Some generally accepted accounting principles (GAAP) apply only to health care, and there are many health care organizations that use other comprehensive bases of accounting when GAAP does not apply -- for instance, an HMO that must report to a government regulatory agency using that agency's guidelines instead of GAAP. What is so unique about health care that it would cause accounting principles to change? This is so confusing to me. Can anyone help me understand this?
There are a few different reasons as to why health care reports under different accounting principles. The first main reason is because in the health care industry, some organizations are government owned (like the VA hospital) and others aren't. This automatically would require the non-government organizations to use accounting principles based more on GAAP than the government owned institution. The government owned facilities would have to adhere to principles as set forth by GASB (Governmental Accounting Standards Board).
The accounting required for government vs. non-government facilities is drastically different, in various circumstances. The main reason is because for the government-owned facility, the financial statements are prepared with the user in mind - those with interest in the government owed facility. When preparing the financial statements for the non-government owned facility, ...