Question

Briefly discuss the role of finance in the healthcare field.

Has this role increased or decreased in importance in recent years?

What role does regulation play in the healthcare sector? What is the structure of the finance function in healthcare organizations?

Answer 1

Healthcare Financial Management

The primary role of financial management in healthcare organizations is to manage money and risk in a way that helps to achieve the financial goals of the organization. When a healthcare organization has strong and organized financial management plans, they're able to provide efficient healthcare to all their patients.THE ROLE OF FINANCE HAS INCREASED IN the recent year which is told in the sub sections below

Healthcare Financial Management Role

The basic activities involved in financial management in healthcare organizations include evaluation and planning, long-term investment decisions, financing decisions, working capital management, contract management, and financial risk management. We'll cover these in greater detail now.

1. Evaluation and Planning

Financial management involves evaluating the financial effectiveness and overall operations of the healthcare organization. This allows the healthcare organization to plan for the future. For example, let's say that a hospital evaluates emergency room revenue and discovers that they're losing patients to a neighboring hospital with more space. In response to this, they may decide to plan for an expansion of their emergency room.

2. Long-Term Investment Decisions

The financial team has a hierarchy, but in general, input is taken from all the managers at all levels when it comes to big investments in the business. Long-term investment decisions involve analyzing implementation strategies and determining how the investment might affect the financial future - for the better or for the worse. Taking the example we looked at before, the financial team at the hospital would look at the cost of an emergency room expansion and potential revenue increases and decide if it would be a good investment.

3. Financing

The financial team must also raise funds for expenditures. This might involve things like fundraising, grants, loans, or using internal funds. They'll look at the cost and benefit of the investment and/or the kind of debt that they will incur. The senior manager will make the ultimate call on financing. In the case of the emergency room example, the financial management team will bring someone in to determine how much a renovation would cost as well as how long it would take. They may decide to use internal funds and then take out a small loan to cover the rest of the expenses, knowing that the long-term investment will bring them more revenue to ultimately help them pay back the loan.

4. Working Capital Management

The financial management team must manage their working capital, which is their current assets minus their liabilities. Assets might include cash, marketable securities, receivables, and inventories. Managing capital is vital to reducing costs and making sure that the organization runs effectively. In the renovation of the emergency room, for example, the team determines which assets can be reused and which assets must be purchased with working capital.

role of regulation in the healthcare sector -

Safeguarding Privacy and Ensuring Quality Care

The U.S. Department of Health and Human Services’ (HHS) Office of the Inspector General (OIG) is the governmental wing responsible for protecting patient privacy, ensuring quality care and combating fraud by ensuring healthcare organizations are compliant with federal healthcare laws and HHS programs.

Fighting Fraud and Abuse

As of 2016, U.S. healthcare spending reached $3.3 trillion, according to the Centers for Medicare and Medicaid Services (CMS). Of that figure, roughly 3% to 10% is lost to fraud based on estimates by the National Health Care Anti-Fraud Association and Federal Bureau of Investigation. A number of laws, statutes and even entire units exist to combat fraud and waste. For physicians and compliance professionals, understanding these laws is crucial, as violations can result in criminal charges, fines and, for physicians, possibly the loss of their medical license.

Protecting Healthcare Workers and the Public

While the OIG and the above-mentioned regulations are designed to ensure fair billing practices, combat fraud and protect patient health and rights, compliance protocols in place under OSHA, FEMA, and the DHS protect healthcare workers and the public.

THE STRUCTURE OF THE FINANCE DEPARTMENT IN HEALTHCARE

The structure of the finance department depends on the type (e.g., hospital, medical practice) and size of the healthcare organization. Large organizations generally structure their finance departments in the following way.

The head of the finance department holds the title of chief financial officer (CFO). (The title of vice president—finance is also used.) This individual typically reports directly to the organization’s chief executive officer (CEO) and is responsible for all finance activities in the organization. The CFO directs two senior managers who help manage finance activities: the comptroller and the treasurer.

The comptroller (pronounced, and sometimes spelled, “controller”) is responsible for accounting and reporting activities, such as routine budgeting, preparation of financial statements, and patient accounts management. The treasurer is responsible for the acquisition and management of capital (funds). In other words, the treasurer must raise the funds needed by the organization and ensure that those funds are effectively used. Specific activities include the acquisition of capital, cash and debt management, lease financing, financial risk management, and endowment fund management (in not-for-profits). In general, the treasurer is involved in those activities discussed in chapters 8 through 10 and chapter 13 of this book.

In large organizations, the comptroller and treasurer have managers under them who are responsible for specific functions, such as the patient accounts manager, who reports to the comptroller, and the cash manager, who reports to the treasurer. In small businesses, many of the finance responsibilities are combined and assigned to one individual. For example, in a small group practice, the finance function is managed by one person, often called the business (practice) manager, who typically is supported by one or more clerks.