The difference of health care services financial management from other fields
Financial management is the process of financing, stewardship, and selection of an organization’s assets. These assets can be the intangible or the tangible things owned or leased by an organization. The selection of asserts necessitates professional judgments, legal fiat and operation. But in final management, assets need to be selected so that they can help the organization reach its financial goal. Financial management looks at the best way to balance risks and the least costly means that would bring the expected returns into an organization.
Professionals dealing with financial management in both small and large organizations are the planners, treasures, analysts, treasurers and accountants. Other non specialists concerned with financial management are the budget managers, trustees, chief executive officers and department directors (Berger, 2008, pp 16).
Financial management in health care organization deals with asset control and its acquisition. It ensures there is cash flow. The financial management in health care organization just like in a bank organization deals with ensuring that assets are put into good use. Also just like other organizations and entrepreneurs, the financial management in health care should base its decisions on the economic principles and one must master the finance fundamentals McLean, 2003, pp 3).
The difference between financial management in health care organization from other settings is the importance and abundance of agency relations. Agency relations, is a situation where by, one party acts on behalf of another; one being the principal and the other being the agent. The two have mutual relations in ensuring that both parties act out of self interest so as To avoid loss being suffered by either of them. All the health care practitioners share agency relationships.
The physicians serve the interest of the patients; the administers serve the interests of the trustees; health care providers serve the interest of capital providers and the third party payers serve the interests of insurance premiums payers. They are the agents to those they serve. The agency relations among these parties have financial effects to the general health care system.
A second aspect which makes health care financial management different from other sectors in the US is that the delivery of health care comprises of a mixture of private non profit organization, the government, and organizations owned by investors. This creates a complex competition of the various organizations that have to co-exist. This leads to confusion of the consumers of health care services. These health care providers have different expectations and motivations. Consumers, therefore, are presented with various choices to select basing on the financial benefit to the consumer. This is the pluralism phenomena which the health care financial mangers are caught up in. They have to consider the goals and the type of the organization for them to make the right decisions in solving the problems they encounter McLean, 2003, pp 4).
A third reason why health care financial management is different from other settings, is that health care service is administered in an environment which is strictly regulated and in a more comprehensive manner than in other organizations. Therefore, in health care setting, capital investment goes beyond making decisions but it is a matter of first being approved by the regulators who need certification. Staff patterns and organization structure are the most crucial factors in cost control. Decision making in the health care delivery system should comply with the acts of the state dealing with professional licensure. Every hospital in the US must present costs reports to Medicare services and Centers of Medicare McLean, 2003, pp 4).
A fourth aspect that is different in financial management of the health care system from other industries is that, it has a wide range of options to financially choose from unlike other sectors. Hospitals which are none profit making are accepted from tax bond in its financing. Such hospitals have the option of borrowing money from commercial banks, can create profit subsidiaries, can use its mortgage in the finance of its plants which are physical, and can partner with other organizations.
The fifth aspect that makes financial management different from the financial management of other sectors, is that most its received revenue is passed to the third -party payouts and not to the clients directly as seen in other sectors. The third party payers like commercial insurance companies, Blue Shield and Blue Cross have the role of reducing the management of patients account collection by the health care provider. They also play the role of ensuring that the services are effectively priced. This is subject to the providers and insurance givers constant negations. The use of the third party payors is called the prospective payment system (Zelman, Millikan, and Glick, 2003, pp 245).
Finally, in today’s US economy, health care delivery is the most rapidly growing sector. The provision of health care services is however, yet to improve. This calls for heath care financial mangers to select the operation assets which can not be externally subsidies. The health care managers currently face the challenge in capital budgeting and working capital management because the accounts are controlled by third party payers unlike other industries (McLean, 2003 pp 5).
Reference
Mc Lean, R (2003) Financial management in health care organization. Cengage publishers, pp 3-5
Berger, S(2008) Fundamental of health care Financial management John Wiley and Sons, publishers, p 16
Zelman, W, Millikan A and Glick (2003) Financial management of health care organizations: an introduction to fundamental tools, concepts, and applications Edition2, illustrated Publisher Wiley-Blackwell, pp 245
