Answer

Financial Resource Management in Healthcare

Financial management is a branch of economics which deals with planning, organizing, directing and controlling the financial resources in organization.  Finance is a key and sensitive resource, which requires   proper and professional management. This is due to the fact that all activities of an organization revolve around financial resources (Finch, 2010).  Organizations which are profit oriented must ensure that they minimize the operational expenditures for them to maximize profit.  It is worth to note that operational expenditures, unlike capital expenditure, do not increase the net worth of a company. According to Sawai et al. (2018), the scope for financial management revolves around investment decisions, financial decisions and dividend decisions. In managing an organization’s finance, all the management principles must be applied in order to enhance the level of efficiency.  Management of financial resources, must be done in a sustainable way. This is to mean that all the concerned stakeholders must be guaranteed benefit, from the decisions which are taken by the financial managers.  From the foregoing, it is evident that financial management is an important aspect in organization.  This paper, therefore, analyzes the various financial management aspects of Seamus Limited.

Fiscally Sustainable Strategies for Seamus Company

    The company intends to move from free service to MCO model. Managed Care Organization (MCO) is managed health care provider or organization of medical service that offers managed care health care plans.  These organizations are certified by the director of Department of Consumer and Business Service (DCBS). The three fiscally sustainable strategies for Seamus Company to move from free services to MCO care are as follows:

Bundled Service

Under this model, the professionals and/or healthcare facilities are paid a single payment for all the services performed to treat a patient undergoing a certain specific episode of care (Mathur & Nowicki, 2011). An episode of care refers to the care delivery process for a certain condition or care delivered within a defined period of time.

 Shared Savings

According to Gapenski and Pink  (2011), this is a type of payment strategy which offers incentives for providers, in order to reduce healthcare spending for a defined patient population, by offering them a percentage of net savings realized as a result of their individual and professional effort.

 Pay for Performance

Pay for performance (P4P), also known as value based purchasing, is a payment model which offers financial incentives to physicians, hospitals, medical groups and other healthcare providers for  meeting certain performance measures (Gapenski & Pink, 2011).

Recommendations on Implementation

            Bundled service should be implemented by fixing a certain amount of remuneration for particular diseases. The savings without bundled services and with bundled services should be compared. All the savings which have been realized as a result of this program, should be shared with the healthcare professionals through the shared savings program (Finch, 2010).  In order to ensure equity, performance targets should be set periodically based on the facility’s targets as well as the industrial trends.  Professional qualifications as well as experience should be also be taken into consideration when setting the targets to be met. For all the professionals who have met their targets within the defined time limit, the company should be able to pay them as   a means of motivation and encouraging others to emulate them. In the event that each episode disease is categorized differently, then expenditure related to them, which is operational in nature will be taxed independently. However, if they are put together (bundled), then they will be taxed collectively, hence reducing the amount of tax payable (Gapenski & Pink, 2011).

            The payments given to the professionals will also be taxed as pay as you earn (PAYE). This means that the tax burden will be passed from the company to the professionals.  Hence reducing the corporate tax paid by Seamus. Some of the fiscal improvements which the company must, therefore, endeavor to put in place will include; proper record keeping  for all the  company’s  staff members, proper record of the pool of diseases handled regularly by the  health facility, maintaining of the records for the hired professionals experience among others.

Financial Management Principles Applicable

The following principles will help Seamus manage its finances

Limiting Debt to Income-Producing Assets

The company should ensure that it enters into debt only if the assets to be acquired will increase the company’s income generating abilities. In essence asset to be acquired through debt, should considerably increase the net worth of the company. However, care should be taken as prediction of income generation for yet to be acquired assets is usually probabilistic.

Risk Diversification

This involves investing in one area or else having more than one investment in assets. The risk brought by one investment would be cancelled by another one.  The company could invest in more than one asset or invest in more than one group of professionals. It is, however, worth to note that both investment alternatives may not give the targeted return, hence a proper provision should be put in place to cater such as events.

Strategies and Insurance for Cost Reduction

            Through bundled service, the Company will be able to pay insurance in pool as opposed to payment of the individual diseases. This means that one insurance policy will be able to cover more diseases. Shared service and pay for performance, on the other hand, will help the company achieve more diligence on the side of professionals, hence reducing the possibility of risk occurring and expenditure on risk occurrence thereof.

