Question

Week 10 Assignment - Fiscal Planning and Management Presentation

Read and use this for this part of the assignment and do as directed please.

You are a regional healthcare administrator for a long-term care organization. You have been asked to provide training to a new group of healthcare administrators, who just completed their degree. They have no work experience in healthcare administration or financial management.

For this assignment, you are to:

1. Develop a presentation using PowerPoint slides that explain the role of healthcare administrators in fiscal planning and financial management.

Be sure to address the following components:

1. Strategic planning.

2. Budgeting.

3. Regulatory compliance.

4. Insurance and reimbursement.

5. Human resources/human capital/staffing.

2. Develop a 10–12 slide presentation with detailed speaker notes. (Your cover slide and references slide are not counted in the the 10-12 slides they are separate).

Go to Google Scholar Databases to find and include 3–5 quality references, one must be your course textbook.

Also, list references used please so they can be put on a slide.

Answer 1

Duties of Heath Care Administrators

Whether they work in nursing homes, private medical facilities or state-run emergency centers, healthcare administrators deal with everything related to operating healthcare sites and organizations.

A multi-disciplinary approach is essential in the field of healthcare administration. Some of the duties of these healthcare leaders include:

Strategic planning of operations management within the respective facility or entity responsible for healthcare services

Formulation of master budgets and budgetary allocations

Introduction of productivity measures in the workplace

Management of outsourced business services and communication with third parties or service providers

Management and introduction of technological updates like the use of new software for record management

Human resource management

Design and maintenance of a compliance program to ensure that facilities maintain proper accreditation

Creation of an emergency plan for adverse events and unforeseen circumstances

Informing healthcare providers and caregivers about new regulations and providing training, if necessary

Effective communication of new policies and procedures to staff, caregivers, and providers

What do healthcare administrators do? They lead interdisciplinary teams to improve patient care and outcomes while improving workplace efficiency and maintaining accreditation. They coordinate and organize everything from compliance to financial planning. Because of these diversified tasks, prospective healthcare administrators should consider an education program that offers instruction in many disciplines like human resources, psychology, finances, mathematics, and healthcare law.

Skills of the Ideal Healthcare Administrator

Healthcare administrators should be professionals who have the many competencies the different disciplines that running a healthcare facility or organization requires. They should work towards the development of critical skills like:

Strong analytical skills. Health administrators and managers will need to go through legal documents, reports about hospital performance, and internal audits or guidelines. Strong analytical skills will be required to identify key data and put it to good use.

Communication skills. Upon the completion of analyses, the findings and the new policies must be communicated with healthcare providers, caregivers, and other staff.

Leadership skills. Pushing for change isn’t always easy. Often, administrators face resistance to change. They need to have excellent leadership skills to manage change in a positive way that engages personnel and ensures the changes happen.

Policy-making skills. Healthcare administrators must be pioneers. They are policy makers who understand new regulatory frameworks and develop implementation strategies to comply with regulations.

Negotiation skills. Like the communication skills, negotiation skills are required to help resolve conflicts. Change isn’t a smooth process, so the healthcare administrator must tactfully negotiate with stakeholders to ensure compliance.

Extensive knowledge of the healthcare environment. To ensure smooth operations and enact change, healthcare administrators need a working knowledge of how healthcare organizations function.

Technical skills. The healthcare administrator doesn’t need to be a provider, but this person should understand enough about healthcare and technological innovations to form judgements about possible technological innovations and their adoption.

Detail orientation. Healthcare administrators need to sweat the details. Since they’re the top executives in their organizations, they’re also the decision makers. When it’s time to take credit for smart decisions or when it’s time to hold someone accountable for poor decisions, it’s the system’s chief administrators who take responsibility. Before they come to a decision, wise healthcare administrators review all the details to ensure that the decision is correct for the organization.

The Healthcare Manager’s Role in Financial Planning

Achieving a strong financial performance is a goal of every healthcare organization. In pursuit of this objective, healthcare managers often use a multi-faceted approach of proven techniques and best practices, including:

Comparative Benchmarks

Benchmarking is a process of learning good practices from other organizations, implementing the practices and setting measurable standards to track progress. Obtaining and analyzing external benchmark data for costs and productivity can help a facility set its own criteria. Annual reviews enable healthcare managers to identify opportunities for savings and ways to fill budget gaps.

Accurate, High-Performing Budgeting

Based on benchmarks and past performance, healthcare managers set accurate budgets for each department. Low-performing departments may be given targeted cost-per-workload goals and be evaluated more often to help them improve.

Establishing Accountability

Experienced healthcare managers know that reaching target budgets should be an expectation, not a vaguely defined target. They often collaborate with department managers and the finance team, instilling accountability into the process from senior management, down. Improving financial planning for healthcare organizations means that each department is required – not encouraged – to meet its budget.

