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  It is outdated!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.

Chapter 2:
Four Things the Healthcare Manager Needs to Know About Financial Management Systems

Four Segments That Make a Financial Management System Work
Original Records—Provide evidence that some event has occurred.
The Information System—Gathers this evidence.
The Accounting System—Records the evidence.
The Reporting System—Produces reports of the effects.

Four Segments That Make a
Financial System Work
The healthcare manager needs to know that these separate elements exist and that they work together for an end result.

Structure of the Information System
Identify the inputs
Identify the outputs
(Examine the diagram in Figure 2-1 in the chapter.)

Function of Flow Sheets
Flow sheets illustrate the flow of activities that capture information.

Flow Sheets Are Useful Because…
They picture who is responsible for what piece of information as it enters the system.
(Examine the two examples of patient information flows in the chapter.)

Figure 2-2 Physician’s Office Flowsheet for Address Confirmation.

Figure 2-3 Health System Flowsheet for Verification of Patient Information.

The Chart of Accounts
Outlines the elements of your company in an organized manner.
Maps out account titles with a method of numeric coding.
Is designed to compile financial data in a uniform manner that can be decoded by the user.

The Chart of Accounts
Every organization has differences in its Chart of Accounts that express the unique differences in its own organizational structure.
(Examine the three examples of different Chart of Accounts formats in Exhibits 2-1, 2-2, and 2-3.)

Basic System Elements:
Books and Records
Capture transactions
(Figures 2-4 and 2-5 illustrate this concept.)

Books and Records:
The Sequence Is…
Initial transaction to subsidiary journal to general ledger;
Review, adjust, balance through the trial balance;
Create reports (financial statements).

The Annual Management Cycle (1 of 2)
Affects the type and status of information the manager uses

The Annual Management Cycle (2 of 2)
The type and status of information used by the manager includes:
Daily and Weekly Reports—Generally contain raw data
Quarterly Reports and Statistics—Generally have been verified, adjusted, and balanced. Called “interim” reports; often used as milestones by managers.
Annual Year End Reports—Generally represents the closing out of a specific reporting period. Primarily intended for external (outside) use.

Communicating Financial Information to Others
It is important to:
Create a report.
Use accepted terminology, standard formats, and executive summary.
Organize in a logical flow.
Place detail in an appendix.