ࡱ> u@ #bjbj Gnnnnttt8D<@h88NNN[.&. .#@%@%@%@%@%@%@$ BR^DI@L/-[.L/L/I@nnNNs^@*1*1*1L/(nNN#@*1L/#@*1$*1N1g>hBT?N, GϜtt/(>?$t@0@>E/fE ?nnnnE?..*1. ....I@I@p1(pThe Financial Management of Hospitals and Healthcare Organizations Michael Nowicki  Chapter 1 Financial Management in Context Molly Freeman May 22, 2007 Outline  Introduction Organizational Purpose Healthcare Management Purpose of Healthcare Financial Management Accounting Finance Major Objectives of Healthcare Financial Management Generate Income Respond to Regulations Facilitate Relationship with Third-Party Payers Influence Method and Amount of Payment Monitor Physicians Protect Tax Status Quality Assessment and Healthcare Financial Management Proactive Strategy Direct Measures of Quality Goal-based measures Responsive measures Decision-making measures Connoisseurship measures Indirect Measures of Quality Resource measures Outcome measures Reputational measures Value-added measures Reactive Strategy Joint Commission National Patient Safety Goals Effects of Quality on Profitability Organizational Ethics and Healthcare Financial Management Value of Healthcare Financial Management Management Functions Planning Organizing Staffing Directing Controlling Management Connective Processes Effect of Financial Management on the Changing Face of Healthcare Appendix 1.1 Financial Accounting Outline Appendix 1.2 Economics Outline Appendix 1.3 Statistics Outline Chapter Summary Healthcare financial management provides both accounting and finance information to healthcare managers to assist them with accomplishing the organizations purpose. There are two types of accounting: financial accounting, which provides historic accounting data to external users (owners, lenders, government, insurers, etc), and managerial accounting, which provides current accounting information to internal users to support planning and control by healthcare managers. Finance is the analysis of the information provided by managerial accounting using techniques such as ratio and capital analyses. Healthcare financial management has 6 major objectives: Generate Income No margin no mission. All organizations strive to survive and grow by generating a reasonable net income by investing in assets and putting the assets to work. Respond to Regulations Federal, state and local governments pay over 45% of all healthcare bills and therefore must ensure that government money is spent well. Additional accreditation and certification standards are imposed by some thrid party payers and to quality for some loans. Facilitate Relationship with Thirs-Party Payers Third-party payers can account for more than 75% of a healthcare organizations operating revenues, so they must be treated as customers. Influence Method and Amount of Payment Third-party payers are aggressive in asking for discounts in exchange for large numbers of patients. These discounts must be managed effectively. Monitor Physicians Physicians influence much of the spending attributable to hospitals and nursing homes. Ensure that ordering patterns are consistent with patient needs. Ensure that the organization has minimized its exposer to legal libability for othe physicians possible negligent actions (through credentialing and risk management). Protect Tax Status For-profits want to reduce tax liability and Not-for-profits want to maintain their tax-exempt status. Quality & Financial Management As costs are driven down, the market is forcing healthcare organizations to compete on quality and price. There are two ways to respond to this pressure: proactively & reactively. Proactive strategies attempt develop and promote their own comprehensive view of quality while reactive strategies attempt to limit views of quality to those views developed by others (accrediting agencies, quality consultants). Deming argues that quality improvement leads to higher profitability:  Organizational Ethics & Financial Management Joint Commission standards require mechanisms to address ethical issues related to topics such as patient rights (informed consent, do-not-resuscitate orders, patient confidentiality) and management responsibilities (resource allocation, conflicts of interest, patient billing practices). Value of Healthcare Financial Management Healthcare financial management provides accounting and finance information to allow managers to perform the management functions and the management connective processes and therefore accomplish the organizational