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Business in Healthcare Essay

  1. Why is accounts receivable aging process in a healthcare organization?
  2. What would happen of the organization did use it or did not use this method.
  3. What are the advantages of inventory control in a health care organization?
  4. Does `just in time ` inventory control apply to the health care organization?

Accounts receivable aging process in a healthcare organization is a technique of demonstrating periodically the status of the invoice that is given to customers for goods and services.   It is an important aspect of the budget process in an organization.  The customers may not pay in cash for their healthcare services.  Some healthcare markets may run on a credit system. The accounts receivable aging process would ensure that the healthcare organization actually keeps a track of what payments the customer has to make, and the balances that are recoverable.

In this way, the organization would be receiving its dues on time and help meet the operating costs. An accounts receivable aging process would also help to maintain relationships with the customers.  The organization can frequently call up the customer and can ask about the pending invoices.  The organization would also identify situations in which relationships with certain clients have to be cut and future transactions abandoned, arising from long due debts.

If several clients are not paying their dues to the organization, then the organization may have to cut such relationships in order to protect its financial situation.   The accounts receivable aging process may also be utilized to identify those customers from whom advance payments should be collected.  Accounts receivable aging would ensure that the reports of the invoices are recorded and are provided as and when required to the authorities of the organization (Wise Geek, 2007).

Recent studies have shown that account receivable aging process is a very important aspect in healthcare organizations due to several factors including high amount of competition, felt need to lower the operations costs, and higher spending on health packages purchased by the consumers.  A healthcare organization in the US had faced losses to the tune of 200 million dollars due to failure of the consumers to pay for their pending bills.   Slowly, the healthcare organizations are beginning to understand the importance of account receivable aging process.

The billing staff are being made aware of various aspects including checking the previous balances, clearing the claims, etc.   At this point of time, there is a sudden increase in the costs of providing healthcare for the patients.   Studies have shown that there may be an increase of about 20 to 40 %.   Hence management of account receivables is all that more important (Bridge Front, 2007).

Having an effective inventory control system in the hospital would have several advantages.   It would ensure that there are no shortages and compromises in the provision of patient care.  In case of an emergency (such as an epidemic or a disaster), an effective inventory control system would ensure that the hospital can meet a sudden rise in demand of patient care.   An inventory control system would ensure that the organization could procure the logistics at a lower rate (considering that discounts and rebates would given for bulk purchases).

The merchant supplying the logistics would also reduce the costs due to lower transportation and operating costs.   An effective inventory control system would also manage wasteful or excessive use of resources.   The hospital can procure the logistics as per the needs and effectively prevent stocks from getting expired in the hospital storeroom. An effective inventory control system would also ensure that all types of consumables including the slow moving and the fast movable ones are procured and handled appropriately (Barlow, 2005 & NIHFW, 2002).

Just-in-time (JIT) inventory control is a new method of managing the inventory in an organization.   It could also be applied in a hospital, but it should ensure that the supplier is trustworthy, familiar and reliable.  A JIT system would help to lower wastages, use space for other purposes, help in reducing the costs, etc.   It would also play a role in improving the quality of care provided (Kenny, 1992).


Barlow, R. D. (2002), Secrets to smart inventory control, Retrieved on September 19, 2007, from Find Articles Web site: http://findarticles.com/p/articles/mi_m0BPC/is_3_29/ai_n12936488

Bridge Front (2007), Front-end Focus, Staff Education Key to AR Management, Retrieved on September 19, 2007, from Bridge Front Web site: http://www.bridgefront.com/news/news_2007.05.14_cb.php

Kenny, B. C. & Symonds, S. B. (1992), Just-In-Time Inventory Management; Application and Recommendations for Naval Hospital, Oakland, DTIC. http://stinet.dtic.mil/oai/oai?&verb=getRecord&metadataPrefix=html&identifier=ADA261824

NIHFW (2002), Material Management, New Delhi: NIHFW.

Wise Geek (2007), What is Accounts Receivable Aging?

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, Retrieved on September 19, 2007, from Wise Geek Web site: http://www.wisegeek.com/what-is-accounts-receivable-aging.htm

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