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QUESTION
There are six major objectives of healthcare finance management;
1) Income generation,
2) respond to regulations,
3) facilitate relationships with third party payors,
4) influence method and amount of payment,
5) monitoring physicians, and
6) Protect Tax Status. This discussion seeks to identify what each specific objective encompasses.
| Subject | Nursing | Pages | 6 | Style | APA |
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Answer
Objectives of Healthcare Financial Management
Healthcare institutions worldwide have a goal of providing optimal care to patients and the community at large. However, to realize this goal for any healthcare institution, different departments in the healthcare facilities must work in unison to accord primary care and maintain the standard of care provided. The finance department of any healthcare institution is one of the major departments needed towards fulfilling this goal by providing financial information and accounting transparency that allows healthcare institutions to make decisions garnered towards proper oversight of internal and external spending. Therefore, to achieve this while providing quality care, healthcare financial management encompasses objectives such as generation of income, response to regulations, facilitation of relationships with third-party payers, influencing methods and amount of payments, monitoring physicians, and protecting the institution’s tax status by setting up strong financial systems and financial management plans. This paper discusses how each financial objective mentioned above works towards healthcare financial management.
Income Generation
Nowicki (2018) explains that income generation is the most important financial objective of any healthcare organization towards providing quality care as the ultimate goal for healthcare institutions. Healthcare organizations need to adapt, survive, and grow to compete with other organizations in providing care to people in need. The only way to do so is to have a substantial revenue stream that provides continuous capital for projects in the healthcare facility to run smoothly (Gapenski & Reiter, 2016). Therefore, healthcare institutions do so by generating income through the investment of assets and ensuring that they are profitable to the institution.
Healthcare financial managers ensure income generation through periodic reviews of market prices for healthcare services and reflecting on market rates (Gapenski & Reiter, 2016). Also, income generation can stem from proper evaluations on the performance and effectiveness of departments within the healthcare facility towards revenue spending and returns (Nowicki, 2018). While these might be internal ways of generating revenue, Gapenski and Reiter (2016) reiterate that healthcare financial managers can launch new healthcare services that become a new sense of revenue for healthcare organizations. Consequently, financial managers incorporate these launches into a proposal tabled to the organization's board for approval, with certain approvals towards their funding and profit projections. Therefore, this ensures healthcare organizations generate income internally and externally towards their success and maintaining a competitive advantage.
Response to Regulations
While the main responsibility of healthcare organizations is to take care of the sick and provide quality care, some organizations may take advantage of the elderly and sick in the community; therefore, the government responds to this by putting up regulations and legislation. These legislations and regulations protect the sick and elderly in the community from exploitation by healthcare organizations (Nowicki, 2018). Therefore, healthcare financial managers should ensure that there is reimbursement on government-funded projects such as Medicaid and Medicare that help the poor and elderly in the community in payment of healthcare services when they cannot afford those (Staff Writers, 2020). In a 2014 report, Truffer et al. (2014) explain that the poor can be covered by Medicaid to avoid exploitation from healthcare organizations. Hence, financial managers corroborate that healthcare organizations do not exploit the sick and elderly by responding to regulations set by confirming the healthcare organizations they are affiliated with are certified to qualify from federal and state third-party loans for reimbursement to avoid exploitation while assuring quality care (Gapenski & Reiter, 2016). By responding to government-set laws and regulations, healthcare financial managers prevent healthcare institutions from lawsuits and ensure cost-efficiency while providing quality care.
Facilitation of Relationships with Third-party Payers
Gapenski and Reiter (2016) state that the U.S. healthcare system has private insurers and government-funded Medicaid and Medicare programs as third-party payer payment systems towards the provision of affordable care to patients. Private insurance companies, Medicaid, and Medicare will seek to find discounts for their patients in healthcare organizations (Staff Writers, 2020). Therefore, healthcare organizations should treat third-party payers as customers since either of the three pays a certain percentage of the patient's bill (Nowicki, 2018). Healthcare financial managers in assuring profitability of the institution guarantee fair rates to third-party payers. The strategy of fair-rate negotiation ensures that healthcare institutions retain patients under third-party payers; therefore, they mitigate financial risks while having a competitive advantage and providing quality care.
