Importance of Effective Financial Management in Healthcare Organizations

Limiting charges for indigent patients is one strategy used by healthcare organizations to support their status as nonprofit organizations. Some organizations conduct community needs assessments and implement strategies to meet those needs.

Fremont, CA: Healthcare boards are responsible to ensure that management and finance teams run efficiently while pursuing profit-oriented goals. Healthcare organizations must have strong and efficient financial management plans and systems in place in order to succeed and provide quality healthcare to all of their patients.

Senior executives rely on finance professionals to provide accounting and other financial data to assist them in making sound decisions and monitoring internal and external spending. Health care finance managers are responsible for developing and implementing strategies to assist health care providers in generating enough revenue to cover expenses and plan for future growth.

Following are some of the key objectives of financial management in healthcare:

Evaluation and Planning

Financial managers assess the effectiveness and overall financial health of organizations. They can plan for the future with careful planning. Assume a health clinic was losing patients to a center on the other side of town because the technology they were using was slow and out of date. A thorough evaluation and planning would assist the clinic in making plans to update its technology.

Protecting Tax Status

Federal and state governments are always looking for new ways to raise funds, and one way they do so is when a nonprofit organization loses its tax-exempt status. As a result, it is critical for health care management teams to focus on tax-exempt laws and regulations.

Limiting charges for indigent patients is one strategy used by healthcare organizations to support their status as nonprofit organizations. Some organizations conduct community needs assessments and implement strategies to meet those needs. Another strategy is to establish nursing schools in communities with few educational institutions and charge low tuition rates to assist in the development of a skilled nursing workforce.

Generating Income

Another goal of financial management is to invest in assets to ensure long-term financial viability. Financial managers regularly review the prices of health care services to reflect market rates in order to generate income while remaining competitive. Furthermore, they assess the effectiveness of various departments within hospitals.

Income generation may also entail deciding whether to launch new services. For example, now that cannabis is legal in some states, some healthcare organizations may consider opening a cannabis dispensary as a new source of revenue while also ensuring the drug is safe and legal.

If the senior management approves of a project, the health care finance manager creates a proposal outlining the project's costs, potential funding sources, and annual profit projections.