Analysis of Payment for Performance Strategy

As had been stated earlier, this is a type of strategy in which the company makes a decision to share with its employees the gains it has gotten, in terms of bonuses, on the basis of performance. This fiscal stagey is set to be used by the company as means of encouraging excellence on the part of their employees, without necessarily being coerced and strictly supervised. 

The Possible Risks

While the above measure is beneficial, it poses the company to a number of risks, including increase in operational costs, discouragement for some employees who may not be able to achieve the set targets hence no reward, unsustainability of the program due to high costs among others.  It is evident that, though the company will has set the above strategies in order to manage financial resources, there is a possibility of the company spending more, if no risks analysis are done on them properly. However, the above risks can be mitigated by putting a provision.  In the event that the program of payment for performance becomes unstainable, the company should device ways through which the strategy can be abandoned for an alternative one.

Financial Benefits of Increased Benefit

           Service benefit refers to the benefit realized by an individual, as a result of serving as employee in a certain company.  In case Seamus implements an increased benefits benefit the company would be able realize an increase productivity of employees, reduction in tax payable because service benefits are not taxed and reduced operational costs, as pensions are only paid after retirements. These advantages, however, may not be guaranteed as they can only be realized in long term.

Financial Drawbacks of Increased Benefit

            Though increase service benefit has to an extent some possibilities of benefit the company, there are some financial drawbacks. Some of the financial drawbacks which are likely to be faced include;

Costly Operational Costs in Long Term

          In long term, Seamus will have a very high costs of operations as a result of this move.  Though it may take some time for the company to have a number of retirees, once the expenditure will be lifetime to nature.

Reduced Profit

          Once the employees are guaranteed fixed and increased service benefit, their productivity may not be as would be expected, if they are remunerated based on their performance. This is likely to reduce the level of productivity, turnover and ultimately the realizable profit.

Reduced Liquidity Ratio

           As has been stated above, the company stands a chance of increasing its operational costs, and in the process its realizable profit. This may in turn reduce the liquidity ratio of the company, hence exposing the company to liquidity risks.

Employees Usage and Benefits to the Company

           Introduction of the service benefits by the company stands a chance of benefiting both the company, as well as the employees. This is to mean that this service is symbiotic in nature. Usage of this strategy by employees will make them feel better while serving the company.  Satisfaction of the employees will in turn increase the productivity of the subject employees, at the benefit of the company. This may reduce employees’ turnover rates, increase the company’s earnings, and ensure a consistent level of productivity among others.

Analysis of External Partners Healthcare

Other than the internal partners, who are mainly the employees and the owners of the hospital, the healthcare facility obviously has external partners. External partners include, suppliers, the general public, the government, competitors and the support businesses.

Financial Benefits

The following are some of the ways through which these partners stands a chance of benefiting financially from Seamus:

Getting Employment Opportunities

             The general public will obviously have their employment opportunities increased by the operations of the company.  Those employed will be to earn income from the facility and increase the standards of living.

Boom on the Business

          The complimentary businesses, such as insurance companies, banks, among others, are likely to realize a boom for their businesses. This is due to the fact that, the health facility will either buy their services directly, or have its clients buying their services. This will boost their businesses and profit thereof.

Increased Tax Revenue

The hotel will pay tax to the government directly in form of corporate tax also submit the PAYE tax which they will collect.

Financial Drawbacks

The general public is likely to face an increase in the cost of living as a result of the establishment of the health facility within their locality, the competitors will have their profit and turnover reduced as a result of increase in the rate of competition. These among others are the financial drawbacks expected by the external partners.

Ascertainment of External Partners’ Benefits

            The external partners stand a chance of benefiting more when the company is established. This is due to the fact that the company will create jobs, increase realizable tax, attract more support business, among others. This will lead to an increase in the living standards. The possible drawbacks should be treated as the cost of partnership.  Seamus should have partnership with external partners as it draws suppliers, employees, competitors and customer from external partners. This means these partners will influence the ability of the healthcare facility to exist.

Conclusion

         From the above analysis, is possible to conclude that establishment of Seamus Limited, is feasible, as the company stands a chance of having an internal and external benefit. The company should however, set long term and short term strategies, which should be reviewed periodically depending on the dynamics in the industry.