Purpose
The purpose of this assignment is to assess your ability to:
● Define healthcare finance and how the role of finance has
changed over time. Action Items
● Complete the following items listed in the Week 1 Reading and
Preparation object:
○ Read Chapters 1-3 in Gapenski (2013).
○ View the Week 1 Presentations.
● Respond to the following prompt by 11:59 p.m. on the due date
listed above.
○ Discuss the role of finance in the healthcare industry.
Has the role increased or decreased in recent years?
Explain.
○ Reply to at least four of your classmates’ responses by
the following Sunday at 11:59 p.m. Make your own discussion post and reply to these for names below including their names
individual reply for each name
Sheenay Pryce (pryce.3797) 4 days ago.
Healthcare financing is the concept that involves the process of how society pays for the healthcare services it
consumes (Gapenski, 2009). This includes planning, acquiring and using resources to maximize the efficiency of a
healthcare company (Gapenski, 2009). The two larger organizations of finance are considered to be accounting and
financial management (Gapenski, 2009). Both play a role in financial management in healthcare organizations.
Financial activities of healthcare organizations can be summarized by the 4 Cs: costs, cash, capital, and control
(Gapenski, 2009).
According to McClintock (2014), a study was performed in Nebraska demonstrating the effects of data-driven
decision making. With the usage of this concept, the role of the hospital financial department was elevated. It is
evident that the role of finance has increase in more recent years as hospitals are looking for ways to cut healthcare
costs while also improving patient care and delivery. All of these aspects can be improved through planning
framework which examines multi-year financial forecasts (McClintock, 2014). This therefore increase the
incorporation of finance in healthcare decision making. With the role of finance in healthcare on the rise, healthcare
companies will be in need of financial officers to manage these accounts.
Gapenski, L. C. (2009). Fundamentals of Healthcare Finance. Chicago, IL: American College of Healthcare
Excutives. McClintock, T. (2014). The Role of Finance Within the Hospital has Elevated - #HIMSS14. Retrieved from
http://blogs.perficient.com/healthcare/blog/2014/02/17/the-role-of-finance-within-the-hospital-has-elevated-himss14/ Gina Parsons (parsons.2160) 3 days ago.
In my opinion, there isn’t an industry or business today which does not rely heavily on financial management. By
simply defining the primary role of financial management, it is easy to see why this is the case: the primary role of
financial management is to plan for, acquire, and utilize funds (capital) to maximize the efficiency and value of the
enterprise (Gapenski, 2013). To do this, financial management functions in a variety of activities without which a
business could not even function, let alone thrive. These activities include evaluation and planning, long-term
investment decisions, financing decisions, working capital management, contract management and financial risk
management (Gapenski, 2013). Beyond simply being included amongst the many, many industries in which financial
management is important, it’s role in the healthcare industry is particularly vital and has certainly increased in recent
years.
To explain this shift in the role of financial management, one simply must look at the current financial environment in
which the healthcare industry operates and compare it to the past. Previously, in a relatively gentler financial
environment, it was the case that most healthcare providers were reimbursed based on costs incurred, making the
role of finance relatively minor and straightforward – financial management was primarily concerned with cost
accounting, that is, to account for the money what was spent by a healthcare business. In contrast, the much harsher
and more expensive financial environment healthcare faces today has given financial management within healthcare
a very big, and very difficult task to accomplish – that is, the function of cost-containment (Gapenski, 2013). Simply
put, health care is expensive. Unless costs can be kept reasonable, patients and insurance companies will be forced
to pay more for health care services. However, there is a catch: today’s health care policy legislation is pulling the
reins tighter and tighter on what healthcare facilities can charge (Smith, Wheeler, Rivenson, & Reiter, 2000).
