financial managemt discus3

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Kristin

For a healthcare organization, consistently creating financial statements is crucial to helping the organization determine vital information about the business. Reiter & Song (2021) noted that financial statements are the collection and communication of quantitative data that provides the economic status of an organization for public view. This information is vital to helping an organization understand its strengths and determine where inefficiencies lie. There are four components to a financial statement: the income statement, the statement of changes in equity, the balance sheet, and the statement of cash flows (Reiter & Song, 2021). These four components play a role in providing valuable information about an organization’s revenue, expenses, profitability, and whether financial obligations were met. Utilizing financial statements can help an organization understand and make informed decisions on where changes can be made to improve the organization. Dong (2015) demonstrated the positive correlation between profitability, costs, financial leverage, and operational efficiency on the quality of patient care.

For consistency and usability, regulatory jurisdictions have created standardized forms and disclosures. Under the guidance of the Financial Accounting Standards Board (FASB), they created guidelines to ensure consistent preparation and reporting of financial statements, which are known as generally accepted accounting principles (GAAP) (Reiter & Song, 2021). The uniformity allows leaders and stakeholders to better understand the current financial state of an organization and make more informed decisions.

Healthcare organizations need to understand the impact of their financial statements. To provide better care to patients, an institution must determine whether the finances will be there to offer such care. Financial transparency is crucial to help determine what improvements need to be made to maintain the business. Additionally, financial transparency helps investors present or future evaluate an organization’s financial stability. References

Dong G. N. (2015). Performing well in financial management and quality of care: evidence from hospital process measures for treatment of cardiovascular disease.  BMC health services research,  15, 45. https://doi.org/10.1186/s12913-015-0690-x

Reiter, K.L. & Song, P.H. (2021). Gapenski’s Healthcare Finance: An Introduction to Accounting and Financial Management, Seventh Edition: Vol. Seventh edition. AUPHA/HAP Book.

Marc

An important marker for the success and viability of a hospital or hospital organization is financial performance. Consistent financial reporting is key to capturing the insights that the financial performance of an organization can hold.  Even with the amount of government reporting for public hospitals through tax and Medicare reporting records, even these show inconsistencies depending on the data source (Ozemeral et al., 2012). Along with many other data sources, financial reporting can show correlations between the financial performance of an organization and other areas such as quality and patient safety and devote more resources to improvement initiatives.

Hospitals have become increasingly mandated to do more with less; in other words, to lower cost while maintaining quality outcomes and safety. Financially stable hospitals show increased performance in patient experience, lower readmission rates and decreased risk of adverse outcomes (Akinleye et al., 2019). Hospitals that are better off financially can devote more resources to maintaining high reliability and quality improvement, while distressed organizations struggle to meet those targets (Akinleye et al., 2019). This is important to note because financially struggling organizations may be serving vulnerable populations and are unable to purposefully engage in quality improvement measures.

The financial reporting of a hospital organization may be a key indicator of the ability to deliver quality and safe care to patients. While non-profit reporting for regulatory purposes is required, it is also important for public organizations to maintain consistent reporting showing that it has the financial ability to meet quality standards and participate in quality improvement initiatives.

Resources

Akinleye, D. McNutt, L., Lazariu, V., & McLaughlin, C. (2019). Correlation between hospital finances and quality and safety of patient care.  PLoS ONE 14(8): e0219124. DOI: 10.1371/journal.pone.0219124

Ozmeral, A.B., Reiter, K.L., Holmes, G.M., & Pink, G.H. (2012). A comparative study of financial data sources for critical access hospitals: audited financial statements, the Medicare cost report, and the Internal Revenue Service form 990.  The Journal of Rural Health, 28(4), 416-424.