Generally Accepted Accounting Principles Paper

Generally accepted accounting principles have been defined by the American Institute of Certified Public Accountants (AICPA) as a set of regulations, customs and guidelines that are used by AICPA associated lawyers and other individuals who practice law. These principles are recognized as legitimate within and without courts of law. The three major sources of accounting principles include accounting practice bulletin opinions, the Federal Accounting Standards Board (FASB) and AICPA research bulletins. These sources apply for governmental as well as non-governmental entities. Most healthcare providers face huge problems concerning cost, quality of patient care and access because of legislation. It is these proved accounting principles that have worked over the years to mitigate the impact, retain the profit margins, and service provision. Now, health care organizations are at the mercy of Medicare and Medicaid when it comes to controlling reimbursement although these principles can save them if applied properly.

Developing roadmaps for information technology goals

The number of American hospitals that have purely paperless electronic systems including health records currently stands at less than 2%. This large initial expense has meant that only the more sophisticated and richer health facilities were able to install this requirement. More and more institutions need to join the list of hospitals switching to the paperless system through making the technological investment in order to restructure communications and care deliverance. The advantages of electronic systems are that they avoid repetition, losses and improve access to vital medical information.

Revenue cycle review

A common problem that surfaces in nearly all healthcare-billing systems has been leaving the rightful revenue unaccounted for through errors, over-allocation and other activities. Health organizations should plan to amass the full amounts that are owed through tracing the accurate amount of the original invoice and then tracking down and managing the early and full payment. The opinion by many consumers that the healthcare billing process is quite confusing is not far from the truth. Most health institutions currently follow the bill and re-bill process that ultimately takes 30, 60 and 90 days has very many loopholes and issues that make it highly inefficient. The hospitals will still need to streamline the billing system to improve cash gathering and satisfy the customer’s needs.

Exposure of assets and liabilities

The Generally Accepted Accounting principles (GAAP) techniques and methods can allow health firm to expose the assets while still accounting for the depreciation. The liabilities are also outlined and this will help the hospital to realize the areas that are at risk and what level of attention is required. GAAP methods also create reports that can be used to show contributions from donors. All this information gleaned from the GAAP methods can enable the top management to integrate new approaches that convert pledges into real donations. Constant and proper application of GAAP methods will also ensure that a firma will have an advantage when it comes to possible takeovers or mergers (Bonham et al, 2011).

Increasing bargaining power

This is because GAAP methods offer medical institutions a report of the long-term cash operations budget. The firm can then use this advantage to keep employees or offer particular signature services to the customers. GAAP methods display the company’s financial status in one platform. The transparency offered through usage of GAAP methods also provides a quick way of diagnosing errors in management. The management can then have the opportunity to establish a sturdy financial foundation with a better-quality balance sheet.

Credit worthiness and financial stability

Through application of GAAP methods, insurance agencies and other money lending institutions such as banks can compare the status of a particular medical firm or the whole health sector to other businesses. In this way, financial institutions can easily determine the credit worthiness of a particular hospital or health institution. An example would be a health company with revenue of about $ 500, 000 that may seem substantial and stable until compared against another similar firm having revenue of over $1 million. Apart from these comparisons, fro the sake of establishing credit worthiness, GAAP methods can also produce the projected revenue from different sources such as state-funded medical insurance and other payments from insurance companies (Epstein et al, 2009).

GAAP methods also promote financial stability within medical institutions. Under this platform, medical firms apply the accrual method to monitor their accounting. Companies can use the reports deduced by GAAP to discover outstanding revenues. Such firms can also use GAAP reports to show the acquisition or revenue even though they are not received for example government grants. Medical institutions can also use the GAAP report display the financial status. GAAP has been proven the most effective regulations and standards that have assisted many health firms in salvaging their wrecked financial status as well as planning.

Conclusion

Other benefits of GAAP within medical firms include increasing the financial rating of the firms that integrate these principles within their organizational structure. However, the scope and enforcement of GAAP principles within different organizational setups in different industries has proved an uphill task.

References

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Bonham, M., & Ernst & Young. (2011). International GAAP 2011: Generally accepted accounting practice under International financial reporting standards. Chichester, West Sussex, England: Wiley.

Epstein, B. J., Nach, R., & Bragg, S. M. (2009). Wiley GAAP 2010: Interpretation and application of generally accepted accounting principles. Hoboken, N.J: Wiley.

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