objectives. There are 5 Financial Management Functions: Planning Operating budget and capital budget (must align to organizations strategic plan) Organizing Provide a chart of accounts to identify revenue & cost centers Staffing Medical records, information systems, accounting, admitting, & materials management are all often under financial management Directing Use rewards and penalties to accomplish the organizations purpose (a.k.a. motivating & influencing) Controlling Budget, financial reports, financial policies & procedures, and financial audits allow for monitoring performance and taking corrective action when necessary There are 3 Management Connective Processes: Communicating reporting & advising Coordinating coordinating relationships Revenue to expenses Capital budgets to operating budgets Volumes to prices to collected revenues Etc Decision making the quality of financial management is often judged by its decisions and recommendations Review Appendices 1.1, 1.2 & 1.3 for outlines of Financial Accounting, Economics & Statistics. Terms & Definitions Accounting System System that accurately and promptly assigns costs and charges to the appropriate cost centers and revenue centers. Finance A subset of the field of financial management that includes the analysis of the information provided by managerial accounting using techniques such as ratio and capital analysis. Financial Accounting A field of accounting that provides to external users accounting information in prescribed formats that is generally historic in nature. Managerial Accounting Field of accounting that provides to internal users accounting information that is both historic and prospective in nature. There are no prescribed formats for managerial accounting information. Ratio Analysis Financial analysis method that evaluates financial performance by computing relationships of important line items found in financial statements. Third-party payers Agents of the patient who contract with providers to pay all or part of the patients bill. ACHESA Accrediting Commission on Education for Health Services Administration AUPHA Association of University Programs in Health Administration CEO Chief Executive Officer CFO Chief Financial Officer CHFP Certified Healthcare Financial Professional CPA Certified Public Accountant HFMA Healthcare Financial Management Association Joint Commission Joint Commission on Accreditation of Healthcare Organizations NPSG National Patient Safety Goals   PAGE 1 Chapter 1 Quality Improvements Productivity Improvement Lower Costs Lower Prices Improved Market Share Increased Volumes Increased Profitability BCSTU~2 ƵqbI7#h}h}5CJOJQJ^JaJ1jh}5CJOJQJU^JaJmHnHuh5CJOJQJ^JaJ#h}h5CJOJQJ^JaJh_\hS^5OJQJ^JhS^5OJQJ^Jh5OJQJ^Jh_\h5OJQJ^J h_\hCJOJQJ^JaJ.jh_\CJOJQJU^JaJmHnHu h}h_\CJ OJQJ^JaJ h}hCJ OJQJ^JaJ CSU_   R b y - @ `'`'`'V`'`'`'`'`'`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V & Fgd_\ & Fgd_\$a$gd_\#8##@ [ o 2 a    $ 0 P  `'V`'9Y`'9Y`'9Y`'9Y`'V`'9Y`'9Y`'9Y`'9Y`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V`'V & Fgd_\ & Fgd_\ & Fgd_\ & Fgd_\2    @ J O V pqr]szŲtaI1a1a.hKh\{5CJOJQJ^JaJmHnHu.hph\{5CJOJQJ^JaJmHnHu%h\{CJOJQJ^JaJmHnHu%h}CJOJQJ^JaJmHnHu%h]CJOJQJ^JaJmHnHu.h]hM6CJOJQJ^JaJmHnHu%hMCJOJQJ^JaJmHnHu.jh}CJOJQJU^JaJmHnHu#h@th}5CJOJQJ^JaJ h_\h_\CJOJQJ^JaJ  qr]{7JD&'S & Fgd7[gd\{ & Fgd\{gd_\z{67]IJ\_ OǴǴ򢐂tttftNt.jhy]oCJOJQJU^JaJmHnHuhy]oCJOJQJ^JaJhArCJOJQJ^JaJhpCJOJQJ^JaJ#hArh}5CJOJQJ^JaJ#hArhp5CJOJQJ^JaJ%hpCJOJQJ^JaJmHnHu%h\{CJOJQJ^JaJmHnHu.hKh\{5CJOJQJ^JaJmHnHuh\{CJOJQJ^JaJCDS[WrrrddVdh`CJOJQJ^JaJh9,CJOJQJ^JaJh:dCJOJQJ^JaJ#hKh7[5CJOJQJ^JaJh7[5CJOJQJ^JaJ#h7[h7[5CJOJQJ^JaJh7[CJOJQJ^JaJhy]oCJOJQJ^JaJh}5CJOJQJ^JaJhy]o5CJOJQJ^JaJ#hy]ohy]o5CJOJQJ^JaJ2WPQRShHI# ^`gdygd_\ & Fgd` & Fgd`gd9, & Fgd7[NOPQST\hzòyjXOG<h\Sh\SCJaJh\SCJaJh\S6CJaJ#h@th}5CJOJQJ^JaJh\S5CJOJQJ^JaJ7jh`h`6CJOJQJU^JaJmHnHuhAr5CJOJQJ^JaJh}CJOJQJ^JaJ h7[h7[CJOJQJ^JaJh:dCJOJQJ^JaJh9,CJOJQJ^JaJh`CJOJQJ^JaJ#hKh`5CJOJQJ^JaJGH_$ 2 4!6!*B*ph3̙FV@F _\FollowedHyperlink >*B*ph4@"4 :dHeader  !4 @24 :dFooter  !0=Kbu  0=KbuDCSU_ Rby-@[o  2a$0Pqr]{ 7 J D&'S2WPQRShHI#$456 Bf*45678MNghtu0000x0000000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0- 0@ 0@ 0@ 0@ 0- 0 0 0 0 0 0 0 0 0 0 0 0 0  0 00 0  0  0 0  0 0 00x0 0 0 0 0 0 00000000x000000 0 0 0 0 000 0 0 0 0 0 0 00000000x00@000x00000000000000x00000@08 @08 @0< @0@00 (* 000000000000000PQRShH Bf*45<00tʧ<00<00<00<00`0<0 0|00@0@0@0@0@0@0<00<00@0p@0@0<00tO? 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