Health Care Financial Environment

Comparative Summary: Health Care Financial Environment

Introduction

Provision of healthcare is one of the core businesses of any government anywhere in the world. It is because human beings are bound to fall sick, with the number of diseases increasing, some becoming resistant to drugs used, even as others are successfully eradicated from the face of the earth. However, with time many private hospitals and other healthcare centers have arisen, deemed to offer better healthcare services to many elites and working class citizens all over the world. This paper will examine comparatively financial environment among healthcare institutions that are profit oriented, like hospitals, the ones that are not-for-profit oriented, like nursing homes, and also the ones operated by the government, like Veteran Affairs Hospitals.

Due to the kind of services they provide to people, healthcare institutions that are not–for-profit, like nursing homes, enjoy some benefits that have a bearing on their financial structures. The structure of this type of healthcare institution can be in the form of a holding company, in order to take advantage over the scope and economies of scale, as well as gain favorable tax treatment. These kinds of institutions enjoy numerous and helpful government conferred advantages, which help and support them in the continuance of offering the crucial healthcare services they are involved in. One of these conferred advantages includes property tax exemptions. Another exemption they normally benefit from is corporate income taxes. They are further highly eligible for private donations, due to their non-profit nature of operation (Sloan, 2000).

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Furthermore, non-profit healthcare institutions also enjoy bond financing that is exempt from taxation. Some of the financial policies unique to this not-for-profit healthcare environment are those, which ensure that healthcare institutions do not make enormous profits and exclusively serve public rather than private citizens. It is meant to ensure that no excessive private gains are realized and they are also able to maintain the tax-exempt status. One finds such financial policies only at not-for-profit healthcare institutions. Some of the prevalent financial management practices in the not-for-profit healthcare environment include the exercise of control over the institution by a board of trustees, as opposed to other healthcare institutions. It is because such institutions lack existing shareholders, and as such, not a single body of individuals can claim to exercise ownership rights over the whole institution at any given time (Gapenski & George, 2007).

Government-run healthcare institutions operate in a somewhat different financial environment in comparison to private profit as well as non-profit healthcare institutions. The financial structure of government healthcare institutions is more concentrated with immediate integrated delivery systems. This financial structure is favored by governments to cut down on some costs through offering a broad range of patient care in a unified manner, as well as other supportive services. It makes it easier to carry out financial management activities. Public healthcare institutions are heavily funded by governments, whether local governments or national governments. Receiving most of the funding from the government, provided the funding arrives at the beginning of a financial year, the healthcare institution’s management in charge of finance matters can draw up their budgets and financial plans in advance. It ensures that the institution operates smoothly in the course of any given financial year (Dipoksan, 2012).

However, financial environment, in which these healthcare institutions operate on, can be volatile and faced with many challenges. It is due to the fact that since their chief source of funding is the government of a given country, any governance problem or chaotic situation within echelons of the government can impact quite negatively on the healthcare institution. For instance, in a government riddled with debt, undergoing an economic meltdown and recession, facing a shutdown or even a debt default, the amount of funding to healthcare institutions may be heavily impacted (Sloan, 2000).

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Furthermore, in many countries such public institutions as healthcare providers, corrupt practices and embezzlement of funds are commonplace. As such money allocated by government can be misused at the government level. It can even worsen once it is in the receipt of the healthcare institution’s management. All these are uncertainty challenges facing financial officers operating in a financial environment such as that of the government run and funded healthcare institutions. Comparing it to the profit oriented healthcare institutions, one can comprehend that government funded healthcare institutions are disadvantaged, especially in poor and mismanaged countries. However, in many developed and advanced countries, it is the exact converse, since governments in these countries fund healthcare in profound and articulate manner. However, in these developed countries, private profit oriented healthcare institutions still have a more stable financial operating environment (Dipoksan, 2012).

Effective financial management in the field of healthcare has been quite a challenge to many healthcare institutions for many reasons. One of the main issues causing this is involving more healthcare officers in financial management practices at increased running costs. Furthermore, cost management and other financial practices are not commonplace in the healthcare field. It is because it is the notion of many healthcare practitioners that healthcare services are deemed crucial and thus, activities of cost management should not happen in such an environment. It is partly true, since healthcare services are extremely crucial; however, cost management and other financial management practices are about improving efficiency within these institutions and cutting down on massive wastages taking place (Gapenski & Pink, 2007).

Another issue that poses great challenges is the issue of third-party payment system whenever accessing healthcare services, whether for profit or not-for-profit healthcare systems. The use of healthcare insurance systems, both governmental and private complicates financial management practices, thereby adding to the inefficiency blighting most healthcare institutions. Moreover, the revenue cycles  within many healthcare institutions are not well developed and also capital access channels are not functioning well. It make it difficult to practice financial management within such unpredictable financial environments (Gapenski & Pink, 2007).

In conclusion, healthcare sector is a very challenging sector whenever it comes to the financial management practices. However, governments as well as private institutions that supervise these healthcare institutions need to incorporate financial management practices, corresponding to each specific financial environment in order to reduce inefficiencies within the healthcare financial systems.

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References

Gapenski C. L, Pink H. G. (2007). Understanding Healthcare Financial Management. 5th ed. Chicago: Health Administration Press.

Sloan, F. A. (2000). Not-For-Profit Ownership and Hospital Behavior. Retrieved from: http://public.econ.duke.edu/~fsloan/156/articles/Sloan_Article.html

Dipoksan, N. O. (2012). Financial Management of Healthcare Organizations. Retrieved from: http://moshtok.blogspot.com/2012/02/financial-management-of-healthcare.html

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