FinancialManagement inHealthcare

BasicToolFornonfinancialmanager Heru Adi Prasetya,SE.,MM.,Ak.

HospitalsareregisteredwiththeAmerican HospitalAssociationasone of fthe h f following: ll i

TypeDescription 1. General:Providepatientservices,diagnosticandtherapeutic, foravarietyofmedicalconditions 2. Specialty:Providediagnosticandtreatmentservicesforpatients whohavespecifiedmedicalconditions, conditions bothsurgicaland nonsurgical 3. RehabilitationandChronicDiseases:Providediagnosticand treatmentservicestodisabledindividualsrequiringrestorative andadjustive services 4. Psychiatric:Providediagnosticandtherapeuticservicesfor patientswhorequirepsychiatricrelatedservices Hospitalsareorganizedaspublic(nonfederalandfederal), investorowned,andnotforprofitentities.

ElementsofFinancialManagement g

Planning

Decision Making

EFM
Organizing and Directing

Controlling

Managers Manager sViewpoint

Financial

Process

Clinical

Managers Managers Viewpoint Viewpoint

TheFinancialViews 1. Workwithfinanceonadailybasic 2 Responsibleforthereporting 2. functions 3. Usuallyalsodostrategicplanning

ManagersViewpoint
TheClinicalViews 1 Usually 1. U ll work kwith ithi interact t tdirectly di tl with ith patient 2. Responsibleforservicedelivery 3. Alsoresponsibleforclinicaloutcomes

ManagersViewpoint
ProcessViews

1. Workwiththesystemofthe organization 2. Responsiblefordataaccumulation 3. Oftenaffiliationwiththe i f information ti system t depertment d t t

 WhatdoesThe HealthcareManager NeedtoKnow?

Foursegmentthatmakea financialmanagement systemWork 1. 1 2. 3. 4 4. OriginalRecord InformationSystem TheAccountingSystem Th Reporting The R ti System S t

FourPillarsofFinancialPractice
1. CashFlow 1 2. RiskAversion 3. TimeValueofMoney 4. ControlofOpportunityCost

AccountingPrinciples

Rulesfordebitandcreditentries
AssetandExpenses Liabilities Liabilities,Owners Owners EquityandRevenue

Increase

Debit

Credit

Decrease

Credit

Debit

BasicSystemElement
Initialtransactiontosubsidiaryjournalto generalledger CreateFinancialstatement Reviewsadjustbalancethroughtotrial b l balance

TheAnnualManagementCycle
DailyandWeeklyReport:Cashflow flow,Out Patients,InPatient,etc QuarterlyReportandStatistics:Financial, Operational(Qualityandsafety) Annual A lYear Y and dReport R :Financial Fi i lreport, QualityandSafety

ChartofAccounts Everyorganizationhas differencesinitChartofAccounts thatexpressestheunique differencesinitso own n organization g structure

HospitalRevenues
Typically,hospitalsgettheirrevenueinavariety ofways: 1. Byprovidingmedicalservices 2. By yproviding p gnonmedicalservices 3. Throughdonationsandgrantsfrom individuals foundations individuals, foundations,orthegovernment 4. Throughinvestments

Hospitalsgroupthewaytheymakemoneyinto h diff i three differentcategories

GainsandLosses

NonOperating Revenue

Operating Revenue

HospitalExpenses: HowHospitalsSpendMoney

Hospitalsmustspendmoneytofunctionand providepatientcare.Themaincategoriesof expensesinclude 1. Salaries,employbenefit 2. Supplies l and dother h 3. Depreciationandamortization, 4. interest,and 5. baddebtexpenses. p

SourcesofHospitalFinancial Information

Therearethree Th h major j fi financial i l statements: 1. Theincomestatement 2. Thebalancesheet 3 Thecashflowstatement 3.

Theincomestatement

Thereareseveralmajorelementsona balancesheet.
1. Assetsareeconomicresourcesthatareexpectedto providefuturebenefitsbyhelpingtoincreasecashinflows orreducecashoutflows.Property,plant,andequipment (PPE)areconsidere assets. 2. Liabilitiesareeconomicobligationsoftheorganizationto outsiders,orclaimsagainstitsassetsbyoutsiders. Accountspayableisasexampleofahospitalliability. 3. Netassets,fundbalance,orownersequityareall differentnamesforthesamething:theyallrefertothe residualinterestin,orremainingclaimsagainst,the organizations i ti assets t after ft all llliabilities li biliti have h been b deducted.Thismaybeexpressedas:assets liabilities= netassets.

STATEMENTOFCASHFLOWS
CASHFROMOPERATINGACTIVITIES NetIncome$10,645 $ NoncashExpenses(Depreciation&Amortization)13,152 WorkingCapitalChanges: IncreaseAccountsReceivable6 6,480 480 IncreaseAccountsPayable4,295 TotalCashfromOperatingActivities$25,982 CASHUSEDFORINVESTINGACTIVITIES Property,Plant,andEquipmentPurchases7,854 IncreasesorDecreasesinMarketableSecurities2,702 CASHFROMFINANCINGACTIVITIES IssuanceorRepaymentofLongTermDebt7,087 TransferstoandfromAffiliates4,300 NETCHANGEINCASH$9,443