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PubMedDate not supplied

Clinical governance and external audit.

This paper describes a model of clinical governance that was developed at South Auckland Health during the period 1995 to 2000. Clinical quality and safety are core objectives. A multidisciplinary Clinical Board is responsible for the development and publicising of sound clinical policies together with monitoring the effects of their implementation on quality and safety. The Clinical Board has several committees, including an organization-wide Continuous Quality Improvement Committee to enhance the explicit nature of the quality system in terms of structure, staff awareness and involvement, and to develop the internal audit system. The second stream stems from the Chief Medical Officer and clinical directors in a clinical management sense. The Audit Committee of the Board of Directors covers both clinical and financial audit. The reporting lines back to that committee are described and the role of the external auditor of clinical standards is explained. The aim has been to create a supportive culture where quality initiatives and innovation can flourish, and where the emphasis is not on censure but improvement.

Academic Medical Centers↗
PubMed2004

Derivative financial instruments and nonprofit health care providers.

This article examines the extent of derivative financial instrument use among US nonprofit health systems and the impact of these financial instruments on their cash flows, reported operating results, and financial risks. Our examination is conducted through a case study of New Jersey hospitals and health systems. We review the existing literature on interest rate derivative instruments and US hospitals and health systems. This literature describes the design of these derivative financial instruments and the theoretical benefits of their use by large health care provider organizations. Our contribution to the literature is to provide an empirical evaluation of derivative financial instruments usage among a geographically limited sample of US nonprofit health systems. We reviewed the audited financial statements of the 49 community hospitals and multi-hospital health systems operating in the state of New Jersey. We found that 8 percent of New Jersey's nonprofit health providers utilized interest rate derivatives with an aggregate principle value of $229 million. These derivative users combine interest rate swaps and caps to lower the effective interest costs of their long-term debt while limiting their exposure to future interest rate increases. In addition, while derivative assets and liabilities have an immaterial balance sheet impact, derivative related gains and losses are a material component of their reported operating results. We also found that derivative usage among these four health systems was responsible for generating positive cash flows in the range of 1 percent to 2 percent of their total 2001 cash flows from operations. As a result of our admittedly limited samples we conclude that interest rate swaps and caps are effective risk management tools. However, we also found that while these derivative financial instruments are useful hedges against the risks of issuing long-term financing instruments, they also expose derivative users to credit, contract termination and interest rate volatility risks. In conclusion, we find that these financial instruments can also generate negative as well as positive cash flows and have both a positive and negative impact on reported operating results.

Financial Management↗
PubMedDate not supplied

A financial model for assessing hospital performance: an application to multi-institutional organizations.

The financial growth of investor-owned and not-for-profit hospitals has become an increasingly important research topic. More hospitals are forming multi-institutional organizations (MIOs) in an attempt to achieve greater market share and improve financial self-sufficiency. Few studies have provided a model for systematically analyzing financial growth in MIOs. A financial model is presented here to analyze equity growth. The model is applied to MIOs using recent audited financial data from more than 500 hospitals in 18 MIOs, eight investor-owned and ten not-for-profit. The results indicate that investor-owned MIO hospitals achieve significantly greater equity growth primarily through greater profit margins. The implications of these findings are discussed relative to the increasing price-competitive healthcare environment. The usefulness of the financial model is assessed in terms of its value as a financial diagnostic tool.

Financial Management↗
PubMed1989

Audit for all--but how?

Audit will soon be common-place and obligatory. The task will be difficult to perform manually but becomes simple and straightforward using the practice computer. Extensive clinical and financial audit may be easily derived from practice daily activities recorded on the computer.

Family Practice↗
PubMed1993

Hospitals in distress. Problems and solutions.

In the past five years the number of hospitals in financial distress has increased alarmingly. And though hospital administrators are feeling more optimistic now that their institutions will survive, they recognize the need to remain vigilant. It is important to recognize the warning signs of financial distress. Hospitals normally proceed through four stages of financial disintegration if no measures are taken to intercede: weak performance/condition, default, bankruptcy and dissolution. As the stages progress, fewer options for redress can be taken and loss of personnel and assets becomes inevitable. Materiel managers who regularly monitor key statistics, such as non-salary expenses per adjusted occupied bed, days in accounts payable, inventory dollars per adjusted occupied bed and so forth, can recognize the warning signs and take appropriate measures. Corrective actions can include reducing inventory levels, renegotiating contracts and leases, rebidding key contracts and supply items and extending purchase payment terms. A case study shows how a medical center experiencing weak performance implemented expense reductions in utilization, contracts, purchase costs/rebidding and inventory for substantial savings.

