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The Role of Accounting in Healthcare Management

Posted by Angie Walters, CPA, CITP on Nov 5, 2018 12:00:00 PM

Sound financial management is critical in any industry, but healthcare is particularly challenging because the industry changes so fast. The Affordable Care Act (ACA), changes in Medicare coding and the increased adoption of electronic medical records have made medical accounting more complicated, calling for a firm understanding of accounting procedures and practices. Additionally, the accounting department within a medical office must follow set Generally Accepted Accounting Principles (GAAP) guidelines to avoid fees, fines, and criminal charges.

As a healthcare practitioner who owns your practice, you count on an office manager or financial professional(s) to ensure your business is running at its full potential. After all, you need to be able to pay your bills, meet payroll responsivities and make a profit so you can continue to build your practice. But how do you know if you can improve your revenue with the elimination of poor practices and reduction of inefficiencies? 

Understanding Revenue Cycle Management

Nowhere is accounting more important in a medical practice than in revenue cycle management (RCM). Income (revenue) is the lifeblood of any business. In healthcare, RCM calls for:

  • Managing a medical office’s payments received
  • Processing and tracking, which can often become complex
  • Determining patient eligibility for specific services
  • Collecting copays, as applicable
  • Coding procedures and services accurately
  • Following up on denied claims 

When these tasks are carried out with sharp attention to detail and a proactive approach to following up, your practice is in good shape. However, that depends on all of your staff understanding their role in RCM. Let’s face it, everyone is multitasking, which has its advantages. However, without a well-documented workflow, it’s easy to miss tasks, which can lead to inaccurate reporting, costly errors and even irritated patients who are more likely to look for another doctor. 

See related blog: 5 Tips for Managing the Cash Flow of Your Medical Practice

Red flags 

Is your accounting staff/individual properly trained in accounting procedures and processes? Are they taking advantage of special medical billing software to help track a complicated claims processing system?

To fully optimize a revenue cycle management, one mistake can throw off the entire practice’s ability to be profitable. For example, who is confirming patient eligibility, insurance status and checking for co-pays? Is there a consistent schedule of following up on claims? A well-documented workflow is a must to avoid missed tasks.

Coding practices are a significant source of risk, whether intentional or inadvertent. All providers within your practice must coordinate with IT tasks to be on the same page for procedures. You may even want to consider an independent outside agency to detect any questionable coding practices.

While technology has helped practices to become more efficient, highly automated claims processing can remove the human oversight of your billing process, and in some cases hide internal fraud.


Practitioners and office management have to regularly communicate with staff so that everyone understands their roles. If you do not review financial reports on a regular basis, the result can be inaccuracy in collections, accounts receivable and revenue.

When you have highly-efficient revenue cycle processes and well-documented workflows in place, your practice will likely see increases in revenue/payments and decreases in bad debt write-offs. When you don’t, you will likely receive significantly lower revenue.

Unless you are certain that your accounting practices and personnel are right on the mark, it may be time to have your accounting operation reviewed for accuracy, efficiency and full realization of revenue. Have questions about increasing profitability in your medical practice? Contact Angie Walters at 214-635-2547 to learn about our Medical Practice Advisory Services.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Medical