healthcare financial management

healthcare financial management

The Importance of Financial Management in Healthcare

1. Introduction to Healthcare Financial Management

Understand that healthcare organizations have much bigger stakes at risk; these entities are obliged to meet strict internal and external operating principles to function successfully. The organizations must have strong leadership. Effective financial management ranks at the very top of these tenets. The essential backbone of financial management in healthcare organizations is a healthcare finance team. The team is designated to provide healthcare financial information in a transparent way. The entire organization benefits from the oversight and control they attain. The healthcare financial management team is vital in ensuring that healthcare organizations run successfully. These functions include financial reporting, revenue management, budgets, and capital management.

Financial management is an organic function of a healthcare organization. One of the keys to a successful organization is successful financial management. According to the Healthcare Financial Management Association, financial management is the best resource for understanding how the financial functions integrate within the healthcare organization. This is not saying that the finance department is the nucleus of the accounting and budgeting functions, but that it is an integral part of every department within the healthcare organization. Financial management measures the effectiveness of how healthcare entities meet their fiscal obligations. Financial management is comprised of four major elements: improved performance, improved service processes, rapid change, and cost efficiency. The Healthcare Finance Management Association is comprised of finance professionals within the healthcare realm. This organization is a valuable resource for individuals seeking information about financial management.

2. Key Principles and Concepts in Healthcare Finance

The Budgeting Process: The budgeting process is part of an organization’s prediction and estimate of costs and services. It requires that the organization prioritize its services based on customer needs and that the organization makes efficient use of resources.

The Key Measurement Method: Managers need to carry out their measurement systems to assess the performance of different areas for motivation and to prepare budgets. The Key Measurement Method is used in manufacturing and consumer-based companies like John Deere and a number of electric power companies. Nevertheless, no healthcare organizations utilize this management approach unless manufacturers such as General Electric and Citibank manage them. Digital display is used by the managers to monitor their cost, quality, and numbers of hours.

Economic principles underlie the entire field of finance, whether in the corporate, public, or personal sector. Thus, these core principles are relevant to understanding the financial aspects of healthcare. A working knowledge of finance can help managers make better short- and long-run decisions. Financial managers, especially those in healthcare organizations, face constant issues regarding financial matters. They must deal with accounting and financial institutions, financial attributes of an enterprise, and regulations and laws imposed by the public sector. In addition, the advent of advanced integrated financial systems has added more functions to the traditional financial manager role. Thus, financial issues are not narrowly defined but rather cover a broad range of important concerns. It is important that a healthcare organization have knowledgeable financial managers and systems to oversee these critical functions.

3. Financial Challenges and Strategies in the Healthcare Industry

The deficit the profession is experiencing in these areas warrants consideration by the academic community in relation to how we educate our students to function in the healthcare of the future. Neither convenience nor ease of use are valid reasons to ignore these financial pressures, nor are they valid reasons for not imparting financial knowledge to the persons who will lead the healthcare profession. Outpatient physical therapy clinics and physical therapists in managerial positions continue to be primarily dependent upon fee-for-service reimbursement for payment rendered. Decreasing numbers of PT practices are now getting involved in insurance contracts that require payment from the insurance company. With this decrease, additional financial pressure is exerted on the private practitioner. Without a significant infusion of direct public or private funding, it is unlikely that these pressures will lessen in the foreseeable future. This demands a professional awareness of, and an open dialogue about, the financial aspect of healthcare.

Financial management in healthcare is recognized as an important aspect of the profession and is consistent with the professional’s responsibility to render the best patient care. As insurance companies and managed care organizations impose tighter restrictions on patient treatments, and a population of increased individuals requires healthcare, the healthcare clinician must become cognizant of the financial side of healthcare. As the owner of an outpatient orthopedic physical therapy (PT) clinic, the first author is predominantly responsible for the financial success of the company. This responsibility is well beyond the typical interest area of the PT, making financial management and learning a much more daunting task. Many clinicians have a strong desire to increase their financial skills.

4. Technological Innovations in Healthcare Finance

In the context of globalization, world-class technologies and standards in management systems have guided the attention of health managers and are explicitly recommended by policy makers. The gradual advancement of technology and changes that have taken place in our society and in the business world have led to profound changes in the healthcare industry, where the integration of new technologies can have direct implications on clinical practice, thus creating a link between infrastructure and the result of strategic healthcare action. It is therefore important to identify new solutions, review major concepts and present future study areas, in terms of strategic options that can positively impact the framework of contemporary challenges in healthcare finance.

The ongoing worldwide reform of the current healthcare system aims at modernizing the delivery of healthcare services, patient’s knowledge and accountability, and considerably improving communication among providers and payers through the use of the most advanced information systems. Specialized software products for healthcare finance can provide advanced services for data integration with all different clinical and administrative sources so as to support an improved planning process, based on more reliable patient-and-disease data to project case volume and related revenue, in order to optimize patient outcomes. The process of authorization by payers can be also enhanced by computerized management of the documentation of clinical labor and items related to each patient, to guarantee collection of full reimbursement for treatment modalities. These benefits can also be typically generated from computerized coding, charge posting, claim processing, and patient billing modules.

5. Conclusion and Future Trends

Finally, a brief analysis of the results was performed. In general, the values may indicate low efficiency of current processes, which highlights the potential application of evaluated models. Even in a simplified and possibly inappropriate way, we also adjusted the first suggested model to attend the holistic modeling, observing the aggregated operation of the 2nd level activities, the description of which is very important because it can be easy to verify substantial differences between models’ binary outputs and the operated scenarios. However, the accounting of all relevant variables and concepts that could provide a better performance resolution should be increased. Although the results obtained here indicate that both the direct and holistic approaches can adequately be utilized in the form put, mainly when the use of finite resource restrictions are coherent and considered. It is essential to consider the combination of resources to enable the FP to achieve the goals presented.

This work aimed to produce a basic guide on how to use Data Envelopment Analysis (DEA) technique to assess the financial performance in the Health Care Industry. So, we first define the concept and expose the main characteristics and applications of it. After that, we present a detailed and practical account of DEA, emphasizing theoretical concepts, foundations, main characteristics, its mathematical models, and how DEA has been utilized to assess efficiency in Health Care. The explained models were used to produce examples of how they can be applied in real cases, using companies from a healthcare database. Besides, we relate DEA to other linear programming techniques that have also been used for the same purpose. We finish this model by making an assessment of the future scenarios of health care financially seen, mainly in Brazil, exposing our conclusions and lessons from the described applications.