In the healthcare industry, organizations have suppliers, and work with other companies that supplies the company with resources and equipment that hospital/clinic staff is able to use. It is important to note that these exchanges do not occur for free.
There is a financial element of the process that has to take place and must be accounted for. Many environments such as non-profit, for profit, and government healthcare financial environments would not survive without some kind of financial structure set in place.This document will attempt to discuss these environments with respect to each having a financial structure, unique policies within that environment, and financial management practices that are prevalent in the financial environment.
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A discussion on why financial management is more difficult in health care than in other industries will follow. Financial Structures There are many health care organizations that are set of as organizations that are for profit or in a position where they can offer medical services that will bring in a profit.In many cases for profit healthcare organizations can manage their case-mix more carefully (Hurwitz, 2014). For example, an organization looking to profit on services rendered would strategically be coated near a population of well-insured patients. This would cause profit to be high, due to the high volume of insured patients. Looking more into the financial set up of the for profit organization, taxes are known to be paid by the revenue bought in by the organization. Staff and owners can expect to be paid by the profit the organization brings in.For profit organizations must follow Generally Accepted Accounting Principles (GAP).
This means that if the healthcare organization plans on sharing financial statements with others it should be required to follow these principles in preparation Of the tenements. With GAP, assumptions can be made that there is consistency from year to year in the system used to prepare the organization’s financial statements (Intro to Accounting Basics, 2014). Many of these entities are invested owned which means they can either be privately or publicly held.
Health organizations that are considered nonprofit, means that they are non- governmental entities, but organized for providing healthcare services for those in need, mainly society. The nonprofit structure is unique in that many people who may not have insurance can still benefit from health services here. These entities can enjoy income and property tax exemptions because of these nonprofit relationships with society.
Since they are unprofitable, they can rely on other sources of funding, which many come in forms of donations.When preparing financial statements, these entities will use what is called the statement of financial positions, as well as a statement of financial activities. The non-profit is subject to itemization for tax purposes, and any total assets minus total liabilities are reported as net assets. Profit gained from funds given cannot be distributed as earnings and profits are ore than likely reinvested back into the organization to maintain and improve health care services. The non-profit must also follow the unique policy of GAP set Of guidelines to ensure proper financial Statements.According to Expenses, (2011) there are other unique features of the non- profit organization. For example, an organization can have an unlimited lifespan and can continue in existence even after its original owners and managers have died or left the company.
He also states that it is easy to transfer ownership of organization because ownership can be divided into share of stock that can be easily sold. Government health care entities serve special purposes. According to Expenses (2008), governmental hospitals are broken into either federal or public entities.He states that the public entities are funded in whole or partly by cities, counties, tax districts, and or the state.
The public healthcare organizations have converted into ownership sections like private non-profit, because of the difficulty that the local governments have found to be able to fund while providing other necessary public services (Expenses, 2008). Governmental entities also follows the unique policies such s Generally Accepted Governmental Auditing Standards (SAGAS), which is used as a guide for auditors to perform audits using competence, integrity, objectivity, and independence (The Yellow Book, 2014).Effective Financial Management While Ankles, (2006) notes that it is not clear that everyone will become the Chief Financial Officer of a firm, it is still yet very important for all managers and executives to have a firm understanding of accounting and financial management in order to be successful. Where many other industries have separate financial departments which performs all financial operations, effective financial management in health care at some point becomes the role Of many health care managers who must be able to account for the financial management of their units (Finnier, 2006).The finance position in health care involves providing financial analyses to improve decisions that affect the wealth of the organization (Finnier, 2006). Achieving effective financial management in health care can be difficult than the financial management in other industries for one is that many practices and financial aspects can be hard to measure. When hospitals and physicians are not regularly paid by heir customers, the third party payer, or insurance payer is yet another factor in the difficultly of issues that can arise in the effectiveness of financial management.
Hallmark, (2011), brings to light that the hiring and training process can have an impact on the effective financial management, as well as negotiating prices, establishments of referral relationships, choosing the customers/patients, and lastly compliance. All these factors and more play a major role in the effectiveness of financial management in the healthcare industry which sets it apart from most other industries. Conclusion Financial environments in healthcare are set up to operate and function for the organization to fulfill the needs of the people who use the services.
The financial aspect may always take extra steps to understanding its greatest depths and attempts to account for the breakdown of figures and numbers. With time and more complex healthcare systems to come it may continue to be difficult to analyze a system that uses many methods in financing. Whether the environment is for-profit, non-profit, or government, it is important to know that effective financial management will bring the major refit for all healthcare organizations. References Finnier, F.
A. & Ward, D. M. (2006). Accounting concepts.