Sound financial, ethical practices in for-profit and non-profit health care organizations are important because they increase the confidence that all stakeholders have in the organization. Health Care managers have to ensure that good ethical practices are employed while carrying out all the elements of health care finance management to ensure financial stability for the organization and preference from consumers and stockholders.
There is much fraud and abuse in healthcare organizations that accounts for 3 to 15 percent of total health care expenditure according to the department of Health and Human Services and Department of Justice. This paper provides a summary of elements of financial management, generally accepted accounting principles, and general financial, ethical standards. The paper also provides examples from various articles that reflect ethical standards of conduct and financial reporting practices and their significance.
The four elements of financial management include planning, controlling, Organizing and directing and decision making. In planning, the health care manager identifies the organizations objectives and sets up a program or step by step process through which to meet the organization’s objectives. In controlling, the manager evaluates the processes to see how the plans made are being followed. He or she will do these by comparing current performance with earlier performance to see if there are areas that need improvement.
In organizing, the financial manager allocates resources to make sure that they are put into the most profitable use. In decision making, the manager selects the best course of action basing his or her decision on available information. When a finance manager incorporates good ethical practices while carrying out the elements of financial management, this will ensure organizational credibility. To limit fraud and abuse in health care organizations, they have to adhere to generally accepted accounting principles.
Lack of or poor adherence to these generally accepted accounting principles for many health care organizations in the last ten year has led to increase in fraud and abuse incidences. The generally accepted accounting principles are minimum uniform standards that are composed of group of accounting philosophies, values and actions that companies employ to assemble reports that show how their money is being controlled. The United States Securities and Exchange Commission requires businesses to use these acceptable accounting principles.
These principles include economic entity assumption that requires each economic entity to have a separate financial record, monetary unit assumption that requires each entity accounting record to include only information that can be quantified, and full disclosure principle that requires that a company’s financial record provide all past transactions. The principle of relevance, reliability and consistency requires that the financial information be relevant, reliable and be prepared in a consistent manner.
Other principles include, matching principle, the cost principle, going concern principle, principle of conservatism, and materiality principle. According to Gallup, B (n. d) the ethical principles that need to be adhered to in financial accounting include the component of independence where financial accounting should avoid conflict of interest. The accounting personnel should demonstrate integrity and objectivity to maintain trustworthiness and maintain competency with generally accepted accounting principles.
Another ethical principle is for the employees to remain responsible to both the patient and the employer avoiding unethical practices such as double billing or overcharging patients. According to an article by Rudman, Pierce and Eberhardt (2009) health care fraud and abuse accounts for 3-15% of the total health care spending in United States. The article gives examples of several health care organizations that have been found to be fraudulent, for example, a dermatologist who performed 3,086 medically unnecessary surgeries.
The article also documents how Raritan Bay Medical Center agreed to pay 7. 5 Million dollars for defrauding Medicare. The False Claims Act enacted by the federal government 1986 was intended to combat fraud and abuse in health care. The Health Insurance Portability and Accountability Act (/HIAA) passed in 1996 led to the establishment of Health Care Fraud and Abuse Control program (HCFAC) to further address fraud and abuse in health care. The increased surveillance has helped to reduce fraud and abuse cases by about 5%.
According to the article common Types of fraud and abuse are misrepresentation of services with the wrong CPT codes, billing of services that were not rendered, billing for supplies not provided, falsification of records or providing medical services that are not necessary. According to the authors, fraud can be reduced by training and education, implementing computer assisted coding, increase regulation by the federal government or through the use of data modeling or mining.
The significance of this example is to show the types of fraud, the various government agencies that work to prevent fraud and ways of combating fraud and abuse. An article in the Huston Chronicle by Rushton, C (n. d) provides examples of ethics in health care accounting and their importance. According to Rushton, ethics in healthcare accounting protect patients from untrustworthy accountants and corporations that misrepresent or hide data regarding the company’s financial status.
The author sites the case of Enron where investors lost more than $ 60 billion due to unethical practices. The author provides importance of disclosure and conflict of interest, gives an account of Sarbanes-Oxley Act and provides information on accounting code of conduct. The significance of this article is to show the importance of ethics in accounting. Ethical financial reporting in health care is important because it provides all stakeholders with important information regarding the financial status of the organization.
A healthcare manager should incorporate good ethical practices while carrying out all the elements of financial management that include planning, controlling, organizing, and decision making in order to ensure transparency and accountability to stakeholders. In the United States, Health care fraud and abuse accounts for 3-15% of total health care expenditure. The Federal governments have tasked various organizations with fraud and abuse control and have helped create the generally acceptable accounting practices to ensure sound ethical practices are followed in healthcare accounting.