|Type of paper:
|Data analysis Healthcare policy Financial management
Financial management is a critical activity in any undertaking. Financial management refers to the process of organizing, controlling, planning, and monitoring all the financial resources to achieve the set objectives within the budget. It is an ideal practice for controlling financial activities such as procurement of funds, accounting, utilization of funds, risk management and assessment, accounting, and all the things related to money. Alternatively, financial management can be termed as the application of the general principles of control to the financial ownership of an organization. Healthcare management deals directly with the business aspect of healthcare and has become a key component in overseeing facility operations, personnel, and information technology. Improving the efficiency and the quality of patient care and the associated costs is a crucial mantra in the modern healthcare industry, but does not go without several challenges (Malik et al., 2016). This paper will analyze the role of financial management in health care and the various challenges associated with the same.
Healthcare facilities face new challenges daily. It is up to the managers and their financial analysts to develop strategies geared toward addressing these issues while providing adequate care for the patients (Jones et al., 2018). On challenge that the healthcare provider faces is securing and growing the market share in areas where patients are more open to over-the-counter prescriptions because they deem hospitals to be more expensive (Bai et al., 2017). Thus, financial managers must research, understand the community and develop market strategies, which include consolidation, non-traditional partnership, feasibility, and strategic relationship in providing user-friendly specialized services at an affordable price to retain the same market share (Bai et al., 2017).
With such a landscape, it is worth noting that the most pressing challenge is healthcare attempting to control costs while at the same time trying to offer quality health solutions. American College of Physicians asserts that the key drivers of this rising Medicare cost are inappropriate to use of the ever-advancing medical technology, in-appropriation of the payment systems such as payment distortion, and a labor forces that is not aligned with the actual requirement, nationally (Bai et al., 2017). Other areas that are great contributors are high administration costs, medical liabilities resulting in expensive lawsuits, chronic diseases, and an increase in the elderly population. Controlling these costs is imperative in promoting the national health outcome amid an environment with increased pressure to do so. Thus, to achieve this, healthcare facilities should put into consideration the following key elements.
One of the critical elements in the planning through which healthcare financial managers should identify all the necessary steps that must be undertaken to accomplish essential organizational objectives. Planning aim is to identify the objectives followed by determining all the steps needed to attain the same goals (Malik et al., 2016). The second element is controlling where, the financial manager is posed with the responsibility of making sure that each area of the healthcare facility is following the plans that have been created and established. The financial manager does this by studying the current reports and making a comprehensive comparison with previous reports (Jones et al., 2018). The comparison will show where the organization requires attention. Organizing and directing is another element where, the financial manager allocate resources within the organization to most effectively perform the plans that have been established. In directing, the manager works daily to keep the facility's results running efficiently. Lastly, decision-making is a significant element, where the managers make choices among all the available options (Jones et al., 2018). Decision-making relies on the information, and the primary tasks are the analysis and evaluation to inform choices. To achieve these elements, the financial manager should employ various data analytics tools.
Data analytic tools have increasingly become essential worldwide leading to massive demand in the market. Various tech companies have noticed this and developed the most advanced and flawless tools making it difficult to select the best. Instead, most of these data analytic tools are chosen based on popularity, user-friendliness, and performance (IMS Proschool, 2019). Though the paid versions are considered to offer premium services, financial managers prefer performance and ease of use. There are data analytic tools that can be used in healthcare facilities in monitoring, assessing, and evaluating performance. They include Excel, R programming, and Tableau public (IMS Proschool, 2019).
Excel is a Microsoft-based software and is an essential, popular, and broadly used as analytical tool in almost all industries, including educational institutions (IMS Proschool, 2019). Despite being proficient in all the other software, most of the financial managers always use excel, especially where there is a requirement of analytics of the internal data. R is a leading data analytic tool and is widely used for statistics and data modeling. It exceeds other software in data capacity, its performance, and also the outcome (IMS Proschool, 2019). Besides, it has a wide array of packages going up to 11,556 and is easily compatible with all computer operating systems (IMS Proschool, 2019). R allows the user to install packages as per their requirement, and this customization is what makes it attractive in financial and statistical data analysis. Lastly, financial managers use Tableau public which connects all the data sources, be it from R, or excel in creating data visualization, dashboards, and maps with real-time update presented on the web (IMS Proschool, 2019). The advantage of this is, financial managers can manage to share their real-time data with the management to ensure constant updates and ease decision-making. These analyses can also be shared via social media with the management or any other interested party.
Financial statements are essential in healthcare since they contain all the necessary information about the facility's financial health and viability. They assist healthcare providers in making informed decisions because they highlight the areas of weakness that require improvement as well as providing the areas with the best returns (Chen, 2019). Financial statements comprise of a balance sheet that reveals the facility's investments in forms of assets and liabilities (Chen, 2019). It shows the acquired assets, what is owed, and the value that is left after every liability is settled down. The income statement is another financial statement that shows the net income after the expenses are deducted from the total revenue. It is critical to health facilities since it can show the viability and the going concern (Malik et al., 2016). Other statements might include the statement of cash flow to enable the management to understand how the cash enters and leave the facility.
Accurate financial statements assist the facility in settling its obligations such as taxes and illustrate that all the Generally Accepted Accounting Principles (GAAP) are followed and support the institution in making the right decisions (Chen, 2019). It also gives management and understanding of how healthy the institute is.
In conclusion, financial management plays a critical role in all industries. Every organization relies heavily on efficient financial management, but when it comes to healthcare, it is critically essential because there is already an existing high cost of medical care in the United States. Unless the cost is kept in check, and reasonable, the patients and the health insurance companies may be left to pay a hefty amount of money. With the introduction of legislation on the Affordable Care Act, the health care facilities are monitored particularly on what they can charge, especially on Medicare. Based on this, there is no other institution that requires financial management more than health care. To achieve efficiency, key elements such as planning, controlling, organizing, and decision-making should be considered. Additionally, financial managers and accountants should employ data analytic tools to aid in creating accurate financial statements that are geared towards improved decision-making practices.
Bai, Y., Gu, C., Chen, Q., Xiao, J., Liu, D., & Tang, S. (2017). The challenges that head nurses confront financial management today: A qualitative study. International Journal of nursing sciences, 4(2), 122-127.
Chen, C. W. (2019). The disciplinary role of financial statements: evidence from mergers and acquisitions of privately-held targets. Journal of Accounting Research, 57(2), 391-430.
IMS Proschool. (2019, July 19). TOP 10 DATA ANALYTICS TOOLS. IMS Proschool Offers Courses in Data Science, Digital Marketing, IFRS, ACCA, CFA, Business Analytics, Financial Modeling, CIMA, CFP Courses. https://www.proschoolonline.com/blog/top-10-data-analytics-tools
Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives-E-Book. Elsevier Health Sciences.
Malik, A., Field, C., & Gorwood, P. (2016). Managing financial resources in healthcare settings. Psychiatry in Practice: Education, Experience, and Expertise, 45.
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