accounting is the practice of keep track of all financial transactions of an organization while managerial accounting involves the preparation of financial information and communicating it within the organization for decision-making purposes (Jiambalvo, 2019; Ainsworth, & Deines, 2019). These two branches of accounting also differ in others ways. For example, financial accounting practice must comply with set accounting standards, while managerial accounting does not follow any set guidelines. While financial accounting focuses on the overall accounting information of the system, managerial accounting focuses on locating bottleneck operations within the system.

Accounting Principles

Core principles guide accounting practices. Principles of accounting refer to guidelines and rules that must be applied when preparing and disseminating financial information. Multiple accounting principles have been developed by institutions like GAAP (Ainsworth, & Deines, 2019).  Accrual principle requires that all accounting transactions be recorded at the time of occurrence and not when the cash flow from the transaction occurs. Firms are supposed to observe the consistency principle in accounting, which means that once an accounting method is selected for use in an organization, it must be maintained throughout the accounting period.

Accountants must observe the matching principle, which means that each revenue item recorded must be matched with all related costs. The principle of utmost good faith, which requires all parties involved, must remain honest in all transactions. The materiality principle requires that accountants must aim to show good faith by fully disclosing financial reports. The cost principle requires accountants to make a recording of equity, assets, and liability at the original buying or selling prices. The materiality requires accountants to record anything considered as material in the financial statement (Ainsworth, & Deines, 2019).