In a NUR-621: Principles of health care financial management course, learners study principles of health care financial management and the role of financial responsibility within health care organizations. Along with an overview of operational budgets, learners dig into the key aspects of the economic drivers and financial requirements impacting organizations, including the financial demands and implications of specific health care delivery models, efficient staffing models, and the management of operational expenses. Moreover, learners also examine the challenges of aligning key financial performance indicators with safety and quality measures as required in the evolving health care industry.
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What is financial management in healthcare?
Financial management includes handling routine financial operations, such as negotiating contracts, making cash available for expenses such as payroll, and maintaining a cash cushion for unexpected costs. For the healthcare organization stakeholders and managers, financial management means providing the other members of the healthcare organizations with information to make strategic plans to prepare for the future. For instance, in a healthcare organization, financial management may involve activities such as large physician practices and hospitals (healthcare providers) deciding to offer expanded tests or treatments by buying new medical equipment. Helping to make the decision and finding the best way to pay for it are both parts of financial management.
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Five key principles of financial management.
Consistency.
All transactions in a healthcare organization must be handled in a consistent manner. This means that policies and procedures have been established to address similar types of transactions in a routine manner.
Timelessness.
Transactions in healthcare facilities must be handled within a reasonable period of time consistent with time frames outlined for federal agencies, or private sponsors.
Justification.
Healthcare organizations should have a reason for the transaction that supports the organization project’s goals and follows the guidelines outlined by federal agencies or a private sponsor.
Documentation.
The healthcare organization must provide sufficient documentation to support the transaction. Most importantly, this documentation must be retained, organized, and complete enough to stand up to an audit.
Certification.
All healthcare organization’s transactions must be official and carry all the correct authorizing signatures.
10 objectives of financial management in healthcare.
1. Careful Evaluation and Planning
In a healthcare organization, financial managers evaluate the organizations’ effectiveness and overall financial health. Careful planning allows them to plan for the future. Additionally, careful evaluation and planning also help the healthcare facilities to make plans to update their technology.
2. Generating Income
Financial management enables healthcare organizations to invest in assets thus ensuring financial sustainability. Moreover, financial managers regularly review the prices of health care services to reflect market rates all with a goal of generating income and remaining competitive. Additionally, they evaluate the effectiveness of the various departments within hospitals. They may also generate income through entail considering whether to launch new services.
3. Protecting Tax Status
Health care management teams focus on compliance with tax-exempt laws and regulations to avoid losing money spent on paying fines and taxes which would otherwise be avoided by following the laws and regulations.
4. Monitoring Internal Spending
Healthcare finance managers are responsible for monitoring spending to detect fraud and the misuse of funds. Finance managers also set up special teams to conduct monthly audits on all purchases for drugs and equipment to help prevent fraud and misappropriation of funds.
5. Influencing Third-Party Payers
Healthcare finance managers negotiate fair rates so they can retain the most patients and still get the appropriate amount of payment for the care they provide. Thus, healthcare financial management teams develop strategies to help facilities lessen the financial risks that are associated with entering into agreements with third-party payers by negotiating the best possible contracts.
6. Long-Term Investment Decisions
Financial teams in healthcare organizations are involved in making big decisions around investments with input from managers at all levels. Most importantly, they use their expertise to determine how various investments might positively or negatively impact their financial future.
7. Financing
Finance managers also have to raise funds to meet their expenditures. They accomplish this in a variety of ways including fundraising, getting loans, or using other internal funds. They have to make their decisions based on evaluations of the cost and the benefit of the investment or type of debt incurred. The senior manager usually makes the final decision and he or she may bring in an expert to determine what they need, how much it will cost, and how they will fund it.
8. Working Capital Management
Financial teams in healthcare organizations take part in managing capital so that the organization can lessen costs and increase effectiveness.
9. Contract Management
Financial managers create a defined process and flow for the organization’s contracts which helps to prevent mistakes and ensure compliance.
10. Financial Risk Management
Financial managers work with risk management teams to prevent or mitigate losses in healthcare organizations.
