Part II: Record Financial Operations

Transcription

1 Part II: Record Financial Operations CHAPTER 5: EPENSES: (OUTFLOW)

2 Overview: The Distinction Between Expense and Cost Expenses are expired costs that have been used up, or consumed, while carrying on business. Expense in the broadest sense includes every expired (used up) cost that is deductible from revenue.

3 Overview: The Distinction Between Expense and Cost Cost is the amount of cash expended* in consideration of goods or services received (or to be received). * (or property transferred, services performed, or liability incurred)

4 Overview: The Distinction Between Expense and Cost Costs can either be expired or unexpired. Expired costs are used up in the current period and are matched against current revenues. Unexpired costs are not yet used up and will be matched against future revenues.

5 Charges add Costs take away

6 Disbursements for Services Disbursements for services represent an expense stream (an outflow) Disbursements for services can trigger payment either: when the expense is incurred; or after the expense is incurred.

7 Disbursements for Services Payment when the expense is incurred does not require the expense to enter the Accounts Payable account. Payment after the expense is incurred requires the expense to be recorded in the Accounts Payable account. It is then cleared from Accounts Payable when payment is made.

8 Grouping Expenses for Planning and Control Grouping by Cost Center One form of responsibility center. Grouping by Diagnoses and Procedure Beneficial because is matched costs and common classifications of revenues. Study chapter examples.

9 Grouping Expenses for Planning and Control Grouping by Care Settings and Service Lines By care settings recognizes different sites where service is delivered; By service lines would be used for grouping costs if revenues were divided by service line. Study chapter examples.

10 Grouping Expenses for Planning and Control Grouping by Programs Distinguishes projects that posses their own objectives, funding, and indicators. Study chapter examples.

11 Cost Reports As Influencers Of Expense Formats Since the mid-1960s Annual Cost Reports are required by the Medicare Program and the Medicaid Program.

12 Cost Reports As Influencers Of Expense Formats The arrangement of costs into Cost Centers (on the cost report) has strongly influenced the arrangement of expense line items in many health care information systems.

13 Grouping Expenses by Cost Center: Example Cost centers are one method of grouping expenses. For example, a nursing home may consider the Admitting Department as a cost center. In that case the expenses grouped under the Admitting Department may include: Administrative and Clerical Salaries Admitting Supplies Dues Periodicals and Books Employee Education Purchased Maintenance

14 Grouping Expenses by Cost Center: Practice The Metropolis Health System groups expenses for the Intensive Care Unit into its own cost center. Lab. and Laundry expenses are likewise grouped into their own cost centers. Required: 1. Setup a worksheet with columns across the top for three cost centers: Intensive Care Unit; Lab. And Laundry. 2. Indicate the appropriate cost center for each of the following expenses: Drugs Requisitioned Pathology Supplies Detergents and Bleach Nursing Salaries Clerical Salaries Uniforms (for Laundry Aides) Repairs (parts for microscopes) Intensive Care Unit Laboratory Laundry

15 Intensive Care Unit Laboratory Laundry Drugs Requisitioned Pathology Supplies Detergents and Bleach Nursing Salaries Clerical Salaries Uniforms (for Laundry Aides) Repairs (parts for microscopes)

16 Grouping Expenses by Cost Center: Assignment The Metropolis Health System s Rehabilitation and Wellness Center offers outpatient therapy and return-to-work services plus cardiac and pulmonary rehabilitation to get people back to a normal way of living. The Rehabilitation and Wellness Center expenses include the following: Physical/Occupational Therapy Rehab Cardiac Pulmonary Training Administrative Nursing Salaries Physical Therapist Salaries Occupational Therapist Salaries Cardiac Rehab Salaries Pulmonary Rehab Salaries Patient Education Coordinator Salary Nursing Supplies Physical Therapist Supplies Occupational Therapist Supplies Cardiac Rehab Supplies Pulmonary Rehab Supplies Training Supplies Clerical Office Supplies Employee Education Administrative/Clerical salaries

17 Physical/Occupational Therapy Rehab Cardiac Pulmonary Training Administrative Nursing Salaries Physical Therapist Salaries Occupational Therapist Salaries Cardiac Rehab Salaries Pulmonary Rehab Salaries Patient Education Coordinator Salary Nursing Supplies Physical Therapist Supplies Occupational Therapist Supplies Cardiac Rehab Supplies Pulmonary Rehab Supplies Training Supplies Clerical Office Supplies Employee Education Administrative/Clerical salaries