Chapter 1: Introduction to Healthcare Finance & Chapter 2: Healthcare Business Basics

Healthcare Finance
-is the practice of finance within health services organizations
-includes both the accounting and financial management functions
Concerns the measurement in financial terms, of events that reflect the resources, operations, and financing of an organization
Accounting
Provides the theory, concepts, and tools necessary to help managers make better financial decisions
Financial Management
What is the primary role of finance within health services?
to plan for, acquire, and utilize resources to maximize the efficient and value of the organization
Finance activities include:
planning and budgeting
managing financial operations
financing decisions
capital investment decisions
financial reporting
financial and operational analysis
contract management and financial risk management which are primarily financial staff functions
What are the four C’s?
Cost-continuously monitored
Cash-businesses must have sufficient cash on hand to meet payment obligations as they occur
Capital-must raise the capital(money) necessary to buy facilities and equipment needed to provide services
Control-businesses must control their resources to ensure that they are used wisely
What is the structure of the finance department?
comptroller-manager who handles accounting, budgeting, and reporting activities
treasurer-manager who handles capital acquisition, investment management, and risk management
business manager-responsible for the finance function in a small HCO
A single business entity that owns a group of similar providers, such as hospitals
Horizontal System
A single business entity that owns a group of related, but not identical, providers, such as hospitals, medical practices, and nursing homes
Vertical System
A hospital that treats all conditions that require a relatively short hospitalization <30 days
General Acute Hospital
A hospital that treats patients with a common characteristic or conditions, such as a children’s or cancer hospital
Specialty Hospital
The concept that once a patient enters the system at one point, all services needed by that patient will be provided within the system
Patient Capture
What is a business?
-an entity that: raises money in the capital markets, invests these funds in assets, uses these assets to create products or services, sells these products or services to sustain itself
What are the four major categories of business organizations?
proprietorship (sole)
partnership
corporation
hybrid forms
Proprietorship
-a simple form of business owned by one person
Partnership
-an unincorporated business that is created and owned by two or more people
For profit organizations
-a legal business entity that is seperate and distinct from its owners and managers
The earnings of a business after all expenses have been paid
residual earnings
Non for Profit Corporation
-need profits to sustain operations as opposed to pure charities
-tax exempt
-charitable purpose
The profit that is generated when securities are sold for more than their purchase price
Capital Gains