The healthcare industry in the United States is a complex sector with various players including healthcare providers, payers, and pharmaceutical and medical device industries. The industry faces rising costs and pressure to improve quality and access, with issues like addressing chronic illnesses, implementing health IT systems, managing Medicare's long-term sustainability, reducing regulatory burdens, and dealing with continued uninsurance remaining key challenges. Key accounting challenges include revenue recognition, estimating uncollectible accounts, managing reimbursement rates, compliance with regulations, and cost allocation issues. Healthcare accountants and financial analysts need specialized domain knowledge and advanced healthcare-focused accounting systems to manage these challenges. QMK Consulting can help healthcare organizations address these challenges by providing expertise in revenue recognition, uncollectibles and bad debt, reimbursement rate modeling, compliance and regulation, and cost allocation. Their activity-based costing models target overhead allocation issues, and they assist with EHR integrations, MACRA reporting requirements, and provide customized analytics dashboards for finance performance tracking against dynamic healthcare KPIs. Contact their healthcare practice experts to learn more about their services.
About the industry
The healthcare industry in the United States is a large and complex sector that comprises a variety of players. Major components include healthcare providers like hospitals, physician practices, nursing facilities, and home health agencies. Healthcare payers including private insurers, Medicare, and Medicaid also play a significant role.
The pharmaceutical and medical device industries which develop and manufacture drugs, equipment, and supplies are major parts as well. Overall, the US spends far more on healthcare per capita than other developed countries, but also leaves many uninsured.
The industry has faced rising costs and pressure to improve quality and access over time. Issues like addressing chronic illnesses, implementing health IT systems, managing Medicare's long-term sustainability, reducing regulatory burdens, and dealing with continued uninsurance remain key healthcare challenges going forward. The industry makes up a sizable part of the US economy and faces much debate around ameliorating access and costs across the system. Further reforms and policy changes to address these problems remain hotly contested among different stakeholders.
Key accounting challenges faced by the industry
Here are some of the key accounting challenges faced by the healthcare industry in the USA:
Revenue recognition - Healthcare revenue recognition can be complex due to factors like contractual adjustments, reserves, and timing of when services are provided vs paid for. Keeping up with evolving regulations and standards for recognizing different streams of hospital or lab revenues is an ongoing challenge.
Estimating uncollectible accounts - Healthcare organizations frequently have to estimate expected uncollectible accounts from patients based on historical data and write these off. However, accurately projecting the amounts of bad debt and uninsured accounts can be quite difficult.
Managing reimbursement rates - Medicaid, Medicare, and insurance companies are pressuring healthcare providers by often reducing the reimbursement rates or slowing the rate of reimbursement increase. This puts constraints on providers' revenues and margins. Tracking varied payer reimbursement changes requires significant accounting focus.
Compliance and regulation - Healthcare accounting comes with extensive regulation including continued adoption of electronic health records standards, ICD-10 coding, HIPAA compliance, and variable state/federal compliance requirements. Staying on top of regulatory changes and maintaining compliance is an ongoing challenge.
Cost allocation issues - Challenges emerge in terms of appropriately estimating and allocating administrative expenses, material expenses, and overhead costs across different service lines since healthcare delivery can be extremely varied even within one health system. Appropriate cost accounting standards need consistent refinement.
Managing these areas requires healthcare accountants and financial analysts to have specialized domain knowledge and the dynamic regulatory space continues to pose newer challenges periodically. Advanced healthcare-focused accounting systems and skilled personnel can help address these concerns for providers.
How QMK Consulting can help solve these challenges
QMK Consulting can help healthcare organizations address many of these key accounting challenges in the following ways:
Revenue Recognition - We maintain extensive expertise in healthcare revenue recognition requirements and can review current recognition policies against the latest published standards and guidance. Our billings and collections analytics help optimize realization.
Uncollectibles & Bad Debt - QMK leverages advanced predictive modeling techniques to create detailed bad debt and allowance for doubtful accounts estimates that pass regulatory scrutiny while optimizing write-off policies.
Reimbursement Rate Modeling - We build robust financial models factoring in dynamic Medicaid, Medicare and payer mix changes and capitation agreements to better forecast net revenues and required cost savings initiatives needed.
Compliance & Regulation - Our dedicated regulatory compliance specialists stay on top of the latest local, state and federal healthcare laws, regulations and codes to ensure accounting policies meet legal standards for reserves, reporting, filings and disclosures across service lines.
Cost Allocation - QMK's activity-based costing models specifically target overhead allocation issues to match expenses to different patient types more accurately. Regular cost center performance analyses highlight optimization opportunities.
Additionally, we assist with EHR integrations, MACRA reporting requirements and provide customized analytics dashboards for finance performance tracking against dynamic healthcare KPIs that augment in-house analytics capabilities. Contact our healthcare practice experts to learn more.