Question

The demand for healthcare administrators has gone up substantially over recent decades, as has the salary range for the position. The job of managing healthcare facilities has become more challenging and more important than ever before. How would you describe the dual purpose of financial management in health care today?

Answer 1

There isn’t an industry that doesn’t rely heavily on efficient financial management but within the healthcare industry it is vitally important because of the already high cost of medical care in this country. Unless costs can be kept reasonable, patients and insurance companies are left to pay higher dollar amounts and with the Affordable Care Act, legislation is pulling the reins in tighter on what healthcare facilities can charge, especially to Medicare.

There are two main roles of financial management in health care sector.

First is to manage the routine tasks related to finances. This would include such things as keeping expenditures within budget, negotiating contracts with suppliers and tradesmen, ensuring that money is available to meet expenses which would include payroll and keeping aside a contingency fund for all unexpected emergencies and meet the need to be paid. Financial management is also involved in planning the budget alongside the board of directors so that all necessary equipment, supplies and personnel can be procured to keep operations running smoothly.

Second function relates to strategic planning to ensure smooth operations can continue without any hurdles. This involves budget planning and audit ( Medicare Risk Adjustment audit ). And includes providing the other members of the leadership team with information to make strategic plans to prepare for the future. For example, health care providers, such as large physician practices and hospitals, may decide to offer expanded tests or treatments by buying new medical equipment. Helping to make the decision and finding the best way to pay for it are both part of financial management.

• There are times throughout the year that audits are utilized to make sure that money is being billed and collected as it should be so that funds are available to meet the needs of the facility. Whether it is a smaller private practice physician’s office or a large teaching hospital, audits are used as a preliminary to strategic planning.
• Medical billing has always been a difficult endeavor because of billing codes that need to be precisely entered. Now with Medicare reform and the Affordable Care Act, those codes have become even more important and many have even changed. It is no easy task completing an MRA audit (Medicare Risk Adjustment) to ensure all coding is compliant. This is done on both a member by member basis as well as departmentally and finally on the institution as a whole. It would be virtually impossible to go into the next period without this information in order to plan a budget based on current and historical data.

Any health care entity that has an affiliated research group, adds its funding to the tasks of financial management.

Cost effectiveness is so important to an insurer's bottom line that developing guidelines rises to the level of financial management. The task requires significant medical know-how. The insurer wants treatments to work to avoid higher costs down the road. Doctors need to be sure that the treatments are medically sound. Otherwise, they put themselves at risk for malpractice lawsuits.

With the Affordable Care Act, for instance, insurers have had to recalculate their plans and their premium structures. More changes are inevitable. Providers and insurers will need exceptionally skilled financial management for a good while to come.