Health Care Finance
Helpm31990
9781284118308_SLID_CH01.pptChapter 1: Introduction to Healthcare Finance
History of Financial Management
- Codifying management thought over time results in more organized management technique-building.
- Historical efforts all sought to make organizations work more effectively.
Concept of This Text
- A method of getting money in and out of the business
- Revenues = Inflow
- Expenses = Outflow
Concept of The Text
- “How does this happen in business?”
- The purpose of this text is to show how the various elements of finance fit together; in other words, how “it happens in business.”
- The key to understanding finance is understanding the various pieces and their relationship to each other.
Managers’ Viewpoints
- Managers within a healthcare organization will generally have one of three views:
- Financial
- Process
- Clinical
- The way they manage will be influenced by which view they hold.
Managers’ Viewpoints
Figure 1-1 Three Views of Management Within an Organization
The Financial View
- Work with finance on a daily basis
- Responsible for the reporting function
- Usually also do strategic planning
The Process View
- Work with the system of the organization
- Responsible for data accumulation
- Often affiliated with the information system department
The Clinical View
- Usually work with and interact directly with patients
- Responsible for service delivery
- Also responsible for clinical outcomes
Four Elements of Financial Management (1 of 2)
- Planning
- Controlling
- Organizing and directing
- Decision-making
Four Elements of Financial Management (2 of 2)
- Planning—Identify steps that must be taken to accomplish an organization’s objectives.
- Controlling—Make sure that each area of the organization is following the plans that have been established.
- Organizing and Directing—Decide how to use organizational resources to most effectively carry out established plans.
- Decision-Making—Make choices among available alternatives.
The Organization’s Structure
- Important to management because it influences the way the managers manage.
Types of Organizations
- Profit-oriented (aka “proprietary”)
- Non-profit-oriented (aka “not-for-profit”)
Profit-Oriented Organizations
- Are responsible for paying taxes
- May be corporations, partnerships, or individuals
Non-Profit Oriented Organizations
- Do not pay income taxes
- May be voluntary
- May be the government
The Organization’s Structure
- Voluntary organization types may be: churches, private schools, or foundations.
- Government organization types may be: federal; state; county; city; combination of city-county; hospital taxing district; or state university.
Organization Charts
- Often used to illustrate the structure of an organization
- How the degree of decentralization within the organization
The Organization’s Structure
- The purpose of an organization chart is to indicate how responsibility is assigned to managers.
- The formal lines of communication and reporting
- SUMMARY: The organization’s type affects it’s structure. It’s structure is shown in the organization chart.
Two Types of Accounting
- Financial
- Managerial
Financial Accounting
- Generally for outside, or third-party, use
- Emphasizes external reporting
- Must be in accordance with generally accepted accounting principles
- Retrospective (usually concerned with transactions that have already occurred)
Managerial Accounting
- Generally for inside, or internal, use
- Used by managers
- Not bound by generally accepted accounting principles
- Prospective as well as retrospective— Concerned with the future as well as with transactions that have already occurred.