Tracking and Managing Expenses

Monitoring Variances

By tracking expenses properly, it’s easier to catch variances immediately. Monitoring variances enables healthcare managers to enact corrective action quickly, before a cost center gets out of control.

Achieving Balance

While reducing costs is a primary objective, healthcare managers must also help the organization deliver continuously improving quality, patient satisfaction and employee fulfillment.

How can individuals interested in pursuing an advanced career in healthcare learn the high-level financial expertise required to manage costs and deliver effective care? The targeted education provided by an MBA program with a specialization in Healthcare Management is a great place to begin.

The Role of Financial Management in the Health Services Industry

Until the 1960s, financial management in all industries was generally viewed as descriptive in nature, its primary role being to secure the financing needed to meet a business’s operating objectives. A business’s marketing, or planning, department would project demand for the firm’s goods or services; facilities managers would estimate the assets needed to meet the projected demand; and the finance department would raise the money needed to purchase the required land, buildings, equipment, and supplies. The study of financial management concentrated on business securities and the markets in which they are sold and on how businesses could access the financial markets to raise capital. Consequently, financial management textbooks of that era were almost totally descriptive in nature. Today, financial management plays a much larger role in the overall management of a business. Now, the primary role of financial management is to plan for, acquire, and utilize funds (capital) to maximize the efficiency and value of the enterprise. Because of this role, financial management is known also as capital finance. The specific goals of financial management depend on the nature of the business, so we will postpone that discussion until later in the chapter. In larger organizations, financial management and accounting are separate functions, although the accounting function typically is carried out under the direction of the organization’s chief financial officer (CFO) and hence falls under the overall category of ―finance.

In general, the financial management function includes the following activities:

• Evaluation and planning: First and foremost, financial management involves evaluating the financial effectiveness of current operations and planning for the future.

• Long-term investment decisions: Although these decisions are more important to senior management, managers at all levels must be concerned with the capital investment decision process. Such decisions focus on the acquisition of new facilities and equipment (fixed assets) and are the primary means by which businesses implement strategic plans; hence, they play a key role in a business’s financial future.

• Financing decisions: All organizations must raise funds to buy the assets necessary to support operations. Such decisions involve the choice between the use of internal versus external funds, the use of debt versus equity capital, and the use of long-term versus short-term debt. Although senior managers typically make financing decisions, these choices have ramifications for managers at all levels.

• Working capital management: An organization’s current, or short term, assets, such as cash, marketable securities, receivables, and inventories, must be properly managed to ensure operational effectiveness and reduce costs. Generally, managers at all levels are involved, to some extent, in short-term asset management, which is often called working capital management.

• Contract management: Health services organizations must negotiate, sign, and monitor contracts with managed care organizations and third party payers. The financial staff typically has primary responsibility for these tasks, but managers at all levels are involved in these activities and must be aware of their effect on operating decisions.

• Financial risk management: Many financial transactions that take place to support the operations of a business can increase a business’s risk. Thus, an important financial management activity is to control financial risk.

In times of high profitability and abundant financial resources, the finance function tends to decline in importance. Thus, when most healthcare providers were reimbursed on the basis of costs incurred, the role of finance was minimal. At that time, the most critical finance function was cost accounting because it was more important to account for costs than it was to control them. Today, however, healthcare providers are facing an increasingly hostile financial environment, and any business that ignores the finance function runs the risk of financial deterioration, which ultimately can lead to bankruptcy and closure.

In recent years, providers have been redesigning their finance functions to recognize the changes that have been occurring in the health services industry. Historically, the practice of finance had been driven by the Medicare program, which demanded that providers (primarily hospitals) churn out a multitude of reports to comply with regulations and maximize Medicare revenues. Third-party reimbursement complexities meant that a large amount of time had to be spent on cumbersome accounting, billing, and collection procedures. Thus, instead of focusing on valueadding activities, most finance work focused on bureaucratic functions. Today, to be of maximum value to the enterprise, the finance function must support cost-containment efforts, managed care and other payer contract negotiations, joint venture decisions, and integrated delivery system participation. Finance must help lead organizations into the future rather than merely record what has happened in the past.

In this text, the emphasis is on financial management, but there are no unimportant functions in health services organizations. Managers must understand a multitude of functions, such as marketing, accounting, and human resource management, in addition to financial management. Still, all business decisions have financial implications, so all managers—whether in operations, marketing, personnel, or facilities—must know enough about financial management to incorporate financial implications in decisions about their own specialized areas. An understanding of the theory and principles of financial management will make them even more effective at their own specialized work.

In order of importance, survey respondents identified the following near-term actions:

1. Develop a long-term business plan for physician integration.

2. Implement substantial and sustainable cost-containment strategies.

3. Amend strategic and capital plans to account for potential shifts in revenue.

4. Develop a strategic plan for recruitment, retention, and training.

5. Develop strategies to align information technology with transformations in payment and care delivery structures.

6. Redesign care processes and delivery systems to better integrate professional and facility components of care.

7. Forge innovative alliances with other service providers and explore such pursuits as regional health initiatives, micro financing approaches, and employer relationships.

