Navigating Financial Challenges in a Healthcare- Perspectives and Strategies for Moving Forward

Navigating Financial Challenges in a Healthcare- Perspectives and Strategies for Moving Forward

Introduction

Financial management focuses on planning for, acquiring, and using funds to maximize the value and efficiency of an organization. In the healthcare sector, the practice of finance has been controlled by the Medicare program, which demands that healthcare providers, mainly hospitals, provide various reports to maximize Medicare revenues and comply with regulations. Third-party reimbursement complications in the healthcare sector mean that a lot of time is spent on cumbersome billing, accounting, and collection procedures. Therefore, instead of focusing on value-adding activities, most finance work in the healthcare sector focuses on bureaucratic functions. An effective financial management plan needs to contain costs, manage care and other payer contract negotiations, integrate participation in the delivery system, and facilitate joint venture decisions. This report will review financial management in the modern healthcare sector and healthcare managers’ involvement in financial management.

The connection between the role of the health care manager and fundamentals of financial management.

Controlling, planning, decision-making and organizing and directing are the basic principles of financial management (Baker et al., 2017). Planning includes identifying the steps that should be taken to accomplish the objectives of an organization. Organizing includes deciding how to use resources in the most effective way to carry out established plans. Controlling includes ensuring that every area of the organization follows the procedures outlined by top management, while decision-making includes making choices among available options. The main duty of healthcare managers is to create a system that can provide the required high-quality healthcare at a maximum profit (Reiter & Song, 2018). Additionally, healthcare managers order and receive supplies, determine budgets, administer benefits and payroll and maintain regular communication. They also conduct regular meetings with patients, vendors, and doctors to assess healthcare needs and how medical decisions affect the finances and procedures of their facilities.

The importance of health care managers understanding financial principles.

Understanding financial principles is interwoven in the provision of healthcare services, hence affecting every healthcare leader and how they lead and take care of their patients (Zelman et al., 2009). Healthcare leaders can be embedded in various academic-affiliated, private, and company-based institutions ranging from speciality to multispecialty and small to large institutions. It is essential for healthcare managers to understand financial principles to enhance their credibility in dealing with financial matters in a healthcare organization and extend the value of stewardship throughout the organization to colleagues, patients, and other stakeholders. Financial accountability is directly connected to the organizational vision, mission, strategy, and values to achieve a high level of financial performance.

The importance of income, liabilities, assets, and profits information to the health care manager.

Assets and liabilities portray to the healthcare manager the healthcare facility’s financial health by laying out a quick way of determining if the facility has enough assets to meet upcoming liabilities and monitoring the facility’s liabilities to eliminate those that hinder the facility’s growth. Healthcare managers can also monitor the facility’s development by looking at previous assets and liabilities and seeing how they have changed over time. Income and profits tell the healthcare manager the profitability of the facility and the segments or services that are more profitable than others, hence allowing them to make the required changes to increase profitability.

Relationship between the role of a chief financial officer or health care financial manager and the understanding of financial concepts

The main role of financial management in healthcare facilities is to regulate risk and money in strategies that help in achieving the facility’s financial goals. The role of a healthcare financial manager or chief financial manager relates to understanding financial management concepts through evaluation and planning, financing, long-term investment decisions, and work capital management. In evaluation and planning, financial management involves the assessment of the financial effectiveness and general performance of the healthcare organization. Therefore, the healthcare financial manager is able to plan for the future and anticipate future financial needs. A healthcare financial manager also participates in long-term investment decisions involving analysis of implementation strategies and determining how investments may affect the facility’s financial future. A healthcare financial manager is also in charge of financing by raising funds for expenditure and determining the cost and benefit of investments. Working capital management entails the management of assets and reducing liabilities to reduce costs, thus increasing profit.

The current challenges affecting healthcare financing at Memorial Hermann

The present challenges affecting healthcare financing at Memorial Hermann are the increased cost of running the healthcare facility and increased uncompensated care costs. The leading cause of the high cost of running the healthcare facility is the rise in the price of medical supplies due to the increase in demand for medical supplies and equipment. The surge in uncompensated care costs is, on the other hand as a result of losses of jobs hence reducing the patient’s capacity to pay for the healthcare services provided.

Mitigation techniques for these challenges

One of the things that can be done to mitigate the challenges at Memorial Herman is creating new payment models. Safarani et al. (2018) argue that reimbursement levels are redirecting more focus on patients. The facility may, therefore, allow patients to pay for healthcare services in instalments. They should select the instalment plan that they are most comfortable with to avoid payment defaults, hence maintaining operations in the facility without pressuring patients to pay for the services they receive. According to Shrank et al. (2021), a reimbursement structure that aligns payment with value and balances affordability with the continued need for innovation could also effectively address the challenge of increased uncompensated care costs. Another strategy is using community members and less specialized individuals to reduce operating costs and redirect the funds to acquire the required medical supplies and equipment.

Conclusion

Financial management in the healthcare sector is crucial because it dictates the quality of healthcare a healthcare facility provides to its patients. Proper financial management enables the institution to have the right amount of funds to purchase medical equipment and supplies and pay healthcare providers on time, thus promoting high-quality healthcare services. A healthcare manager needs to understand the elements and various concepts of financial management due to their role in planning, organizing, decision-making, and controlling activities in the healthcare facility. They need to adopt the viewpoint that proper decision-making requires understanding the facility’s financial position. Long-term plans cannot be made without a proper understanding of the facility’s financial position, and effective management of financial resources requires an understanding of how to interpret financial statements.

 References

Baker, Baker, R. W., & Dworkin, N. R. (2017). Health care finance. Jones & Bartlett Learning.

Reiter, K. L., & Song, P. H. (2018). Gapenski’s fundamentals of healthcare finance.

Safarani, S., Ravaghi, H., Raeissi, P., & Maleki, M. (2018). Financial challenges of teaching hospitals and providing solutions. Journal of Education and Health Promotion.

Shrank, W. H., DeParle, N., Gottlieb, S., Jain, S. H., Orszag, P., Powers, B. W., & Wilensky, G. R. (2021). Health costs and financing: Challenges and strategies for a new administration. Health Affairs, 40(2), 235-242. https://doi.org/10.1377/hlthaff.2020.01560

Zelman, W. N., McCue, M. J., & Glick, N. D. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts and applications. John Wiley & Sons.

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Memorial Hermann is a hospital system facing serious financial issues regarding its operations and meeting its vendors’ financial obligations. Mr. Jones, the chief executive officer (CEO), called a meeting of some of the administrative managers to share their viewpoints on moving forward.

Navigating Financial Challenges in a Healthcare- Perspectives and Strategies for Moving Forward

Write a 3-page response and include the following: (Make sure to include an introduction and a conclusion)

Describe the 3 viewpoints of the health care managers on how to move forward.
Explain why these viewpoints are important in healthcare financial management.
Answer the following:

Discuss how the elements of financial management relate to the function of the health care manager.
Examine why it is important for health care managers to understand financial principles.
What information do income, liabilities, assets, and profits tell the healthcare manager?
How does the function of a healthcare financial manager or chief financial officer (CFO) relate to the understanding of these concepts?
What are the current challenges affecting healthcare financing at Memorial Hermann?
How should these challenges be mitigated?
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