There are different objectives of the healthcare financial management. The financial management has to find ways of generating an income. This involves coming up with ways of finding funds that will support the activities and operations of the organization. This includes making decisions that involve the use of internal and external funds, and the use of capital and debt. The management generates additional income by billing and collecting the revenues from their operations and by managing the current assets more effectively so that they are more productive (Buchbiner & Shanks, 2008). The financial management has to find a way of ensuring that the organization remains profitable. This will ensure that it is able to invest in the latest technologies and in the process provide better services to the people. Generating profits also ensures that the organization continues providing essential services to the community. When determining a way to generate income for the organizations, the management must ensure that it complies with the industry and government regulations, and that it acts in the best interest of the community. This means avoiding activities that will make the services provided more expensive.
The financial management ensures that it is aware of the government regulations and that the health institution implements the established regulations. The government has developed regulations, especially pertaining to government programs in healthcare. The financial manager should be aware of such regulation to ensure that the organization complies with the law. The management should be aware of how taxes will affect its revenues. It should comply with the law by ensuring that the organization pays the federal, state, and local taxes. Local and state tax laws differ in various locations. Congress can decide to change the federal tax laws and the financial management should be aware of this. Financial management in not-for-profit organizations identifies areas where the organizations are exempted from paying taxes. Finance managers in for profit organizations identify ways of reducing their tax liabilities (Buchbinder & Shanks, 2008).
The management is responsible for negotiating, signing, and monitoring contract with third party payers. Dealing with third party payers is often complicated and involving. It involves collection procedures as well as dealing with cumbersome accounting. Third party payers include commercial insurance companies and government programs such as Medicare and Medicaid. Medicare and Medicaid programs mandate what they pay the health providers, and the finance management does not have the benefit of negotiating. However, the finance management is involved with tough negotiations with commercial insurance providers (Berger, 2008). The finance management should be aware of the different reimbursement methods, and conditions for reimbursement. The methods used for reimbursement include cost based, charge based and prospective payment methods. Many of the hospitals are reimbursed using the national rates, and some hospitals have to make certain adjustments, which increase reimbursement rates received.
The financial management has to find ways of analyzing and controlling costs. Failure to do this often constitutes mismanagement of resources, and this might hinder or stop the institution’s operations. The management finds ways of saving money on healthcare through cost control measures. The management records and analyses all cost information across the organization. It analyses and compares the actual costs to the estimated costs on the budget. By doing so, it determines where the organization has spent the money effectively, and where there has been misuse or misappropriation of funds. This enables the management to propose and implement measures that will lead to more effective fund management. The finance management sets the prices that will maximize the revenues for the organization, while at the same time benefit the community (Berger, 2008). The finance management controls the costs through budget formulation and implementation and implementation of performance standards which measure and evaluate productivity (Herkimer, 1986).
Financial managers influence methods of payment and the amount that the workers receive as payment. They create incentive compensation plans, which ensure that the managers are compensated for their performance. With this incentive, the manager has to work hard to ensure that the organization performs so that he or she will receive a handsome compensation. The financial management influences methods of payment and the amount received through discounts and prices charged (Buchbinder & Shanks, 2008).
Financial management has the responsibility of monitoring physicians. The financial management has the role of making appropriate decisions. Decisions concerning workers in the organization affect the way that the organization will perform. The management has to ensure that the decisions they make are profitable to the organization. Such decisions include hiring of competent and knowledgeable workers who will be productive to the organization. They do this as a way of controlling and reducing the financial risk to the organizations. They monitor the risk posed by the medical staff and their potential liability to the organization. Factors such as negligence on the part of the physician are great financial risks to the organization, and the financial management has to avoid this (Buchbinder & Shanks, 2008).
Berger, S. (2008). Fundamentals of health care financial management: A practical guide to fiscal issues and activities. Hoboken, NJ: John Wiley & Sons
Buchbinder, B. S., & Shanks, H. N. (2008). Introduction to health care management. Jones & Bartlett Publishers
Gapenski, C. L., & Pink, H. G. (2010) Understanding healthcare financial management. Foundation of the Amer College
Herkimer, G. A. (1986). Understanding hospital finance management. Burlington, MA: Jones & Bartlett Learning
Penner, S. (2004). Introduction to health care economics and financial management: Fundamental concepts with practical application. New York, NY: Lippincott Williams & Wilkins.