Operations managers need to understand financial statements to facilitate their functions. An operations manager is responsible for planning, organizing, coordinating, and controlling an organization’s resources to produce goods and services (Reid & Sanders, 2020). Further, Lesambo (2018) considers financial statements to be integral parts of management, ensuring the functioning of an organization. Consequently, the research analysis of Pratt and Peters (2017) supports the idea of highlighting the importance of financial statements as a significant function for effective decision-making. According to Lessambo (2018), the components of a financial statement are cash flow statements, income statements, and balance sheets, providing insight into a company’s financial health, income and expense trends, and operational ability. Moreover, Palepu and Healy (2018) highlight that understanding the financial trends of an organization provides a framework for determining budget plans, and supporting decision-making as a management function.
Financial statements are used as tools for business evaluations through which operations managers can account for the use of resources. In addition, Osadchy et al. (2018) state that financial statements are essential to an operations manager to influence investment and resource attraction (Hasanaj & Kuqi, 2019). A good financial statement is evidence of a profitable and functional organization that boosts investors’ confidence. Operations managers use financial statements as tools to recognize the strengths and weaknesses of the organization’s activities. Therefore, an operations manager can identify what operational activities work and should be prioritized and what activities to modify and strengthen (Osadchy et al., 2018). Operations managers’ roles are associated with financial statements as a tool for team motivation through open discussions of company financial performance (Szydełko & Biadacz, 2016). Thus, financial statements provide a baseline for setting future goals through projections and forecasting.
Hospitals’ revenue faces challenges in maintaining a strong cycle due to the fluctuation of industry dynamics. In addition, Hospital Financial Management Association (2019) reports indicate that hospital revenue is affected by unprecedented pandemics, and emergencies significantly impact hospitals’ financial statuses. An analysis by the American Hospital Association (2020) states that hospital revenue is negatively affected as the facilities struggle to mitigate unexpected challenges and events during a pandemic. Moreover, there is a reduction in cash flow and revenue generation triggered by refraining from hospital visits in fear of contracting the disease in the event of a pandemic (American Hospital Association 2020). As a result, hospital revenue is reduced with limitations of cash flow and demand for the services.
Reimbursement operations in healthcare are determined by the level of service provided, impacting the delivery of services. As Whedon et al. (2017) reported, reimbursement cost is relatively contrasted to the complexity, quality and quantity of care, influencing a variation gap on the policies and costs of reimbursements by different providers. Additionally, reimbursement in healthcare is categorized into charge-based, fee-for-service, and cost-based costing methods (Bruen et al., 2016). Therefore, evaluating the cost of reimbursement is a complex undertaking impacting the functionality of the providers.
Similarly, unclear frameworks and methods of quantifying service cost open up a loophole for service providers to manipulate the system. The loopholes increase the possibility of overcharging service and offering poor services because of low rates of reimbursements (Whedon et al. 2017). In addition, Garrison and Towse (2017) indicate that the limitations in data processing requiring time, effort and human resources, which are scarce, increase the susceptibility of healthcare plan providers to over-reimbursements. Elsewhere, healthcare systems are positively influenced to advance into a technology-based approach. According to Garrison and Towse (2017), reimbursement methods provide incentives for investment and efficiency towards innovation and technology adoption in healthcare. Subsequently, the quality and efficiency of healthcare services are improved substantially.
References
American Hospital Association. (2020). Fact sheet: Financial challenges facing hospitals and health systems as a result of COVID-19, AHA.
Bruen, B., Docteur, E., Lopert, R., Cohen, J., DiMasi, J., Dor, A., Neumann, P., DeSantis, R., & Shih, C. (2016). The impact of reimbursement policies and practices on healthcare technology innovation. ASPE | Office of the Assistant Secretary for Planning and Evaluation.
Garrison, L., & Towse, A. (2017). Value-based pricing and reimbursement in personalized healthcare: Introduction to the basic health economics. Journal of Personalized Medicine, 7(3), 10.
Hasanaj, P., & Kuqi, B. (2019). Analysis of Financial Statements.Humanities and Social Science Research, 2(2), p17.
Hospital Financial Management Association. (2019). Top revenue cycle challenges and opportunities.
Lessambo, F. I. (2018). Financial statements: Analysis and reporting. Palgrave Macmillan.
Osadchy, E., Akhmetshin, E., Amirova, E., Bochkareva, T., Gazizyanova, Y., & Yumashev, A. (2018). Financial statements of a company as an information base for decision-making in a transforming economy. European Research Studies Journal, XXI(Issue 2).
Palepu, K. G., & Healy, P. M. (2018). Business analysis & valuation: Using financial statements.
Pratt, J., & Peters, M. F. (2017). Financial accounting in an economic context. Loose-leaf print companion. Wiley.
Reid, R. D., & Sanders, N. R. (2020). Operations management: An integrated approach.
SZYDEŁKO, A., & BIADACZ, R. (2016). The role of financial statement in performance management.Modern Management Review, 23(4).
Whedon, J., Tosteson, T. D., Kizhakkeveettil, A., & Kimura, M. N. (2017). Insurance reimbursement for complementary healthcare services.The Journal of Alternative and Complementary Medicine, 23(4), 264-267.