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Health Care Finance
Part II: Organizational Classifications
Chapters 1 and 2 provide some introductory concepts about the importance of health care finance. As you know, health care organizations can be classified into ONE of three categories:
- proprietary (profit oriented; pays taxes)
- voluntary (non-profit; do not pay taxes)
- government owned
Identify one health care organization from your state(NEW YORK) that fall into EACH of these three categories. Be sure to (1) Name the organization, (2) Determine the organization’s category, and (3) Explain how you determined or where you found this information. Just to clarify…Your post should include the names of three organizations — one from each of the three categories.
CAUTION: Do not use http://www.hospitalinspections.org/ (Links to an external site.) as your information source. It is outdated!
If you use a data source other than a primary data source, it’s important to confirm your findings with the organization’s website.
Chapter 1: Introduction to Healthcare Finance
History of Financial Management
- Codifying management thought over time results in more organized management technique-building.
- Historical efforts all sought to make organizations work more effectively.
Concept of This Text
- A method of getting money in and out of the business
- Revenues = Inflow
- Expenses = Outflow
Concept of The Text
- “How does this happen in business?”
- The purpose of this text is to show how the various elements of finance fit together; in other words, how “it happens in business.”
- The key to understanding finance is understanding the various pieces and their relationship to each other.
Managers’ Viewpoints
- Managers within a healthcare organization will generally have one of three views:
- Financial
- Process
- Clinical
- The way they manage will be influenced by which view they hold.
Managers’ Viewpoints
Figure 1-1 Three Views of Management Within an Organization
The Financial View
- Work with finance on a daily basis
- Responsible for the reporting function
- Usually also do strategic planning
The Process View
- Work with the system of the organization
- Responsible for data accumulation
- Often affiliated with the information system department
The Clinical View
- Usually work with and interact directly with patients
- Responsible for service delivery
- Also responsible for clinical outcomes
Four Elements of Financial Management (1 of 2)
- Planning
- Controlling
- Organizing and directing
- Decision-making
Four Elements of Financial Management (2 of 2)
- Planning—Identify steps that must be taken to accomplish an organization’s objectives.
- Controlling—Make sure that each area of the organization is following the plans that have been established.
- Organizing and Directing—Decide how to use organizational resources to most effectively carry out established plans.
- Decision-Making—Make choices among available alternatives.
The Organization’s Structure
- Important to management because it influences the way the managers manage.
Types of Organizations
- Profit-oriented (aka “proprietary”)
- Non-profit-oriented (aka “not-for-profit”)
Profit-Oriented Organizations
- Are responsible for paying taxes
- May be corporations, partnerships, or individuals
Non-Profit Oriented Organizations
- Do not pay income taxes
- May be voluntary
- May be the government
The Organization’s Structure
- Voluntary organization types may be: churches, private schools, or foundations.
- Government organization types may be: federal; state; county; city; combination of city-county; hospital taxing district; or state university.
Organization Charts
- Often used to illustrate the structure of an organization
- How the degree of decentralization within the organization
The Organization’s Structure
- The purpose of an organization chart is to indicate how responsibility is assigned to managers.
- The formal lines of communication and reporting
- SUMMARY: The organization’s type affects it’s structure. It’s structure is shown in the organization chart.
Two Types of Accounting
- Financial
- Managerial
Financial Accounting
- Generally for outside, or third-party, use
- Emphasizes external reporting
- Must be in accordance with generally accepted accounting principles
- Retrospective (usually concerned with transactions that have already occurred)
Managerial Accounting
- Generally for inside, or internal, use
- Used by managers
- Not bound by generally accepted accounting principles
- Prospective as well as retrospective— Concerned with the future as well as with transactions that have already occurred.
