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Sample Essay on Managing Finances in Healthcare

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Sample Essay on Managing Finances in Healthcare

Make Strategy Everyone’s Job

This concept argues that every staff member should be fully involved in the daily running of the business in order to achieve the set goals and objectives. The concept outlines three major processes which must be observed in the organization; communication, alignment of personal objectives, and linking staffs payment to scorecard performance. In support of this concept, it is worth noting that these three processes are critical in motivating employees making them feel acknowledged, assuming responsibilities, develop sense of ownership  and working towards achieving the organization’s goals. Communication as explained in this concept as a leadership role in that, leaders should communicate their ideas to their followers and make them understands their intentions hence supporting them towards achieving these intents for the benefit of the whole institutions.

Leaders need to emphasize on the organizations missions, visions and strategies set in achieving them. Though working experience in employment, it is evident that proper communication in organizations assists employee gets to know what organization want to accomplish and hence their role and contributions towards achieving these goals. Though rewarding performances, employees feels more motivated, become more creative, initiative and offer the best towards organization success. Management should set clear goals, motivate employees to achieve them and align every individual to high objectives (Gilley, Gilley, and McMillan 75-94)

Causes of reduced operating margins

Low operating margins in hospitals could have resulted from low prices charged to patients and increased costs for the hospitals. Increasing prices would be difficult due to the competitive market as a result of competition from competitors. High costs could be as a result of labor cost, which accounts for more than 50% of the hospitals operating expenses. Additionally the number of admission of patients has changed with admitted patients who are covered by Medicare and Medicaid increasingly taking a large portion in hospitals. Reimbursements from these institutions do not cover the entire costs for the patients hence reduced operating margins. There have been also an increasing number of uncompensated cares for the patients with financial needs and cares that no payment is expected to be received hence accounting for hospital costs. There are items covered in income statements like cost for provisions of doubtful debts, contingencies, depreciations which is loss of value for the hospital assets and prepayments. These costs are meant to absorb these costs in a situation that they might materialize (Guerin-Calvert, Israilevich, and Lexecon 5).

Improving Cash flows

Cash flow problems have been a major threat to many organizations, which results to bankruptcy and hence winding up procedures for these institutions. Cash flow problems could be improved and hence reducing the need for additional funds though applying the following methods. The organization should ensure that they are collecting their receivables fully from customers through offering discounts to customers if they pay their bills within a specified duration. In addition, tightening credit requirements to customers would help in minimizing default risks affecting the cash flows. Additionally, increasing sales though attracting new customers and maintaining the existing ones through selling additional goods and services. Differences in change in equity as compared to the net income could be as a result of transfer of funds from entity especially for investor owned company resulting from dividends payment. Also could be due to corporate restructuring and occurrence of unrealized losses in the company’s investment portfolio causing the difference (Almeida, Campello, and Weisbach 1777 – 1804)

Recording Donations in Financial Statements

Donations are recorded at a fair value and also a note given to explain them in financial statement of a company. In case of donated supplies worth fair value amounting to $ 45,000, this amount is recorded as other incomes in financial statements and the expenditures matching it recorded under the hospitals expenses. In the case outlined, the hospital had increased its total equity using other sources different from income to amount of $ 7 million. These sources of funds could either be restricted net assets for example plant replacement. Similarly the funds could be from direct equity transfers from the holding company. Additionally, it could be likely that unrealized profits from other assets different from trading securities could have occurred (Cleverley, and Cameron 198 – 207).







Works Cited

Almeida, Heitor, Murillo Campello, and Michael S. Weisbach. “The cash flow sensitivity of cash.” The Journal of Finance 59.4 (2004): 1777-1804.

Cleverley, William O., and Andrew E. Cameron. Essentials of health care finance. Sudbury, MA: Jones & Bartlett Learning, 2003. Print

Gilley, Ann, Jerry W. Gilley, and Heather S. McMillan. “Organizational change: Motivation, communication, and leadership effectiveness.” Performance Improvement Quarterly 21.4 (2009): 75-94.

Guerin-Calvert, Margaret E., Guillermo Israilevich, and Compass Lexecon. “Assessment of cost trends and price differences for US hospitals.” American Hospital Association. Retrieved June 12 (2011): 2012.




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