Health Care Finance Chapter 1

Slide 1:

HEALTH CARE FINANCE Basic Tools for Nonfinancial Managers Judith J. Baker R. W. Baker Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Part I: Health Care Finance Overview:

Part I: Health Care Finance Overview CHAPTER 1: INTRODUCTION TO HEALTH CARE FINANCE Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

History of Financial Management:

History of Financial Management Codifying management thought over time results in more organized management technique-building. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

History of Financial Management:

History of Financial Management Historical efforts all sought to make organizations work more effectively. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Concept of this Text:

Concept of this Text A method of getting money in and out of the business Revenues = Inflow Expenses = Outflow Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Concept of the Text:

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. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Managers’ Viewpoints:

Managers’ Viewpoints Managers within a health care organization will generally have one of three views: Financial Process Clinical The way they manage will be influenced by which view they hold. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Managers’ Viewpoints:

Managers’ Viewpoints Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Managers’ Viewpoints:

Managers’ Viewpoints The Financial View Work with finance on a daily basis. Responsible for the reporting function. Usually also do strategic planning. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 10:

Managers’ Viewpoints The Process View Work with the system of the organization. Responsible for data accumulation. Often affiliated with the information system department. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 11:

Managers’ Viewpoints The Clinical View Usually work with and interact directly with patients. Responsible for service delivery. Also responsible for clinical outcomes. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Four Elements of Financial Management:

Four Elements of Financial Management Planning Controlling Organizing and directing Decision-making Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Four Elements of Financial Management:

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. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

The Organization’s Structure:

The Organization’s Structure The structure of an organization is important to management because It influences the way the managers manage. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

The Organization’s Structure:

The Organization’s Structure Types of organizations Profit-oriented (aka “proprietary”) Non-profit-oriented (aka “not-for-profit”) Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

The Organization’s Structure:

The Organization’s Structure Profit-oriented organizations Are responsible for paying taxes. May be corporations, partnerships, or individuals. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

The Organization’s Structure:

The Organization’s Structure Non-profit-oriented organizations Do not pay income taxes and May be voluntary or May be the government Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

The Organization’s Structure:

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. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 19:

The Organization’s Structure Organization Charts Often used to illustrate the structure of an organization. How the degree of decentralization within the organization. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 20:

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. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 21:

Two Types of Accounting Financial and Managerial Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 22:

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.) Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC

Slide 23:

Two Types of Accounting 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. Copyright © 2011 by Jones and Bartlett Publishers, LLCHealth Care Finance by Judith J. Baker and R.W. Baker. Copyright © 2011 by Jones and Bartlett Publishers, LLC