Hello Dr. A, Classmates,
In the health care industry, we can revert to accounting when speaking about revenues sources and payments. The differences of revenues and expenses provides a balance and this expense is divisible by revenue accrued. The advantages of health care rendered services generate revenue which is always helpful in any economic unit. In addition to this revenue generated can be produced from memorabilia or readily available products inside the facility. If partnerships are formed with other agencies there is yet another form of revenue generated for the parent company also. Revenue is a good thing to have coming in when you are a health care facility.
The disadvantages of receiving revenue from various sources becomes complicated for planning and reporting purposes. Initially the cost to fund certain programs must yield a greater return or the profit margins suffers. If partnerships are ended between parent and subsidiary company the debt incurred may reduce all revenue generated to resolve any legal obligations required to dissolve any contractual agreements. The services provided in health care facilities primarily depend on reimbursement rates from third party payers one large entity is Medicare/ Medicaid. One major disadvantage per (Needleman, J) Institutions that extend the timeframe to repay debt are signs of a struggling financial institution. Additionally, if the value of assets loses value faster than the rate of payment the available cash flow or revenue is not favorable.
Needleman, J. (n.d.) Assessing the Financial Health of Hospitals retrieved from https://archive.ahrq.gov/data/safetynet/needleman.htm
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