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PubMed1984

Hospital breaks new ground with hybrid financing package.

By applying financial management techniques that are more traditionally associated with corporate businesses, an Illinois hospital was able to generate the funds needed for a new replacement facility at a time when the money market was especially tight. The authors explain the structure of the hybrid financing package they used, and how such a strategy enabled the hospital to generate $61 million in capital at an interest rate almost 5 percent below prime.

Financial Management↗
PubMed1980

The chief financial officer's qualifications for the chief executive officer's job.

The changing character of the role of the CFO raises the question of whether the terminal role for someone starting in the financial track is the CFO position or whether the training received in financial management prepares an individual to accept the responsibility of the CEO position. An examination of the responsibilities of both roles comparing their similarities and differences is helpful in answering this question. Job descriptions will vary from institution to institution, depending upon the special needs and circumstances that exist. However, certain characteristics are common to both the CEO and the CFO. Table 2-1 presents a brief comparison of these two roles.

Administrative Personnel↗
PubMed2001

Realizing positive returns from your e-health investments.

Although the healthcare industry still is in the beginning stages of e-health adoption and has yet to achieve a significant return on e-health investments, healthcare organizations can anticipate increasingly positive results over time. To capitalize on the potential of e-health, financial managers need to adopt a clear, concise approach to valuing e-health investment options, making investment decisions, and managing an organization's return on invested capital. Key actions to take are developing a strategy, looking beyond cost reduction to other advantages of e-health strategies, understanding the needs of the stakeholders, becoming comfortable with experimentation, having realistic expectations, and instituting a process for valuing e-health investments that does not duplicate valuation processes for traditional information technology projects.

Cost Allocation↗
PubMed2002

NFP Investor Conference. Growth is back in sight.

In a whirlwind of high-stakes meetings in New York City in mid-May, two dozen of the nation's largest hospitals and health systems strutted their stuff with a single goal: securing their future. Their message was clear: back-to-basics works, and now it's time to grow the business. Executives from 23 providers outlined their work on increasing revenue, boosting margins and shoring up balance sheets. They presented their market positions, strategic initiatives and financial results for investment analysts, credit raters and bond traders. The third annual Non-Profit Healthcare Investor Conference was co-sponsored by the American Hospital Association, Health Forum, the Healthcare Financial Management Association and Salomon Smith Barney. The focus on growth doesn't come without challenges Several common themes emerged from the presentations, among them pressure on reimbursement, workforce shortages, liability insurance issues and capacity constraints. Yet executives agree: it all comes down to the basics, and building the strength to keep their missions alive. As Thomas Meier, vice president and treasurer of Oakland, Calif.-based Kaiser Permanente, put it: "No margin, no mission, no más."

Capital Financing↗
PubMed1999

Will the year 2000 affect your organization's investments?

Healthcare financial managers responsible for the investments of their healthcare organizations should identify the extent of their investment programs' exposure to year-2000-related problems. A letter should be sent to investment-related vendors requesting specific information and assurances regarding the vendors' efforts to contain or eliminate the year 2000 problem. An internal timetable also should be established to move the year 2000 compliance program forward in a timely and organized fashion.

Chronology as Topic↗
PubMed2000

Will your compliance plan pass the effectiveness test?

A healthcare organization that has a dynamic compliance plan that is regularly reviewed, revised, and followed is more likely to be in compliance with Federal and state laws and regulations. Healthcare financial managers should be guided by the criteria for compliance plans set forth by the Department of Justice and the Office of Inspector General in their "Compliance Program Guidance for Hospitals." An independent audit of the compliance plan is recommended, but a careful internal examination of the plan should be performed before the independent audit takes place. It is important to determine how well the plan is followed, revise the plan if necessary, and document actions taken to fulfill the plan's requirements.

Efficiency, Organizational↗
PubMed1986

Implications of the method of capital cost payment on the weighted average cost of capital.