Bankruptcy↗
PubMed2005

The relative value of growth.

Most executives would say that adding a point of growth and gaining a point of operating-profit margin contribute about equally to shareholder value. Margin improvements hit the bottom line immediately, while growth compounds value over time. But the reality is that the two are rarely equivalent. Growth often is far more valuable than managers think. For some companies, convincing the market that they can grow by just one additional percentage point can be worth six, seven, or even ten points of margin improvement. This article presents a new strategic metric, called the relative value of growth (RVG), which gives managers a clear picture of how growth projects and margin improvement initiatives affect shareholder value. Using basic balance sheet and income sheet data, managers can determine their companies' RVGs, as well as those of their competitors. Calculating RVGs gives managers insights into which corporate strategies are working to deliver value and whether their companies are pulling the most powerful value-creation levers. The author examines a number of well-known companies and explains what their RVG numbers say about their strategies. He reviews the unspoken assumption that growth and profits are incompatible over the long term and shows that a fair number of companies are effective at delivering both. Finally, he explains how managers can use the RVG framework to help them define strategies that balance growth and profitability at both the corporate and business unit levels.

Accounting↗
PubMed2003

Evaluating group purchasing organizations.

A formal evaluation process can help healthcare organizations assess the current and/or potential value of a group purchasing organization (GPO). Healthcare organizations should approach a GPO evaluation as if they were entering into a new relationship. The evaluation should include purchasing and financial services, value-added services, and corporate relations/business practices. Healthcare organizations should consider the potential economies of scale and other services offered by a GPO. Healthcare organizations should consider using acceptable substitutes for products currently used or seeking products through alternative sources if doing so achieves greater value.

Capital Expenditures↗
PubMed2003

Hospitals, group purchasing organizations, and the antitrust laws.

Hospital members of group purchasing organizations should ensure that their GPO's business practices do not restrain trade. Hospitals should monitor their GPO to minimize their antitrust exposure. GPOs and their hospital members should assess administrative fees, bundling arrangements, duration of contracts with suppliers, and product-breakthrough policies in relation to their impact on competition and product innovation. GPOs and their hospital members should closely monitor activities of federal and state antitrust agencies in light of the agencies' renewed antitrust concerns.

Antitrust Laws↗
PubMed2005

Improving hospital budgeting and accountability a best practice approach.

Best practices in setting and managing healthcare organization budgets include: Using comparative benchmarks. Setting accurate, high-performance department budgets. Establishing a culture of accountability. Managing expenses. Monitoring variances and requiring corrective action plans. Employing a balanced scorecard.

Benchmarking↗
PubMed1991

The WAMI Rural Hospital Project. Part 4: Improving the financial health of rural hospitals.

Sound financial management has been identified as a critical component of effective hospital administration. Inadequate financial practices are a leading factor in the failure of hospitals. As part of the Rural Hospital Project (RHP), which operated in six rural Northwest communities from 1985 to 1988, detailed and extensive analyses of financial practices were conducted to identify strengths and weaknesses of the hospitals' financial management. In addition, 15 hours of formal education covering a variety of financial topics were presented to project participants. Results of the evaluation demonstrated that the greatest degree of change occurred in the financial management leadership capacity of the hospitals. All five hospitals, which either had no chief financial officer initially or subsequently experienced a turnover in the position, recruited individuals with strong qualifications. Vacancies in the administrator position in three of the four hospitals were filled by individuals with stronger financial management qualifications than their predecessors. Hospital board finance committees were formed in three of the four communities which previously did not have them. The biggest changes in financial practices occurred in the budgeting processes, which by 1989 better reflected the goals and strategies of the hospital's strategic plans. The financial performance of the six hospitals varied considerably over the study period. As a group, the RHP hospitals continued to require substantial nonoperating subsidies to remain solvent, despite improved financial practices. Despite the methodological limitations of this evaluation, we conclude that the intervention improved the capacity of the hospital administrations' financial leadership, as well as that of the governing boards, and led to substantial improvement in selected financial practices at all sites. Rural hospitals continue to operate in a hostile and precarious financial environment that limits their ability to sustain themselves on the basis of operating revenue alone.

Alaska↗
PubMed1995

Communication: an essential element in internal control.

In a healthcare organization, an internal control system segregates duties by function within the organization's financial operations. But segregating duties by function can result in poor internal communication that, in turn, can undermine an organization's internal processes and procedures. Effective communication can serve as an essential link between internal controls and operational effectiveness.

Accounting↗