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Healthcare organizations are looking to quality programs as a key to survival, but many financial managers are unaware of the measurement methods they can use to quantify the results of quality management efforts. These methods can tell what impact quality initiatives have had on corporate culture, systems operations, and the bottom line.
In addition to strict financial outcomes, healthcare financial managers should assess intangible assets that affect the organization's bottom line, such as clinical processes, staff skills, and patient satisfaction and loyalty. The balanced scorecard, coupled with data-warehousing capabilities, offers a way to measure an organization's performance against its strategic objectives while focusing on building capabilities to achieve these objectives. The balanced scorecard examines performance related to finance, human resources, internal processes, and customers. Because the balanced scorecard requires substantial amounts of data, it is a necessity to establish an organizational data warehouse of clinical, operational, and financial data that can be used in decision support. Because it presents indicators that managers and staff can influence directly by their actions, the balanced-scorecard approach to performance measurement encourages behavioral changes aimed at achieving corporate strategies.
Nurse executives of home health agencies do not need accounting degrees to direct quality care programs, but do need to understand financial concepts that will enable an intelligent dialogue with the agency administrator or chief financial officer. The author discusses basic financial management and how the nurse executive of a small home health agency successfully turned it into one of the largest home care agencies in Illinois.
Six months ago, the Family and Medical Leave Act of 1993 was signed into law, and key provisions of the act became effective on August 5, 1993. This article examines the main provisions of the act, explains how employee leaves will be granted in compliance with the act, outlines the consequences of noncompliance with the act, analyzes the operational ramifications of the act, quantifies the financial implications of the act, and discusses the role of the healthcare financial manager in assisting with the formulation of a hospital policy to comply with the act.
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Hospital administrators have long recognized the importance of strong ties with medical staff. Implementation of the resource-based relative value scale (RBRVS) has disrupted the normal practice of physicians and has placed renewed stress upon the hospital-physician relationship. Hospital administrators can use their expertise to help physicians offset revenue losses incurred under this payment reform. Such an approach is logical and will benefit all parties involved, because it will enhance physician-facility relations and augment facility credibility. In this article, RBRVS is examined in terms of its impact on physicians, hospitals, and the relationship between the two. Financial management strategies are identified that can assist physicians to increase practice efficiency and cost containment to remedy potential revenue reductions caused by the implementation of RBRVS.
Today's healthcare financial managers are faced with the challenge of controlling costs and providing quality care while maintaining the necessary records to comply with government requirements and observe sound business practices.
A healthcare organization or system often needs to make capital expenditures to expand or renovate its facilities or to finance other important projects. It may be difficult, however, for an organization to gauge how much of its resources it can afford to commit to capital projects. To help the organization evaluate the feasibility of a capital expenditure, an analysis of financial resources should first be conducted. Using an actual healthcare system whose name has been changed to protect its identity, this article outlines how healthcare financial managers can perform an affordability analysis, based on the debt-to-capital ratio or debt service coverage, to determine the amount of resources to allocate for future capital expenditures.
Managers in the NHS are facing financial reforms which will impact greatly on their role. In general terms, service managers tend to be functionally trained and their financial awareness has not been a pre-requisite for their selection. Their ability to respond to their new role requirements is therefore untested, but it represents a crucial factor in the success of the reforms. This article examines the financial awareness of a group of managers who need financial skills, drawn from a range of work categories. The results indicate that there is room for the managers in the sample to improve their financial awareness, and reports that significant differences between work categories may be expected. However, the managers expressed satisfaction with the financial information they received although this information could be better presented. Given the increased complexities of financial information produced in the reformed NHS, these managers will require further training if they are to fulfil their new role to their true potential.
This paper describes "what if?" financial planning models developed for health care administrators and financial managers to study and evaluate the economic impact of changes in a health care organization's charge structure, operating policies, reimbursement plans, and services and resources. Models for inpatient and outpatient care systems are presented. The models are described in terms of input, output, and application. An assessment of the state of the art of financial planning and prospects for the future of what if?models are given.
Primarily due to economic forces, health services are being forced into a tight organisational framework of hospitals, clinics and services which need to be managed by educated professional managers. These managers need to be competent general and financial managers, competent planners, knowledgeable about health status, health issues, the Australian health care systems and knowledgeable about society, law and ethics. Assumptions that recruitment of people with such a formidable array of talents would be difficult are incorrect as judged by current experiences. Very talented and experienced candidates are being attracted to graduate education programs in health service management in many Australian universities. Accordingly the future management of Australian health services should be in good hands.
