Final answer:
Private health care organizations follow FASB standards, while governmentally owned health care organizations follow GASB standards, reflecting the differentiated financial reporting required for the private sector and government entities.
Step-by-step explanation:
Private health care organizations follow FASB (Financial Accounting Standards Board) standards for accounting and financial reporting, while governmentally owned health care organizations follow GASB (Governmental Accounting Standards Board) standards. This distinction reflects the different environments in which these types of organizations operate. Private institutions such as a private hospital typically adhere to FASB because they are part of the private sector, whereas government bodies like the Department of Health and Social Services or other governmental agencies rely on GASB standards due to their responsibility to taxpayers and governmental oversight. In instances such as a nonprofit health organization, it may depend on the specific circumstances, but many nonprofits will follow FASB unless they are closely tied to a government entity.
In offering health care coverage, both public and private healthcare systems face unique challenges. Public healthcare is funded by tax dollars and is generally not subject to market competition, while private healthcare relies on private funding and is subject to the pressures of the marketplace. The type of financial reporting standards they follow reflects these structural differences.