Health Care Budgeting and financial process

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Healthcare budgeting, finance and payment systems are currently under extensive scrutiny today. The Affordable Care Act has put this discussion into a very dynamic state. But let’s not get into an ACA debate on this, but look at budgeting and finance from a Healthcare administrators viewpoint.

Based on the reading below, discuss how, from a healthcare managers perspective, budgeting and financial management changes as payment systems change.

 Discuss what you think might be meant as the payer/patient mix.

 Why is this mix important to a Healthcare Manager?

  What could this mean to budgeting, staffing, salaries, etc? (There is no text for this part.. This is your critical thinking!)

Health Care Budgeting, Finance, and Payment Systems

Managing the financial elements that sustain the viability of a health care facility and ensure a sound health care delivery system is an important duty. As health innovations continue and new and improved methods for providing care and treatment expand, so will the cost of medical care. Managers and leaders of today’s modern health care system will continuously be challenged to find ways to ensure accessibility to care while mitigating financial liabilities for their organizations. For managers to perform their financial management responsibilities, they must understand the basic concepts of financial management and budgeting, as well as payment systems relative to the health care industry.

To allocate financial resources appropriately, managers must use the budgeting process as a means of planning and controlling. The budget helps to communicate in fiscal terms the priorities for a health care organization, and the budget becomes a statement in which an organization’s objectives can be communicated to internal and external stakeholders. This week, you will be able to attain course outcome number 3: Develop and communicate plans to utilize human, technical, and financial resources to manage health care organizations.

As previously stated, the financial plan is communicated through the budget, which outlines organizational priorities. The budget period, or time frame in which funds are to be spent, is further broken down into budget type. There are accounting periods or budget periods in which funding allocations will occur. However, the most common budget period is recognized as annual, or otherwise referred to as a fiscal year.

The preparation, justification, and implementation phases of a budget are important. It is during these phases that managers must decide how dollars will be allocated. For example, a health care facility may have a revenue and expense budget. In this budget, funds will be requested, justified, and ultimately approved for implementation.

For instance, if we take the personnel budget, typically the largest for a health care organization, we will find costs associated with wages and salaries. If a health care facility is planning to offer a new specialty service, managers may request additional funds from previously submitted budgets to finance the new program. Funds may be required for capital equipment and contract and maintenance costs.

The fact that many Americans will face substantial hardships while attempting to pay for their health care is not a new revelation. When people are sick, they are simply concerned about becoming well. When they are well, they are only concerned about sustaining their good health. Many people are unclear about the appropriateness of their medical care, from the diagnosis to the ancillary services and treatment. As a result, they are unaware of the extent of financial liabilities they face for receiving unnecessary treatment.

Health care managers are not only fiscal advocates for their organizations—they are also financial educators for patients. Managers will often find themselves in the role of educator. Because patients are generally concerned about the status of their health, they tend not to focus on the bureaucracy involved with the delivery of care they receive.

During this course, you will see greater discussion about specific payment systems. Payment systems are important because they allow organizations to recover revenue for services provided. Moreover, it is also important to know that payment systems can differ between individual providers (private practice physicians) and facilities (hospitals and clinics).

Health care providers ordinarily use either the capitation method or the fee-for-service method. However, a combination of the two may also be used.

In the capitation method, physicians can accept fixed payments for services provided over a specific period of time for a defined population. Most medical professionals find this method to be the most risky for providers since they assume a great responsibility for the health of the patient. By contrast, the fee-for-service method is the most advantageous for the health care provider. Providers are not limited to fixed payments, and the risk is primarily assumed by the payers. However, critics believe that the fee-for-service method artificially inflates medical costs by providing excessive and unwarranted medical care.