York Place Project

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Part I: Health Care Finance Overview

CHAPTER 1:

INTRODUCTION TO HEALTH CARE FINANCE

History of Financial Management

Codifying management thought over time results

in more organized management technique-

building.

History of Financial Management

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 health care organization will generally have

one of three views:

FinancialProcessClinical

The way they manage will be influenced by which view they hold.

Managers’ Viewpoints

The Financial View

Work with finance on a daily basis.

Responsible for the reporting function.

Usually also do strategic planning.

Managers’ ViewpointsThe Process View

Work with the system of the organization.

Responsible for data accumulation.

Often affiliated with the information system department.

Managers’ Viewpoints

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

PlanningControllingOrganizing and directingDecision-making

Four Elements of Financial Management

Planning — Identify steps that must be taken to accomplish and 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

The structure of an organization is important to management

becauseIt influences the way the managers

manage.

The Organization’s Structure

Types of organizations

Profit-oriented (aka “proprietary”)

Non-profit-oriented (aka “not-for-profit”)

The Organization’s Structure

Profit-oriented organizations

Are responsible for paying taxes.

May be corporations, partnerships, or individuals.

The Organization’s Structure

Not-for-profit-oriented organizations

Do not pay income taxesand

May be voluntaryor

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.

The Organization’s Structure

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

Financialand

Managerial

Two Types of Accounting

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.)

Two Types of Accounting

Managerial AccountingGenerally 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.