Running a private hospital is complex by nature, and that complexity inevitably finds its way into the financial statements. For this reason, external audits rarely focus only on the numbers. Just as important are the underlying processes, management judgments, and the quality of the information supporting them.
Revenue recognition is often one of the most sensitive areas. Private hospitals typically deal with a mix of insurance companies, corporate clients, and self‑paying patients, each with their own pricing structures, billing timelines, and contractual terms. Getting revenue recognised correctly, especially close to year‑end, requires careful attention. Where processes are unclear or cut‑off is not well controlled, this is often where audits become more involved and adjustments arise.
Receivables are another recurring focus. Auditors will look closely at whether balances are recoverable and whether provisions are supported by evidence rather than assumptions. This means hospitals need a solid understanding of their payer mix, collection history, and settlement patterns. Estimates that are not clearly backed by data, particularly in relation to insurance recoveries or older patient balances, are likely to be challenged.
Internal controls also play a key role. Many private hospitals still rely heavily on manual processes, particularly in billing and collections. While this is common in the sector, it naturally increases audit attention on how controls are designed and how consistently they are applied. Weak documentation, informal approval practices, or limited segregation of duties can quickly surface as audit issues if not addressed in advance.
Experience shows that early preparation makes a real difference. Open discussions with auditors before year‑end, covering key risk areas, significant judgments, and any operational changes, can prevent surprises later on. More importantly, they give management the opportunity to resolve potential issues before they turn into delays or disagreements during the audit. Management that takes this approach tend to go through audits more smoothly and produce more robust financial reporting.
At Baker Tilly, we work closely with the management teams of private hospitals to support audit readiness, combining technical expertise with a practical understanding of the sector’s day‑to‑day realities.
