The Role of Financial Management in the Healthcare Industry

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There isn’t an industry that doesn’t rely heavily on efficient financial management but within the healthcare industry it is vitally important because of the already high cost of medical care in this country. Unless costs can be kept reasonable, patients and insurance companies are left to pay higher dollar amounts and with the Affordable Care Act, legislation is pulling the reins in tighter on what healthcare facilities can charge, especially to Medicare. There probably isn’t another industry in greater need of financial management than healthcare and why their role within the industry is so important. So what exactly is their role?

Basic Duties of the Financial Management Team
Any routine tasks that have to do with finances are dealt with by the financial management department. This would include such things as keeping expenditures within budget, negotiating contracts with suppliers and tradesmen, seeing to it that money is available to meet expenses which would include payroll and keeping aside a contingency fund for all those little things that crop up and need to be paid. Financial management is also involved in planning the budget alongside the board of directors so that all necessary equipment, supplies and personnel can be procured to keep operations running smoothly. It is a huge responsibility for any large facility.

Strategic Planning Function of Financial Management
When it comes to strategic planning, there are times throughout the year that audits are utilized to make sure that money is being billed and collected as it should be so that funds are available to meet the needs of the facility. Whether it is a smaller private practice physician’s office or a large teaching hospital, audits are used as a preliminary to strategic planning. Medical billing has always been a difficult endeavor because of billing codes that need to be precisely entered.

Now with Medicare reform and the Affordable Care Act, those codes have become even more important and many have even changed. It is no easy task completing an MRA audit (Medicare Risk Adjustment) to ensure all coding is compliant. This is done on both a member by member basis as well as departmentally and finally on the institution as a whole. It would be virtually impossible to go into the next period without this information in order to plan a budget based on current and historical data. Highly specialized software is often required to complete this task efficiently.

The Financial Management Team
In healthcare, Financial Management encompasses a list of duties far greater than in many other industries. Not only is it imperative to have a competent staff knowledgeable in the day to day operations of the facility in question but also one that is in touch with financial trends within the industry. Many times the financial management team is headed by an MBA who is directly answerable to the board of directors and quite often large institutions have one or more accountants on staff.

It is a huge undertaking and one that is continually under fire due to the high costs involved with medical care. Anyone trying to understand all that financial management does is most often overwhelmed at the mere prospect and it’s no wonder why it takes years to become expert in this field.

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