Financial viability is the ability of healthcare organizations to generate revenues that are higher than expenses. The healthcare has been changing constantly and if organizations cannot keep up with the changes, they are unable to survive. There are many factors that can influence the financial viability of organization. Healthcare is a business and its revenue mainly comes from the provided services to patients. The inflow funds into organizations are from patients, which include patients’ self payments and insurance reimbursements. Other contributions for revenue may include foundation assistance grants, tax supports, and so on. The incoming revenues from these sources should be greater than or equal to the expenses, which is essential to financial viability (Cleverly & Cleverly, 2017, pp. 32-34). …show more content…
The expenses have many contributing factors that can affect financial viability, such as: hospital costs for employees, providers, equipment suppliers, medical technologies, outsource services contracts, debts, and vendor for eatable supplies. The cost of payments for employees and providers depicts the largest expenditures of organizations. Additionally, debts financing significantly affect the financial viability as healthcare organizations are becoming to depend on debts more and more. Keeping up with the new medical technologies to ensure the best possible services that can be provided to patients as well as changes in outsource services contracts and vendors for eatable supplies also require large spending of organizations (Cleverly & Cleverly, 2017, pp. 32-34). Healthcare organizations should always evaluate financial viability to ensure there are more incoming funds than out coming expenses, which assures that quality of provided services will remain high at all time. C. Financial decision-making
Another consideration that the clinic should take into account is the external environment. The seasonal patient volume and the bank agreement may be the main aspects of concentration. Although the relationship between the bank and the clinic is defined in the case, Alpine Clinic should consider alternative solutions or alternative organizations to finance its needs. Also, the clinic should estimate the possible changes in the economic environment in the next years and the impact of them in the serving population of the clinic.
Measures Most Important for the Survival of a Healthcare Organization In order for an organization to be successful, they need to survive and grow. A low occupancy rate of hospitals has been a subject of discussion.
In order to investigate this issue, Dr. Molloy must first identify some key financial components within his medical practice. From the information given in the case summary and profitgraph, the following can be determined:
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
The revenue of the healthcare industry unlike any other depends on the inpatient occupancy or ALOS(average length of stay), the volume of outpatient visits and procedures, the services ordered for the inpatients and outpatient. For CHS the majority of its revenue comes from Managed care and other insurers ( apart from govt. insurance) with 54.5%, after which comes the gover...
When determining whether to merge or partnership with another hospital is a beneficial choice, one will need to review financial information to make an informed decision. According to Cleverly, Cleverly, and Song in order to make effective decision it requires adequate knowledge and interpretation of financial information. Understanding the accounting processes of business decisions results in effective operational decisions (2012). Some of the financial statements that are used to make these decisions are income, itemized, balance statements, net assets, and cash flow.
In spite of the grants and other foundations, the vast majority of the budget would need to be paid by with donations
Bigalke, J. T. (2009, February). Healthcare Financial Management [Managing Uncertainty to succeed in the new health economy]. , (), . doi: Retrieved from
The first business principle that is associated with patient and system cost is manage cash flow very closely (Fisher,
The development of value based healthcare reimbursement systems between healthcare payers and healthcare providers is evolving from the need to provide patients with beneficial healthcare technologies under conditions of significant economic uncertainty. The concept examined centralizes on shifting the focus of the healthcare system from volume to value. Value is measured by outcomes achieved based on a full cycle of care not volume of services rendered based on each service performed.
2. The twin problems of the health care industry as viewed by society are cost and access. First of all, the cost of getting health care is very high and it is getting higher each day. This has been mostly caused by the combination of high cost and an increase in quantity of services provided to the communities. The other problem involves access to health care. American enjoy limited or no access to health care. Many efforts have been done to reform this, but still but still many people are left without access to the care. These two problems are related due to the fact that if the health care industry gets to high off course people no longer will be able to have any access to it. The higher prices are, the lower access people have to it.
Increasing prices for medical treatments, consultations, and drugs is another element in increasing health care costs. Increasing prices of health care services and drugs were the main reason for increasing health care expenditures between 2009 and 2010. Poor productivity is another element of increasing health care costs. Because there is little or no intervening growth in productivity gains for health care, health care costs would increase over time; and because of inelastic demand health care expenditures would also increase (Baumol, 1988). Because it is difficult to measure value of health care service, it is very difficult to evaluate productivity gains in health care. Referrin...
There are a couple of problems affecting the surgical services department. One of them is that the unit /hospital pays a lot of money for surgical supplies and equipment. The second problem is labor and productivity. The two problems are included in the operational and personnel budget. These types of budgets are the highest cost to the department; personnel budget being the highest then the operational budget (Marquis & Huston, 2012).
There are several factors that contribute to the complexity of the revenue cycle. Frequent changes in contracts with payers, legislative mandates, and managed care are just a few examples of reasons why revenue cycle in the healthcare industry is so complex. Furthermore, the problems that arise in the steps of the revenue cycle further complicate the whole process. For example, going through the steps of the revenue cycle efficiently is extremely difficult when it is managed by poorly trained personnel. Furthermore, if a healthcare provider does not have the proper information system to track patient records and billing, receiving reimbursement can become difficult. In addition, one of the main factors that delay payments is denial from the insurance companies. The reason for Denial includes incorrect coding, the certain sequence of care and medical necessity or even delay in submitting claims. Lastly, inefficient patient correspondence can not only hinder the process of revenue cycle but also result in many patient complaints (Wolper, 2004).
The information that has for financial department will determine the budget and the planning for the organization. In establish or development for the organization, the financial information that gathers will determine the size of the company.