Most financial reporting systems will share the following dimensions:

Cost data is usually based upon historical cost

Cost of acquired resources are charged to departments or responsibility centers

Products that can be directly traced to a patient treatment should be costed and charged directly to the patient, regardless of whether they are in a direct or indirect department

Costs in indirect cost centers are allocated to direct cost centers and eventually assigned to products consumed in a patient treatment

In most hospitals, resources are acquired and consumed within departments or activity centers to produce a product or service generally defined by department as its service units (SUs). However, not all SUs can be directly associated with the delivery of patient care; some of the SUs may be only indirectly associated with patient treatment. For example, housekeeping cleans laboratory areas, but there is no direct association between this function and patient treatment. However, the cleaning of a patient's room could be regarded as a service that is directly associated with a patient. Understanding the nature of the production process defines leads to the definition of two sets of costing standards. First, the specific cost of SUs from both direct and indirect departments must be established. These two systems can be established before the fact and used as budgets or they can be determined after the fact and used to establish future budgets or in-control decisions. Accurate costing in any healthcare setting requires the cost analyst to determine the costs of products produced, such as lab tests and patient meals, and to also define either the actual quantities of products that were consumed or will be required in a patient encounter.

The budget is one of the most important documents of a healthcare organization and is the central document of the planning/control cycle. It identifies the revenues and resources that will be needed for the organization to achieve its goals and objectives and allows the organization to monitor the actual revenues generated and its use of resources against that which were planned. A budget is both a planning document, which identifies the revenues and resources that will be needed for an organization to achieve its goals and objectives, and a control document, which allows an organization to monitor the actual revenues generated and its use of resources against that which were planned. While single-year and multiyear budgets vary by the time horizon they forecast, fixed and flexible budgets vary on the basis of volume projections. Fixed budgets forecast for a single level of activity, while flexible budgets forecast revenues and expenses for various levels of activities. The traditional budgeting approach begins with what exists and either gives a slight increase, no change, or a slight decrease to various line items, programs, or departments. By contrast, zero-base budgeting continually questions both the need for each program and its level of funding. It asks, "Why does this program or department exist in the first place?"

Module 10 template.

Use this as a template for the written assignment.Read the text chapter and see Table 11-1 in text (pages 265-268) for more clarification. Select any of the hospital financial audits for this exercise from the folder (or use one from a hospital that you select from public data sources, etc.). You will have to search the audits to find this information.

When you have completed the information below, cut and paste this table into your paper. Do not attach as a file.

Table 1: Analysis of (Name) Hospital Audited Financial Statements 2021-2020

Audit Data Element	Benchmark Measure	2021 Results	2020 Results	U.S. Median
Return on Equity	Excess revenue over expenses/net assets			8.5
Total Margin	Excess revenue over expenses/operating revenue + non- operating expenses			5.0
Revenue Growth	(Operating revenue current year - operating revenue prior year)/operating revenue prior year		-----	5.4
Days cash on hand	(Cash and cash equivalents + long-term investments)/[(Total expenses-depreciation)/365]			33
Days in accounts receivable	Net accounts receivable/(Net patient revenue/365)			53
Average age of plant	Accumulated depreciation/Depreciation expense			11.1
Long-term debt/equity%	Long-term debt/net assets			15.0
Debt financing%	(Total assets - Net assets)/Total assets			42.1
Cash flow to total debt %	(Net income + Depreciation0/total liability			10.5