Influencing Methods and Amount of Payment
After offering third-party payers fair rates towards patient retention, healthcare financial managers have the responsibility to guide and control the methods and amount of payments that third-party payers chose. Nowicki (2018) explains; most third-party payers ask for discounts for their patients, leaving healthcare institutions struggling to break even and remain afloat. Therefore, through financial management, healthcare institutions can pre-negotiate discounts and amounts payable by third-party payers before the administration of care to patients (Nowicki, 2018). The Medicare program is an example of a function pre-negotiation for billing processes that ensures all elderly patients have coverage for their medical expenses to a certain amount; wherein, past the set limit, the patient will be responsible for the costs incurred (Staff Writers, 2020). Gapenski and Reiter (2016) add that pre-negotiations help healthcare financial managers assess and mitigate financial risks to avoid over-expenditure and revenue loss while treating patients. Resultantly, capping rates through pre-negotiations helps keep healthcare institutions in the competitive market.
Monitoring Physicians
Physicians in healthcare institutions are responsible for much of the organization’s spending indirectly as much as the purchase of medication and medical equipment that they use. However, Gapenski and Reiter (2016) state that most healthcare facilities do not engage physicians in the institution’s revenue cycle; hence, increased cases of fraud and misappropriation of funds. These negative effects of not having oversight on physician activities include discharging patients without checking on any diagnostic tests conducted by the physician on the patient, leading to loss of revenue. Physician monitoring is needed through ordering monthly audits and disciplinary actions taken on physicians found in cases of the fund, equipment, and medication misappropriations by healthcare financial managers (Nowicki, 2018). Healthcare organizations ensure organizations do not find themselves in legal suits or losing revenue through such monitoring activities.
Protect Tax Status
Lastly, healthcare financial managers are responsible for protecting the tax status of the organization. Nowicki (2018) explains that healthcare financial managers should comply with tax-exempt laws. Gapenski and Reiter (2016) add that since healthcare institutions are non-profit organizations, reducing the charges for poor patients in the community helps healthcare organizations protect their tax status. Also, healthcare organizations can research issues affecting the surrounding community health-wise and address them; hence, increasing their revenue source from the government towards profitability while remaining relevant to the community and protecting their tax status (Gapenski & Reiter, 2016). In developmental projects like building nursing homes and nursing schools, health organizations increase the skilled nursing workforce and enrich the society, hence protecting their tax status.
Conclusion
The finance department of any health institution is important in ensuring that quality care is provided by generating income, facilitating relationships with third-party payers, responding and abiding by government-set regulations and laws, influencing methods and amount of payments, monitoring physicians, and protecting the institution's tax. Healthcare financial management helps institutions decide garnered towards proper oversight of internal and external spending to provide optimal patient-centered care, ensure the institutions have a competitive advantage, and remain relevant to the community through community outreach programs. Therefore, healthcare financial management is essential for the growth and success of any healthcare facility.
References
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Gapenski, L. C., & Reiter, K. L. (2016). Healthcare finance: an introduction to accounting & financial management (6th ed.). Health Administration Press; Arlington, Virginia. Nowicki, M. (2018). Introduction to the financial management of healthcare organizations (7th ed.). Hap/Aupha, Health Administration Press; Washington, Dc. Staff Writers. (2020, January 30). Medicare, Medicaid, and Medical Billing. MedicalBillingandCoding.org; MedicalBillingandCoding.org. https://www.medicalbillingandcoding.org/medicare-medicaid-billing/ Truffer, C. J., Wolfe, C. J., & Rennie, K. E. (2014). 2014 Actuarial Report On The Financial Outlook For Medicaid. https://www.medicaid.gov/medicaid/downloads/medicaid-actuarial-report-2014.pdf
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