FINANCIAL MANAGEMENT IN HEALTHCARE

Financial Management in Healthcare

Financial Management in Healthcare

Introduction

In today's healthcare environment, where financial realities play an important role in business decision making, it is vital that managers at all levels understand the basic concept of about healthcare finance and health services system. Healthcare finance and how these concepts are used to enhance the financial wellbeing of the organization. In this topic, we introduce readers to health care , including its goals and organization.

Healthcare Finance

Surprisingly there is no single answer to that question because the definition of the term depends, for the most part on the context in which it is used.We begin by examining the healthcare sector of the economy, which is second in size only to the real estate sector and consists of a diverse collection of industries that involve either directly or indirectly, the healthcare of the population. The major industries in the healthcare sector include (Schlossberg, N. K., Lynch, A. Q., & Chickering, A. W. 1989):

Health Services

The health services industry consists of providers of health services, including the medical practices, hospitals, clinics, nursing homes and home healthcare agencies.

Health Insurance

The health insurance industry, which makes most of the payments to health services providers, includes government programs and commercial insurers as well as self-insurers.Also included here are managed by care companies such as health maintenance organizations (HMOS), which incorporate both insurance and health services (provider) functions (Pulich, 2002).

Medical Equipment and supplies

These industries include the makers of durable medical equipment such as diagnostic equipment and expendable medical supplies such as disposable surgical instruments and bandages.

Pharmaceuticals and Biotechnology

These industries develop and market drugs and other therapeutic products.

This category includes a diverse collection of businesses ranging from consulting firms to educational institutions to government and private research agencies.The principles and practices of finance can not be practiced I a vacuum but must be based on realities of the current healthcare environment, including how healthcare services are financed. Furthermore insurance involves payments to healthcare providers; much of managed care involves utilization management of healthcare providers, either directly or through contracts and most of the consulting work is done for providers(Kamel Boulos & Wheeler, 2007).

Now that we have defined the healthcare, we must define finance. Finance is the term used within the health services industry and it consists of both the accounting and the financial management functions (in many settings, accounting and financial management are separate disciplines) Accounting as the name implies, concerns the recording, in financial terms of economic events that reflect the operation, resources and financing of the organization. In general, the purpose of accounting is to create and provide to interested parties, both internal and external, useful information about the organizations financial status and operations (Pulich, 2002).

Whereas accounting provides a rational means by which to measure a business financial performance and asses operations, financial management or corporate finance provides the theory, concepts and tools necessary to help managers make better decisions. Of course the boundary between accounting and financial management is blurred; certain aspects of accounting involve ...