Sample Essay Paper on Health Care Financial Terms Worksheet

Health Care Financial Terms Worksheet


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Term Definition Scenario
Balance sheet This is a financial statement showing the assets and liabilities of a health institution at any given time. There are two types of assets; Short-term assets in a hospital are the accounts receivable for healthcare services and sale of products, such as medicine, operating cash and short-term investments of less than 12 months. Long-term assets include the land, buildings, and the equipment of a hospital. Liabilities: the short-term liabilities are ending payments for the hospital for either purchase of drugs or payment of outsourced services, such as security or construction services, and are to be paid within 12 months. From the balance sheet, the difference between assets and liabilities indicates the financial health of the hospital and it is the equity (Needleman, n.d).
Statement of revenue and expense It is a record of the sources of income and all expenditure in delivery of healthcare services  In a hospital, revenue can be obtained from various sources, such as government subsidies, donor funding, payment for inpatient and outpatient services, and any other investments that a hospital could be having. The statement of revenue and expenses enables an organization to know whether it is operating at a loss or profit hence showing the financial wellbeing (Needleman, n.d). The records are also important for auditing purposes and avoiding fraud charges because of the multiple funding and reimbursements of healthcare from healthcare insurance programs, such as Medicare, Medicaid, and commercial insurances
Revenue cycle It is the process through which the hospital gets paid for the services provided to inpatient and outpatients. In a hospital, it is not always possible to determine the exact cost of healthcare services before they are delivered. Therefore, some of the services are rendered on credit basis (Gapenski & Pink, 2007). The hospital has to keep a track of the account receivables and follow for reimbursements from the patients’ insurers or wait for the patient to organize for payments. Revenue cycle entails an efficient billing system in order to follow the payments and be reimbursed (Hall, 2004). It is also important that proper agreements are made with the patients or their guardians to avoid bad debts and legal tussles in the process of payment.
Payer mix These are the various sources of payments and reimbursements for healthcare services that include health insurances and government insurance programs, such as Medicare, and other third-party payers, such as payments from patients’ employers Healthcare services are financed by various sources and the multi-financing calls for proper determination of who to fund for services. Third-party payers who are the insurers pay either through fee-for-service or capitation (Gapenski & Pink, 2007)
Revenue It is all the income generated from provision of services, and also funding from governments and donors Hospitals obtain most of the revenue from their healthcare services. Public hospitals are sponsored by the government for most of their expenses. A hospital should have adequate revenue to cater for the patients.


Gapenski, L. C., & Pink, G. H. (2007).Understanding healthcare financial management (5th ed). Chicago: Health Administration Press. Retrieved from

Hall, J. A. (2004). Chapter 4, Revenue Cycle: Accounting Information Systems, 4th. Ed. Retrieved from

Needleman, J. (n.d). Assessing the Financial Health of Hospitals. Retrieved from