In addition to cost-containment efforts, there are additional finance functions within the healthcare industry today that
are required to be of maximum value to the enterprise. These arise from recent changes in the health services
industry, and include supporting managed care and other payer contract negotiations, joint venture decisions, and
integrated delivery system participation (Gapenski, 2013). The expansion both the number, complexity, and
importance of the finance within healthcare organizations we see today clearly shows that its role has increased and
is arguably more important than ever within the industry. References:
Brookfield, S. D. (2012). Teaching for critical thinking: Tools and techniques to help students question their
assumptions. San Francisco, CA: John Wiley & Sons.
Gapenski, L. C. (2013). Fundamentals of Healthcare Finance (2nd ed.). Arlington, VA: Health Administration Press.
ISBN: 978-1-56793-475-5
Smith, D.G., Wheeler, J.R., Rivenson, H.L., & Reiter, K.L. (2000). Financial Management in Leading Health Care
Systems. J Health Care Finance, 26(4), 19-30. Christina Gearges (gearges.4768) 2 days ago.
Finance in the healthcare industry plays an important part. Financial teams have common goals that they set out to
accomplish and any team is looking to make the industry more efficient and increase the value as much as possible.
The healthcare industry organizes finances using the four C’s because the four C’s help them describe their financial
activity (Gapenski, 2009). The first C is cost. Cost is a factor that needs to be taken good care of. Spending a lot
could cause detrimental damage to the industry because it may hurt spending too much. There are costs that should
be done to advance the industry for example, purchasing a new machine because that could cause more revenue
and more business coming into the hospitals. The second C is cash. Cash is needed to ensure that the company advances because without cash the company cannot move forward, however, they also need to have the capabilities
to acquire cash when needed. This takes skill and a lot of financial work to ensure keeping cash on hand and being
able to acquire cash. The third C is capital. Healthcare needs capital to ensure that they can be able to purchase
other equipment needed to keep them going. Lastly, the fourth C is control. Control is a very important part of
anyone’s life, however, to an industry control needs to be ensured to control resources and make sure that certain
resources are being saved or being used at the same time.
Finance has changed over the years. It has increased because they are now focused on moving forward. They do
not look at what is happening in the past but they are focused on the future. They look for opportunities and want to
advance the industry as much as possible. Looking at the past is not necessarily a bad thing but we tend to get
fixated on it and not really look towards the future. In terms of finance, I believe that the future is the key to success.
Where the company is going rather where has it gone will only enhance the company and enhance the role of finance
in the healthcare industry.
Reference:
Gapenski, L. C. (2009). Fundamentals of Healthcare Finance. Chicago, IL: American College of Healthcare
Excutives.
Andy Peprah (peprah.2375) 4 days ago.
The primary role of finance in health services organizations, as in all business, is to plan for, acquire, and use
resources to maximize the efficiency (and value) of the enterprise (Gapenski, 2013). The two most important areas in
finance include accounting and financial management. In these two areas the financial activities at a health service
organization maybe summarized by cots, cash, capital, and control.
The role of healthcare finance has increased in recent years based on the overwhelming expenditure of the nations
GDP on healthcare alone. “In 2010, almost 18 percent of the nation’s total value of goods and services was spent on
healthcare. The proportion of GDP devoted to healthcare is expected to rise to almost 20 percent by 2020, an amount
greater than the anticipated expenditure for housing and food combined” (Gapenski, 2013). Hospital care, physician
and clinical services, and prescription drugs are top of the healthcare expenditure. This is because in times of high profitability and abundant financial resources the finance function tends to decline.
For example, “when most healthcare services organizations were reimbursed on the basis of the actual costs they
incurred, the role of finance was minimal. At the time the most critical finance function was cost accounting because it
was more important to account for costs that it was to control them (Gapenski, 2013). However in recent years
providers have had to adapt to the changes in the healthcare system. As a result, the finance function has changed to
support cost-containment efforts, managed care and other payer negotiations, joint venture decisions, and integrated
delivery system participation. These are now some of the reasons why the healthcare finance has changed over time.
References
Gapenski, L. C. (2013). Fundamentals of Healthcare Finance (2nd ed.). Arlington, VA: Health Administration Press.
ISBN: 978-1-56793-475-5