Lessons learned over 10 years of management services organization (MSO) development can help financial managers increase their healthcare organizations' odds of success in such ventures. If administered appropriately, with a focus on managing and retaining covered lives, MSOs can be valuable vehicles for tying community physicians to organizations interested in developing integrated delivery systems.
Several issues will challenge healthcare organizations in 2004. Increasing costs, a labor short-age, demanding consumers, eroding profits, and limited access to capital will create financial pressures. How healthcare organizations respond will determine how they weather the challenges. The most successful organizations will focus on financial management strategies and will seize the opportunity to transform themselves. Technology will play a major role in the strategies.
The tax-exempt status of not-for-profit healthcare organizations increasingly is being challenged by private, for-profit, investor-owned organizations. Often, the business practices of not-for-profit organizations are virtually indistinguishable from those of for-profit organizations, and not-for-profit organizations sometimes provide less charity and unfunded care than their for-profit competitors. Moreover, the tax subsidies not-for-profit organizations sometimes are used to support activities that compete with those of for-profit organizations. To withstand challenges to their tax status, financial managers in not-for-profit organizations should assume an active role in developing clearly articulated, empirically based information about the extent of community benefit their organizations provide and its value.
Because the operation of the pharmacy department is critical to the successful financial management of any hospital, pharmacists need to develop systematic budgeting systems that truly reflect costs. The variable budgeting techniques proposed by this author can reflect fluctuations in the cost of drugs.
In 1993-1994, the Office of Inspector General (OIG) conducted an investigation of allegations that numerous hospitals had fraudulently billed the Medicare program for investigational cardiac devices. OIG found evidence of fraud related to these devices as well as to certain investigational procedures. Partly as a result of this probe, Senate hearings were held in 1996 to ascertain whether fraud and abuse in Medicare billing was a widespread problem. Investigational devices and procedures received particular attention during these proceedings. Hospitals involved in the 1993-1994 OIG investigation maintained that the Federal government previously sanctioned billing for the use of some investigational or experimental devices, that the devices and procedures in question had already been proven to be safe and effective, and that the devices or procedures resulted in better patient care or shorter lengths of stay. For these and other reasons, the hospitals contended, billing Medicare for these devices was appropriate. Although HCFA has allowed the Medicare program to pay for the use of some investigational devices and procedures since November 1995, Federal fraud and abuse investigators continue to scrutinize the billing practices of hospitals engaged in clinical trials. Financial managers in healthcare organizations that use investigational devices--even those not engaged in clinical trials--need to carefully review their organizations' compliance with Medicare billing requirements.
This paper distinguishes three separate ways in which casemix measurement serves as a foundation for hospital and health system reform. At the hospital level, diagnosis related groups provide a means of describing kinds of acute inpatient care which in turn facilitates utilisation review activities essential to modern clinical and financial management. At the system level, casemix adjusters such as diagnosis related groups provide the basis for comparisons of productive efficiency across institutions, and reduce the risk of adverse funder reactions to higher per case costs which are attributable to differences in casemix. States are increasingly using casemix as the basis for funding hospitals in order to reduce non-casemix related differences. Finally, health reform experiments in using market-like mechanisms (such as managed competition, purchaser-provider split) require at a minimum that the product purchased be precisely specified, and that clinical risks of cost overruns be equalised amongst insurers or providers.
Results of a 1995 compensation survey of healthcare organization chief financial officers (CFOs) indicate that the larger the organization for which the CFO works (as measured by operating revenues), the larger the CFO's compensation package. The survey findings show that CFOs who work for organizations with annual operating revenues of more than $199 million earn an average of $189,300 annually, while CFOs at organizations with operating revenues less than $50 million earn $76,400. Other factors influencing CFOs compensation, according to survey results, include education level, gender, and job responsibilities; geographic location of the employing organization; organizational type (multi-unit system, stand-alone hospital, etc.); and organizational ownership (physician-owned, not-for-profit, etc.) The survey was co-sponsored by the Healthcare Financial Management Association (HFMA) and Aetna Life Insurance and Annuity Company and conducted by Management Compensation Services, a division of Hewitt Associates LLC. It is the first HFMA survey to be devoted entirely to compensation. In previous years, compensation data were obtained as part of CFO profile survey findings.