The author develops a theoretical and mathematical model, based on published financial management literature, to describe the cost of capital structure for health care delivery entities. This model is then used to generate the implications of changing the capital cost reimbursement mechanism from a cost basis to a prospective basis. The implications are that the cost of capital is increased substantially, the use of debt must be restricted, interest rates for borrowed funds will increase, and, initially, firms utilizing debt efficiently under cost-basis reimbursement will be restricted to the generation of funds from equity only under a prospective system.

Capital Financing↗
PubMed2000

Internal investigations: a proactive approach to compliance.

Healthcare financial managers increasingly are recognizing that internal investigations can uncover and help correct improper activities before they attract government attention, as well as reveal valuable facts about any questionable activities that may be the target of a government inquiry. An organization that exhibits a high level of responsibility by undertaking a thorough internal investigation of possible improper activities may reduce or eliminate civil or criminal sanctions the government can impose if the organization is found guilty of improprieties. Furthermore, an internal investigation can preserve the organization's integrity and reaffirm its commitment to high ethical standards and sound business practices.

Ethics, Institutional↗
PubMed1996

EDI helps PHOs meet information needs.

While the organizational structures of physician-hospital organizations (PHOs) may differ from region to region, financial management of all PHOs requires that comparable information about the type and volume of patient services provided under each contract must be available so that the profitability of different contracts can be analyzed. However, comparable information often is not readily available. Obtaining these data is a challenge facing all PHOs. One Midwest healthcare system has designed and implemented an inexpensive electronic network that connects most of the participants in its PHO. This network has enabled the PHO to obtain information about the care provided under its contracts, information that would not be available otherwise.

Computer Communication Networks↗
PubMed1997

Can earning prompt-payment discounts really save money?

Healthcare financial managers should determine whether to take advantage of the discounts vendors offer for prompt payment of invoices. Prompt-payment discounts offered by vendors can result in substantial savings, but this benefit may be offset by the costs of acquiring the funds necessary for faster payment. The best results are achieved when the cost of funds is less than the discount savings that can be achieved, vendor discounts are available for a high percentage of the provider's purchase base, the provider is able to negotiate with vendors to increase discount levels, and the provider has an efficient system for processing invoices.

Accounts Payable and Receivable↗
PubMed2001

Avoiding HIPAA hype: preparing for HIPAA affordably.

In the scramble to prepare their organizations for HIPAA compliance, healthcare financial managers may believe they must commit significant funds to overhauling information systems and hiring consulting firms. But security and confidentiality policies required by HIPAA cannot be implemented solely by upgrading computer systems. HIPAA compliance requires a wholesale change in staff attitudes and behavior regarding patient security and confidentiality. Healthcare organizations can prepare to comply with HIPAA regulations practically and affordably by combining in-house expertise with limited assistance from outside consulting firms. An added benefit of emphasizing the use of in-house resources to prepare the organization for HIPAA compliance is that the organization can develop and retain its own experts on HIPAA.

Facility Regulation and Control↗
PubMed1999

New AICPA standards aid accounting for the costs of internal-use software.

Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," issued by the American Institute of Certified Public Accountants in March 1998, provides financial managers with guidelines regarding which costs involved in developing or obtaining internal-use software should be expensed and which should be capitalized. The SOP identifies three stages in the development of internal-use software: the preliminary project stage, the application development stage, and the postimplementation-operation stage. The SOP provides that all costs incurred during the preliminary project stage should be expensed as incurred. During the application development stage, costs associated with developing or obtaining the software should be capitalized, while costs associated with preparing data for use within the new system should be expensed. Costs incurred during the postimplementation-operation stage, typically associated with training and application maintenance, should be expensed.

Accounting↗
PubMed1994

A return-based alternative to IRR (internal rates of return) evaluations.

A dilemma often faced by healthcare financial managers is whether to describe a potential investment project to organizational decision-makers in terms of the projects' internal rates of return (IRR) or to use the net present value (NPV) method. The IRR represents an intuitively appealing method of measuring investment value, but a number of conceptual and methodological problems associated with IRR measurement would seem to argue the use of the NPV method. Unfortunately, while the NPV measure is theoretically valid, it lacks the intuitive appeal of the IRR in communicating the value of investment alternatives. This article details an alternative method of measuring return that incorporates all the intuitive appeal of the conventional IRR, but few of the shortcoming associated with that measure.

