Hospitals Financial statements
Hospitals also issue Financial Statements like all other business organizations. These statements give an account of the type of financial actions of the Hospital i.e. how much revenue was generated, the amount spent and surplus left. The financial statements give a complete picture of the Hospital's financial health and also evaluate its performance during a given period of years.
An independent auditing firm prepares the Audited Financial Statements, based upon generally accepted accounting and auditing principles. An Audit includes examining on a test basis, evidence supporting the amounts and disclosing in financial statements assessing the accounting principles used and significant estimates made by management. The Financial Statements of the Hospital include
1) Comparitive Statement of Operations: The comparative Statement of Operations evaluates performance of the Hospital over a designated period of time usually a year. It provides all the important information on profitability and performance of the Hospital including the Hospital Profit and Hospital Profit is evaluated as
Operating Revenues- Operating Expenses = Operating Income
Operating Income +/- Non-Operating Gain/Loss = Total (Surplus/Deficit)
2) Balance Sheet: The Balance Sheet gives an overview of an organization's financial health at a particular period of time. The major aspects covered by Balance Sheet are:
a) Assets: Assets are the economic resources which provide future benefits by helping raise
Funds or reduce Expenditures. Property plant and equipment (PPE) are known to be as Assets.
b) Liabilities: Liabilities are economic obligations of the organization to outsiders or claims against its assets.
c) Net Assets: They are the remaining assets of the organizations total assets left after deducting all liabilities.
d) Balance Sheet Equation: The Balance Sheet consists of two sections, counter balancing each other forcing the sheet equation:
Asset = Liabilities + Equity (or Net Assets)
3) Cash Flow Statement: The Cash Flow Statement is a record of the cash that has come into and gone out of an organization, after operating expenses have been met during the accounting period. This analysis of the Cash Flowing in provides us a reliable and valuable perspective of the hospital's performance on the financial front. The standard areas covered in this statement are
»Cash from Operating Activities
» Net Income
»Non-cash Expenses (Depreciation and Amortization)
» Working Capital Charges
»Total Cash from Operating Activities
»Cash used for Investing Activities
» Property Plant and Equipment Purchases
»Increases or Decreases in Market Place Securities
» Cash from Financing Activities
» Issuance or Repayment of Long Term debt
» Transfers to and from affiliates (exchange/transfer of funds between Hospitals affiliated to other entities)
4) Footnotes: Important points such as indicators used to measure charitable commitments, descriptions of changes in accounting principles and affiliate name and transfers etc are discussed in the footnotes attached with the other financial statements.
Normally people are often unaware of the enormous challenges that threaten the very existence of Urban Hospitals. Lack of knowledge of Healthcare Financing and Operations can hinder people in recognizing of hospitals for what they truly are – Community Assets. Even a basic understanding of Hospital Finance can help people understand and assess the combination of the actual business dynamics along with the latest trends of the Hospital Industry.