8. Ensure that online customer service capabilities keep pace with consumer expectations.

9. Significantly increase resources/planning for services delivered outside the traditional hospital setting.

10. Seek merger partner(s) to gain efficiencies of increased size and access to capital.

Tax Laws

The value of any financial asset, such as a share of stock issued by Tenet Healthcare or a municipal bond issued by the Alachua County Healthcare Financing Authority on behalf of Shands HealthCare, and the value of many real assets, such as a magnetic resonance imaging (MRI) machine, medical office building, or hospital, depend on the stream of usable cash flows that the asset is expected to produce. Because taxes reduce the cash flows that are usable to the business, financial analyses must include the impact of local, state, and federal taxes. Local and state tax laws vary widely, so we will not attempt to cover them in this text. Rather, we will focus on the federal income tax system because these taxes dominate the taxation of business income. In our examples, we will typically increase the effective tax rate to approximate the effects of state and local taxes. Congress can change tax laws, and major changes have occurred every three to four years, on average, since 1913, when the federal tax system was initiated. Furthermore, certain aspects of the Tax Code are tied to inflation, so changes based on the previous year’s inflation rate automatically occur each year. Therefore, although this section will give you an understanding of the basic nature of our federal tax system, it is not intended to be a guide for application. Tax laws are so complicated that many law and business schools offer a master’s degree in taxation, and many who hold this degree are also certified public accountants. Managers and investors should rely on tax experts rather than trust their own limited knowledge. Still, it is important to know the basic elements of the tax system as a starting point for discussions with tax specialists. In a field complicated enough to warrant such detailed study, we can cover only the highlights.

Current (2010) federal income tax rates on personal income go up to 35 percent, and when state and local income taxes are added, the marginal rate can approach 50 percent. In his 2009 State of the Union Address, President Obama proposed raising the federal income tax rate from 35 percent to 39.6 percent for the uppermost tax bracket, and there is some chance that this increase will happen.

Business income is also taxed heavily. The income from partnerships and proprietorships is reported by the individual owners as personal income and, consequently, is taxed at rates of up to 50 percent. Corporate income, in addition to state and local income taxes, is taxed by the federal government at marginal rates as high as 39 percent. Because of the magnitude of the tax bite, taxes play an important role in most financial management decisions made by individuals and by for-profit organizations.

Depreciation

A fundamental accounting concept is the matching principle, which requires expenses to be recognized in the same period as the related revenue is earned. Suppose Northside Family Practice buys an x-ray machine for $100,000 and uses it for ten years, after which time the machine becomes obsolete. The cost of the services provided by the machine must include a charge for the cost of the machine; this charge is called depreciation. Depreciation reduces profit (net income) as calculated by accountants, so the higher a business’s depreciation charge, the lower its reported profit. However, depreciation is a noncash charge—it is an allocation of previous cash expenditures—so higher depreciation expense does not reduce cash flow. In fact, higher depreciation increases cash flow for taxable businesses because the greater a business’s depreciation expense in any year, the lower its tax bill.

Financial Challenges in Healthcare

Maintaining Financial Health and Flexibility

Sizable health systems come with sizable fixed costs, which can make it difficult to maintain financial flexibility. And spending is only expected to rise, thanks to economic forces like an aging and expanding population, advancements in technology and clinical approaches, and increased labor costs. Pressure to reduce out-of-pocket costs has boosted the desire to enrich public health systems.

Increasing Outpatient Care

More care is focused in the outpatient arena, but most revenue-generating care comes from facilities-based care, according to Athena Health. This is driven by patient request, financial incentives and innovations that now allow minimally invasive surgeries that no longer require a hospital stay.

Even moving to an acquisition of these outpatient facilities may require most hospitals to face a deficit for the first several years, not to mention the challenge of aligning incentives.

Increasing Costs

Most (70%) participants in the ACHE survey said increasing costs of staff and supplies were an issue for their hospitals. Looming tariffs may also pose issues in supply chains for the healthcare industry. For example, the pharmaceutical and medical device sectors rely on the ability to move raw materials and products abroad back to U.S. buyers. Supplies necessary for producing drugs may also increase in cost, according to the PwC report, particularly chemicals.

Insurance Reimbursement

Overall, the industry has seen a dip in private health insurance, particularly among younger patients, according to a Deloitte report. This is impactful because the longer it takes for the hospital to receive payment, the less efficient its finances are, as the services provided have essentially been a loan. This can also hamper innovation if insurance providers refuse to reimburse emerging procedures.

With healthcare spending on an upward trajectory and pressure from patients, insurers, and governments to clamp down on costs, savvy financial management is paramount to the healthcare sectors success. Everyone stands to benefit from a financially sound healthcare system equipped to weather the disruption and uncertainty to be expected in the next decade.