healthcare financial management epub

healthcare financial management epub

Optimizing Financial Management in Healthcare Organizations: An Epub Guide

1. Introduction to Financial Management in Healthcare

In the past, clinical federations have been formed to give physicians control over expenditure. The aim is autonomy of judgment. In settings where organization implies a clear division of responsibilities, with benefits linked to results, the temptation is to engage staff in the attainment of predetermined objectives. Unfortunately, reports mention that some self-governing groups only have a limited budget. Staff associations have often been accused of exploiting their strong position. These have even been described as a state within a state or as a syndicate with a privileged situation and a clear conflict of interest. Defending personal interests is contrary to a non-professional managerial attitude and does not contribute to hospital management.

Healthcare operates in a challenging and competitive environment associated with limited resources. Clinicians and hospital administrators must maintain or improve patient care under severe budget constraints. Concern is expressed about an increased demand for healthcare services and the limited resources available for these. Medical staff are being asked to become more cost-conscious. In the past, they were accused of worrying more about the patient than about costs. Physicians may not appreciate the cost-benefit aspects or the usefulness of healthcare resources that do not contribute to the quality of care. Neither do they always understand, or have decision-making powers regarding, the use of such resources.

2. Key Financial Concepts and Principles in Healthcare

As a non-profit enterprise, the goal of a healthcare organization is to contribute to the public good. To accomplish this goal, it must be financially viable over an extended period. This chapter examines the key elements involved in financial planning. Discussed here are the conceptual differences between the traditional model of business finance and that for a healthcare organization. Attention is also focused on mechanisms and practices that contribute to financial viability and how management is held accountable for the stewardship of institutional resources. In addition, discussed are how business decisions in a healthcare organization are informed by financial considerations. Finally, financial reporting differences, based upon the type of organization are addressed. The reader is cautioned that healthcare finance discussions have inherent contradictions and are surrounded with much confusion. These are mostly generated by the not-for-profit nature of the business under review. The reader should bear in mind that analyses and decisions in a for-profit enterprise have more universally accepted solutions, while those for a not-for-profit come with a variety of potentially viable answers. It is generally thought that proprietary goal setting, clear market dynamics, and market discipline bring clarity and objectivity to business results. These attributes are particularly valuable in a health care environment laden with moral and ethical issues. Furthermore, it is becoming increasingly more difficult to distinguish between service as a commercial or social activity emphasizing the need for objectivity and clarity in the narrower aspects of contract fulfillment by the business manager. This book’s focus is operational rather than policy-oriented. However, some broad approaches can be observed from broader healthcare policy, particularly the essential role of the not-for-profit portion of the industry. What emerges is a mixed business model for healthcare enterprises, the merger of the traditional business with the not-for-profit sector. Even this broad policy perspective is contentious. The reader is encouraged to ask questions addressing broad strategic (mission) questions in healthcare while working through practical financial management topics and issues presented in this book. The critical financial management functions in any business environment include goal setting, acquiring and employing assets, performance measurement, and learning with respect to the future. The focus here is on these four core functions in a not-for-profit healthcare settings. In the long term, there are commonalities in the financial management practices of the business and the not-for-profit entities; however, in the short term, the tension between purpose and performance consideration is more pronounced for the not-for-profit healthcare setting.

3. Challenges and Opportunities in Healthcare Financial Management

Advancements in technology and processes are redefining several areas of finance, digital payments, electronic bill payments, time and expense, global financials, budgeting, auditor reporting/revenue recognition, and healthcare business intelligence. When managed and monitored properly, these features can make a significant impact on financial management practices, allowing the possibility of lower non-patient-serving spend and an optimized healthcare service cost. With the growing need to support more cost-effective ways of maintaining infrastructure and resources, finance is rapidly becoming one of the most important strategic supporters. By working on self-service and complete process automation, healthcare CFOs are reframing their objectives, becoming strategic corporate assets, and actively promoting and shaping opportunities. Data governance and management, in combination with business intelligence, are driving significant value through increasing compliance, increasing revenue getters, increasing competition, and rising profits through better operations evidence.

Healthcare financial management is a complex area that focuses on managing a healthcare organization’s money effectively and efficiently. The main areas of financial management are healthcare revenue cycle management (RCM), healthcare expense management (HEM), and grants and revenue generation. Many factors drive the need to manage financials effectively, including an increased focus on improving patient outcomes, changes in regulatory guidelines, increased focus on efficiency across departments using unique and often niche technology, and a significant percentage of employees across healthcare being paid for working. One of the most significant challenges in this area is the need for standard integration between projects that drive a healthcare organization’s costs and operations.

4. Best Practices and Strategies for Effective Financial Management in Healthcare Organizations

There is something about financial management in healthcare that sets it apart from other possible subfields of business economics. Whether that “something that sets it apart” is the institutional setting in which some unique forms of financial market relationships are established, or whether it is the nature of often making critical healthcare delivery decisions about the life and death of a patient, this uniqueness elevates the financial management concepts learned in a basic course into the most tactically implementable concepts in any strategic management course.

Working in harmony with those ideas, as well as with the broad array of other tactically derived ideas that have been developed for even the most specific strategic management courses, is the key to managerial success in a hospital. Financial management concepts differ, of course, in the specific tools used to convey information to help make the critical decisions associated with financial management issues, but several similar terms, such as discounted cash flow, breakeven, and contribution margin, appear across the breadth of strategic management. The purpose of this guide is to provide some of the best practices and high-impact strategies for creating excellence in financial management in a healthcare organization.

5. Case Studies and Practical Applications

For many years the contributing writers to this section have used all of their creative talents and skills to make healthcare distribution and delivery acceptable. The enormous costs associated with healthcare delivery continue to menace the finance of local, state, and national health plans. Many have predicted and know that what finally will kill these health plans is the cost of medical care. Unlike the military, the police, public service, and public education, the costs of healthcare have now taken too much money from the majority of workers. Counting on the government will not help. It could and would increase the net economic drawbacks of healthcare financing. The politicians are too cowardly to admit this. Only action by the healthcare organization will alleviate these problems. The financial management nurse will assure that the hospital and the lives it saves remain in the black.

Over the next few years, all of the best-known healthcare financial situations will be reviewed and studied. It is anticipated that when these studies are complete, the majority of financial managers will use at least a percentage of the strategies outlined in these case studies. All hospitals will want to become “the best and the cheapest”. The entire healthcare and financial services industries will learn how to adapt their skills and expect smaller profit components. They will learn how to make these small fractions pay for larger and larger users of services. The team approach to patient care will become more popular, viable, and necessary for economic survival. One very expensive provider of service will now become, whenever possible, the least expensive. This entire scenario is what healthcare management financial management in healthcare is all about. For many decades people have talked and written about healthcare distribution and delivery.