Healthcare Finance Research

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Healthcare Finance Questions

Diamond Mizell

Health Financial Management HSA 525

Harold Griffin

07/13/2023

Organization Chosen: Mayo Clinic

Mayo Clinic is a not-for-profit organization that provides tertiary and long-term care services to patients with different problems. I chose this facility because it is the largest in the U.S., providing integrated tertiary medical services in over 50 clinics and hospitals. Being a not-for-profit organization means that many of Mayo’s funds come from donations. However, it also collects revenue from service delivery, which is used for projects and expansion. The research aims to understand the financial health of the Mayo Clinic, including its plans for future growth and development. The following questions will help in the study;

1. What period does your financial plan cover and is it documented?

A financial plan can be quarterly, semi-annual, or annual, depending on how a healthcare organization plans. The period for which a strategic financial plan is prepared will help understand how frequently Mayo Clinic conducts financial planning. Short-term plans will indicate frequent planning, while long-term plans will indicate less frequent efforts by the financial planner. It will help understand how the organization's financial plans change or adjust to meet specific needs such as emergencies.

2. Do you have realistic cash flow projections for the next three years?

For a budget and fiscal plan to be effective, financial success must be accurately predicted. The prediction must be realistic and align with the healthcare organization’s financial ability. Therefore, it is essential to understand whether Mayo has accurately predicted cash flow for the next three years. This will require enquiring if the organization has done market research to back up its financial estimates and predictions. The forecasts must be tested against Mayo’s financial plan to ensure all gaps are filled. This is essential in determining the organization’s financial health.

3. Are you liquidable? Are you bankable

Healthcare organizations handle emergencies and other situations such as change. This question aims to understand if Mayo Clinic can quickly access funds by borrowing, accessing from its operating cash flow, or liquidating assets, and being bankable means that an organization can give itself a loan. A healthcare organization must have valuable assets that can guarantee it cash in case of emergencies or a loan when there is a need (Whysel, 2009). It demonstrates capability and financial strength.

4. Are you receiving new clients and working with repeat patients?

Cash flow for a healthcare organization depends on its ability to maintain the loyalty of its clients and attract new ones. It also indicates that the healthcare organization delivers high-quality healthcare at low costs (Zietlow et al., 2018). High healthcare charges derive clients away. Having a steady stream of new and repeat patients indicates that a healthcare organization is stable financially and has numerous options for generating revenue. Therefore, it is essential to understand if Mayo Clinic has access to new customers and if it can maintain its profitability even when there are shifts in trends and buying patterns.

5. Are your investments sufficient? How have you mapped out the use of future funds?

In healthcare, significant investments drive an organization to a strong competitive position. Has Mayo invested in revenue-generating projects? Understanding this will require the financial officer to elaborate on their capital investment levels and how they align with financial ratios. It is also critical to consider how Mayo plans to spend its finances in the future. With the increasing healthcare costs, planning is essential, and targeting the right points will secure an organization’s financial stability and sustainability.

References

Whysel, B. (2009). Liquidity meets the new normal: for health systems today, ample liquidity means" never having to say you're sorry" to your creditors, your board, or your community. Across the country, executives are asking," When will things return to normal?" My answer:" Manage your liquidity as if this were the'new normal.'".  Healthcare Financial Management,  63(12), 108-110.

Zietlow, J., Hankin, J. A., Seidner, A., & O'Brien, T. (2018).  Financial management for nonprofit organizations: Policies and practices. John Wiley & Sons.