How should HMOs measure their efforts and accomplishments?
Accounting procedures among prepaid healthcare plans vary considerably, so much so that the accounting profession is considering what should be appropriate practice. Some standardarization is needed because of wide variations in measuring performance. This can be an obstacle in discussions of whether HMOs are more efficient than other delivery systems and what type of HMO is most successful. Healthcare expenses can be recognized at the time of payment, at the time they are reported to the plan, at the time services are provided, or in anticipation of future services. The accounting profession has identified four HMO models to determine whether organizational structure should affect financial reporting. The models, which differ in the relationship between the HMO and enrolled members and physicians, are staff model, group model, individual practice association, and network model. The accountants reject recognizing expense at the time of payment because it does not conform to generally accepted accounting principles. They suggest two alternatives: recognizing expense when the service is provided, or recognizing as expense, on the date of initial service, the expected cost of all anticipated services required by the diagnosis. The former approach appears preferable because of its consistency with the way healthcare services are delivered and the logic of accounting theory.
D000066:Accounting / Q000379:methods*; D006279:Health Maintenance Organizations / Q000191:economics*; D008962:Models, Theoretical; D014481:United States