Capital Expenditures↗
PubMed1998

Combating silent PPOs.

A silent PPO is a contracting entity that negotiates discounts with providers but sells access to the discounts to other, nonrelated parties after services are provided to individuals covered by the nonrelated parties' insurance policies. Healthcare financial managers should be alert to the presence of silent PPOs when entering into contract negotiations. To combat silent PPOs, a two-pronged approach--prevention and detection--is advisable. Factors to consider include appropriate contract language stating that all clients with access to the discounts have a contract with the PPO, presence of the PPO's logo on a patient's insurance card, and the PPO's willingness to limit the number of providers in its network. Warning signs that indicate the presence of a silent PPO include a high volume of retroactive reclassifications, single employers taking discounts from multiple PPO networks, or payments for services provided to single individuals coming from multiple PPO networks.

Contract Services↗
PubMed2001

Using simple multiple regression to establish labor rates.

Multiple-regression methodology allows healthcare financial managers to set standard rates of pay, thereby enabling them to better control costs. The process for implementing multiple regression is simple. The first step is to calculate the betas, or weights the marketplace gives each job characteristic to determine pay. Data on betas can be purchased, or a regression can be run on market data to calculate the betas. Next, the job descriptions should be reviewed and job incumbents interviewed, and then job characteristics for each job should be ranked on a scale of 1 to 5 to obtain the independent variables, or X values. Then, betas and X values should be entered into the salary formula to obtain standard hourly rates. The proposed standard rates should be verified through market salary surveys.

Accounting↗
PubMed1998

DRG benchmarking study establishes national coding norms.

With the increase in fraud and abuse investigations, healthcare financial managers should examine their organization's medical record coding procedures. The Federal government and third-party payers are looking specifically for improper billing of outpatient services, unbundling of procedures to increase payment, assigning higher-paying DRG codes for inpatient claims, and other abuses. A recent benchmarking study of Medicare Provider Analysis and Review (MEDPAR) data has established national norms for hospital coding and case mix based on DRGs and has revealed the majority of atypical coding cases fall into six DRG pairs. Organizations with a greater percentage of atypical cases--those more likely to be scrutinized by Federal investigators--will want to conduct suitable review and be sure appropriate documentation exists to justify the coding.

Abstracting and Indexing↗
PubMed1997

The impact of IRS-mandated employee reclassification.

The IRS requires healthcare organizations to properly classify their workers as either independent contractors or organizational employees. In order to protect their organizations from IRS-imposed monetary fines, healthcare financial managers must understand how the IRS evaluates employment status and the consequences their organizations will face if they misclassify employees. Changes involving the status of independent contractors and organizational employees instituted by the Small Business Job Protection Act of 1996 are favorable to employers and clarify safehaven provisions under section 530 of the 1978 Revenue Act. Significant changes include requiring the IRS to notify employers of section 530's relief provisions when an audit begins, expanding section 530 relief, clarifying industry practice relief provisions, and shifting the burden of proof to the IRS. In addition to Federal legislation, the IRS introduced administrative initiatives, such as those contained in Announcement 96-13, to clarify worker reclassification issues. In Announcement 96-13, the IRS implemented a three-part plan that includes a test classification settlement program, an appeals process, and a training manual to clarify these issues.

Contract Services↗
PubMed1998

Capital budgeting techniques.

The cost of new medical imaging equipment for a radiology practice is a major capital purchase. Due to rapid advances in technology and imaging techniques, the management decision to purchase new capital equipment can present itself every few years. The present report explains various financial management techniques that are generally used by corporations worldwide to determine their cost of capital. The cost of capital is the return on a capital investment project required by the providers of the capital. The published financial accounts of Sonic Healthcare Limited, Australia's largest pathology company, are reproduced as a numerical example of how the financial accounts of a business may be used to determine its cost of capital. The cost of capital forms an integral part of management's financial decision-making process.

Accounting↗