April 6, 2010
Health Care Financial Management: Reporting Practices and Ethics Whether operating as for-profit or non-profit, organizations must pay close attention to accounting practices and adhere to sound financial management procedures to remain solvent.
This applies to health care organizations as well. With the costs of health care continuing to rise, it is not just consumers who have to manage budgets carefully.
According to Hyman (2010) the cost of providing those services, the way patients pay for these services and the environment in which those services are important factors affecting the care provided or even not provided.This paper discusses elements of financial management crucial to health care organizations for continued operations, generally accepted accounting principles applicable to health care, and summarizes articles related to health care financial management. Elements of Financial Management
Different sources refer to elements or principles of financial management and some sources discuss up to ten principles. Baker (2011) identifies four elements important to health care organizations reporting practices. Planning
Financial managers must know the short-term and long-term objectives of their organizations to create plans fro meeting those objectives. One must identify the objectives and identify the steps necessary for reaching those objectives. Planning is more than the upper management of an organization deciding what it wants to accomplish. Effective planners define strategies when planning and seek the input of everyone involved in the process, and ensure everyone supports the plans and understands their roles in executing the plans.
Outside the realm of finance, controlling can have a negative connotation. In financial management, controlling is a necessary part of leadership. Managers communicate constantly at all levels to provide direction and guidance while ensuring everyone is taking actions as agreed on for their roles, and take corrective actions with anyone who is not acting as agreed. To plan effectively, health care organizations must study past performance and understand current factors affecting their ability to provide medical services. Organizing and Directing
The element of organizing and directing call for managers and supervisors to properly allocate and use resources such as materials, personnel and dedicated funds in the most effective way. Directing is the management art of providing leadership and supervising through effective communication to ensure everyone understands their involvement in the organization accomplishing its goals. Decision-making
Although the element of decision-making seems to be the final outcome of accomplishing organizational financial goals, the decision is an ongoing process. Decision-making is the result of constant evaluation of plans, availability of resources, and information, and decisions within all elements of financial management. These evaluations provide multiple options for making informed decisions. Possessing multiple options allows financial managers to compare the strengths and weaknesses of each alternative and select the option best suited for helping attain organizational objectives.
Generally Accepted Accounting Principles
Generally Accepted Accounting Principles (GAAP) defines the general methods used for process, preparation, and presentation of public accounting information. GAAP avoid specificity for the most part to enable applicability to various industries including health care. However, GAAP does have specific application for financial managers, accountants, and auditors as established by the Federal Accounting Standards Advisory Board (FASAB, 2011). GAAP is based on...