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Happy Hospital Analysis

In: Business and Management

Submitted By ccgirl67
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Happy Hospital Today’s health care system, with its many different types of health care organizations, is extremely complex. The health care environment has many other goals—improving the health and well-being of the community, providing the highest quality health care services, and minimizing morbidity and mortality. Happy Hospital is no different. The issues of plausible steps and measures that they should take to utilize accounting information to make solid financial decisions to progress towards a sound financial hospital will be covered in this paper.

How could Happy Hospital use budgets and performance reports in the decision making process? The use of performance reports would help Happy Hospital extensively. Performance measurement when linked to the budget and strategic planning process can assess accomplishments on an organization-wide basis (Tigue and Strachota, 1994). When used in the long-term planning and goal setting process and linked to the hospital’s mission, goals, and objectives, meaningful performance measurements can assist Happy Hospital’s managers and staff in identifying financial and program results, evaluating past resource decisions, and facilitating qualitative improvements in future decisions regarding resource allocation and service delivery. The use of budget reports would assist the hospital in tracking its cash flow, purchases, expenses and income streams. An analysis of a budget report provides information about how each department is spending money. A budget report would have quickly shown the decision to contract with a managed care organization for a year for a pool of 90,000 patients in the middle of year may not have been the most feasible, given that services had not been delivered yet, so it created a $3,900,000 unearned revenue liability which prompted yet another adjustment for the cash expended for the malpractice insurance as a prepaid expense which also reduced available cash.
How must ethics influence their accounting decisions? "Ethics in its broader sense, deals with human conduct in relation to what is morally good and bad, right and wrong. It is the application of values to decision making. These values include honesty, fairness, responsibility, respect and compassion." - Rushworth Kidder
President, Institute for Global Ethic Happy Hospital is no different from any other business that wants to insure its managers and executive committees of its commitment to managing its finances just as succinctly as it does the rest of the hospital and to accomplish this, the financial decisions of the hospital are based directly on information and judgments provided by their accountants. To maintain a higher level of ethics, Happy Hospital should employ independent accountants, outside of the hospital. If the accountants are independent, then their relationship with the hospital prohibits certain relationships that may lead to bias or present a conflict of interest in the accountant’s financial reporting. It will also help them to maintain a sense of objectivity and refers to an accountant’s responsibility to remain free of conflicts of interest in dealings with his or her clients.

What accounting information is most relevant for Happy Hospital to consider when making decisions? From the perspective of financial management, there are two overriding goals, profitability and viability. Happy Hospital wants to be profitable and it wants to continue in business. This is going to require not only ways to cut down on operational losses, but also the analyses of liquid able assets and how they can be better used. A review of the Financial Ratios from 2007 and 2008 will need to be done as they are showing both operating and total losses that need to be evaluated to uncover what areas this transpired in and how not to repeat it. The other critical area that warrants reviewing is the aging of wages payable along with other aging accounts payable.

The Use of Performance Measures in City and County Governments, Patricia Tigue and Dennis Strachota, GFOA, 1994.
Norton, K. (2009, September). Ethics in Accounting. , (), . Retrieved from
Finkler, S. A. & Ward, D. M., (2006). Accounting fundamentals for health care management Sudbury, MA: Jones and Bartlett.
A Review Happy Hospital
Carol B. Christian
August 27, 2012
Ruth E. Brown, Facilitator
University of Phoenix

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