Chapter 3: Paying for Health Services
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Chapter1-edited-revised1.pptxCHAPTER 1 Introduction to Healthcare Finance
Definition of healthcare finance
Course goal
The role of healthcare finance
Finance department structure
The health services industry
Regulatory and legal issues
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Definition of Healthcare Finance
The definition depends on the context:
Policymaker or manager
Type of healthcare organization
For our purposes, healthcare finance is the practice of finance in health services organizations, which includes accounting and financial management.
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Accounting Versus Financial Management
Accounting concerns the measurement, in financial terms, of events that reflect the resources, operations, and financing of an organization.
Financial management provides the theory, concepts, and tools necessary to help managers make better financial decisions.
Are the two disciplines independent?
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Goal of the Course
The primary goal of this course is to introduce you to the field of healthcare finance, including
principles and concepts,
applications across a variety of provider settings, and
the impact of alternative reimbursement methods.
Along the way, some personal finance concepts are also discussed.
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Finance Role and Activities
The primary role of finance in health services organizations is to plan for, acquire, and utilize resources to maximize the efficiency (and value) of the organization.
Finance activities include
planning and budgeting,
managing financial operations,
financing decisions,
capital investment decisions,
financial reporting,
financial and operational analysis,
contract management, and
financial risk management.
Primarily financial staff functions
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Finance activities can be summarized by the four Cs:
Costs. Costs must be continuously monitored to ensure that they are not excessive for the number of services provided.
Cash. Businesses must have sufficient cash on hand to meet payment obligations as they occur.
Capital. Businesses must raise the capital (money) necessary to buy the facilities and equipment needed to provide services.
Control. Businesses must control their resources to ensure that they are used wisely.
The Four Cs
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Importance of Finance Over Time
When most health services organizations were reimbursed on the basis of costs incurred, the role of finance was secondary.
Today, however, the finance function has increased in importance.
There are no unimportant functions in health services organizations. Operations, human resources, facilities, and so on are all essential to mission accomplishment.
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Finance Department Structure
Chief financial officer (CFO)
Comptroller Treasurer
Budgeting Capital acquisition
Reporting Capital employment
Payables Debt management
Financial operations Financial risk management
What about small businesses, such as a three-physician medical practice?
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Health Services Settings
Health services are provided by numerous types of organizations in many different settings.
Applications presented in this course include the following settings:
Hospital (inpatient) care
Ambulatory (outpatient) care
Long-term care
Integrated delivery systems
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Regulatory Issues
Entry into the health services industry is heavily regulated:
Licensure
Certificate of need (CON)
Cost containment and rate review
Although regulation is designed primarily to protect consumers, critics contend that it protects providers more than it does consumers.
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Legal Issues
The primary legal issue facing healthcare providers is professional liability.
In addition, other issues include
general liability,
antitrust, and
right to die.
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Current Challenges
Surveys of healthcare managers indicate the following concerns:
Financial challenges
Level of reimbursement
Bad debt losses
Billing and collections process
Capital acquisition (raising money)
Balancing clinical and financial issues
Human resources
Nurse recruitment and retention
Other clinical employees
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Conclusion
This concludes our discussion of Chapter 1 (Introduction to Healthcare Finance).
Although not all concepts were discussed, you are responsible for all of the material in the text.
Do you have any questions?
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