The fundamentals of healthcare accounting

Accountants are the unsung heroes of healthy and profitable businesses. You play an invaluable role, helping organizations stay compliant with tax and reporting regulations, remain fiscally responsible, and identify and strategize around ideal growth areas. This is especially true in the healthcare industry where quality of care relies on good financial management. 

If you're looking to advance your career or want to choose an industry where you can help others more directly, healthcare accounting may be a great fit for you. 

What is healthcare accounting? 

Healthcare accounting consists of collecting, analyzing, and reporting financial information for all types of healthcare organizations. This includes preparing and managing balance sheets, cash flow statements, taxes, billing, payroll, and many more staples of the accounting world for:

• Hospitals
• Doctors' offices 
• Specialist clinics
• Nursing homes
• Assisted living facilities
• Labs
• Dental and orthodontist offices
• Rehabilitation facilities

These healthcare organizations fall under distinctive categories, each with unique considerations for taxes and reporting: 

• Investor-owned: Entities owned by investors that provide goods or services with the objective of making a profit 
• Not-for-profit, business oriented: Characterized by no ownership interest nor intention to maximize profits, but self-sustained by fees charged for goods and services 
• Not-for-profit, non-business oriented: Defined as voluntary health and welfare organizations, with revenue from voluntary contributions 
• Governmental: Public corporations, founded and owned in the public interest, supported by public funds and governed by those deriving their authority from the federal, state, or local government

Healthcare accountants need to be proficient in general accounting knowledge and must adhere to generally accepted accounting practices (GAAP). However, accounting in healthcare also requires knowledge and skills unique to the industry. 

If you choose to pursue a career in healthcare accounting, you need to understand concepts like:

• HIPAA compliance
• Healthcare-specific tax exemptions
• Healthcare reporting procedures
• Contractual allowances or adjustments, discounts, charity care and implicit price concessions for contra-revenue accounts
   

Why is healthcare accounting important? 

Healthcare organizations are different from other businesses because they dramatically impact human health and human life. With stakes this high, accounting in healthcare is especially crucial. A good healthcare accountant can find the right balance of financial efficiency that doesn't harm the overall quality of care. 

For example, accountants often work on financial planning, provide insight into costs, and can make recommendations for where to improve performance. A knowledgeable accountant will understand how to find the balance between fiscal responsibility and financial success without negatively impacting patients. This helps healthcare organizations achieve sustainable, cost-effective care that positively influences patient outcomes. 

Bottom line: Healthcare accounting ensures financial efficiency without compromising quality of care.

What are the risks of not hiring a healthcare accountant? 

Healthcare professionals have demanding jobs and no time to learn the complex, ever-changing world of healthcare accounting. Without healthcare accountants on staff, these organizations risk falling out of compliance, mismanaging resources, and negatively impacting staff, patients, and the operations of the facility.

Imagine what might happen to a healthcare organization if employees didn’t get paid, if tax negligence resulted in an audit, or if spending went unaccounted for over weeks, months, and years. It would be enough to cause the ruin of the ostensibly healthiest organizations.

Having knowledgeable, dedicated accountants on staff are key to keeping offices, clinics and hospitals operating smoothly. 

Benefits and challenges of healthcare accounting

Healthcare accounting roles offer the appealing combination of a strong and stable industry and exciting progress and evolution. If you enjoy working in an office and desire job security, but you also want each day to bring new challenges that hold your interest, accounting in healthcare might be for you.

Nearly every American will encounter the health system at some point, sometimes even on a regular basis. There will always be a need for quality healthcare, which means that healthcare organizations will need strong accountants to keep their operations efficient and productive. Your skills will be in high demand.

On the other hand, healthcare accounting can be challenging. You deal with numerous insurance companies and policies and must have a good understanding of each one’s idiosyncrasies. There are also patients who don’t or can’t pay on time, which effects cash flow, budgeting, and forecasting. Likewise, because you deal with sensitive information, you must understand and strictly follow HIPAA regulations.

However, with excellent resources and support, you can excel in these unique industry considerations and enjoy the many benefits of a fruitful healthcare accounting career.

Start your career in healthcare accounting with Becker CPE

If you would like to gain skills that prepare you for a career in healthcare accounting, Becker has the courses and training you need! Our Health Care Industry Library trains you to be a trusted professional in the rapidly evolving world of accounting for healthcare.  With 11 CPE courses, you can earn 15 CPE credit hours while gaining knowledge in these topics:

• Large healthcare and hospital systems, including key industry terms, trends, and challenges
• What it means for an entity to be tax exempt, how to break down the complexities of revenue recognition, and examples of health system financial statements 
• Deep dives into a variety of topics:
  • Economic and operational impacts of social events
  • Healthcare reimbursement systems
  • Cost allocation methodologies
  • Accounting for contingencies, allowances and settlements
  • Threats to exempt status for not-for-profit hospitals 
• Collecting the tools you need to improve business decisions and mitigate risk 

Dramatically boost your expertise in the field of healthcare accounting. Visit the Health Care Industry Library page to meet the instructors, see the available courses, and get started.