Healthcare Center’s Financial Management Essay

Financial Analysis

Every organization is required to perform financial analysis to identify current and future budgetary needs. Healthcare organizations are no exception and need to evaluate their financial data to ensure that they can formulate decisions based on reliable data (Burgess & Radnor, 2013). Analyzing an organization’s finances begins by evaluating how much is being spent by that organization and identifying the different items on which the organization spends its financial resources. Based on these needs, the following section of this paper will carry out an economic analysis of the healthcare center where the field practicum was undertaken. This will comprise an analysis of various tools used for budgetary measures, including the way the organization carries out its budget process, as well as an evaluation of the organization’s balance and cash flow sheets. Based on the outcome of the analysis, the report will seek to provide some recommendations for the organization.

Budgeting

The survival of healthcare organizations is mainly dependent on internal and external factors that have a bearing on the operational aspects of an organization’s different departments. One of the most fundamental aspects of determining the internal environment of a healthcare organization is budgeting. The budget process determines the confines within which the organization should operate during a specific period while allowing managers to report variances and offer their teams the guidance they need to navigate the different challenges that they may encounter (Liebler & McConnell, 2016).

The budget process at the health center was carried out using teamwork to ensure that the contributions of different staff members were taken into account during the process. Including staff contributions in the process of budget, preparation enables the organization to ensure that all are invested in the achievement of the organization’s different goals. For example, the inclusive budget process that was adopted at the health center ensured that the staff members were aware of the resources available to accomplish their goals as well as able to anticipate the amount of money that could be used for their remuneration and welfare. Such knowledge ensured that the management would enjoy more cooperation from staff when dealing with various human resource issues in the organization.

After obtaining feedback from staff members, the management engaged in statistical operations as the second step of the budget process at the health center. At this stage, the departmental heads were expected to provide a measurable or quantified description of the requirements to be undertaken in the next financial period. For example, in this step, the human resource department provided the estimated figures for the amount of money they expected to use for salaries, while the supplies department provided estimates related to the expected purchases for the next financial period. The estimates provided during the statistical planning phase were based on the previous performance of the health center (Delmatoff & Lazarus, 2015). The management also took the time to compare past performance with current operations with the aim of ensuring the estimates were accurate.

The final step in the budget process at the health center was the preparation of expense budgets by the various departments in the organization. The departments used data from previous periods to determine the amount of money they expected to spend. Some of the expenses that were covered in the process included staff salaries; departmental heads worked with staff to determine paid leave days and conduct an evaluation regarding which staff members would receive a bonus payment or a raise in salary. At the departmental level, the administration at the health center was required to settle on the amount to be spent on supplies while ensuring that the resources budgeted for matched the needs of the department during a financial period. The overall finance department also participated in the preparation of the revenue budget, which is designed to forecast the overall revenues to be collected at the health center during the financial period.

Balance Sheet

The health center, like most other organizations, recorded financial statements that provided a summary of the financial performance of the organization. One of the financial statements that were widely used in the health center was the balance sheet, which served to indicate the financial position of the health center. The health center uses the balance sheet to document assets such as third-party payer settlements for services rendered, patient accounts receivable, loans, bank balances, prepaid services, and other investments (Foshay & Kuziemsky, 2014). The health center’s liabilities include deferred taxes, long-term borrowing, payables for supplies, and different owed amounts for the purchase of equipment. The capital for the health center is also documented on the balance sheet and includes funds from the Ministry of Health that are provided to run primary healthcare services, as well as contributions from other stakeholders, which include building blocks and share donations.

The process of preparing the balance sheet at the health center begins with the completion of the asset section, where the assets are distinguished based on their longevity. The fixed assets are grouped together and subjected to depreciation, which serves to account for the wear-and-tear involved with different investments. The adoption of these techniques helps the health center to track the usability of the other machines that are available at the facility. Notably, aside from the building that houses the health center, machinery constitutes the largest percentage of the organization’s assets, and hence, it is paramount that these are well accounted for on the different balance sheets as they help to reflect the actual financial health of the organization (Sullivan et al., 2014). The second step that is undertaken when preparing the balance sheet for the health center is the computation of liabilities, which serves to demonstrate the claims that creditors have against the assets owned by the health center. The balance sheet for the health center also outlines the net worth of the institution, which details the difference between assets and liabilities. An analysis of the information contained on the balance sheet was useful in providing the financial ratios for the health center.

Based on the records found on the balance sheet, the percent owner’s equity was 7.81%, which indicates that the community in which the health center is located owned a sizeable portion of the organization. The debt-to-total-assets ratio for the health center was 0.92, which indicates that the health center is financially healthy and can withstand losses without affecting the organization’s operations. Based on the outcome of the ratio of the total assets, the health center could obtain more financing for any variety of development projects that it may desire to undertake. The debt-to-equity ratio of the health center is 11.80, which indicates that the organization has continued to perform well, considering that the baseline ratio was 13.54 at the start of the organization’s operation.

Cash Flow Sheet

The cash flow sheet offers an insight into the position of the health center regarding sources and uses of cash. Through a perusal of the cash flow sheet, it was easy to discern the cash flow for the health center. The health center recorded both monthly and quarterly cash flow statements, which provided an outlook regarding the trends in cash flow at the health center. For example, the reports indicate that the health center has a healthy flow of cash, with both high profit and high cash flow. Thus, the health center has enough money to pay the different service providers and its staff. Given that the health center has a healthy cash flow, it can purchase the required supplies and lease or buy the equipment needed for the delivery of quality services (Sullivan et al., 2014). Given that the cash flow statement for the health center details the loan repayments for the health center, the organization stands a better chance of receiving credit services from lenders, which ensures that its operations are not affected by a lack of finances. The cash flow statements indicate that merchandise inventory is the main area where most expenses are incurred; hence, this gives the health center an opportunity to make the necessary adjustments to reduce the costs.

Challenges

The budget process at the health center encountered two main challenges. The most pronounced challenge during the process involved delays caused while obtaining the staff members’ feedback to ensure that they are part of the budget process. For example, the health center lacked the capacity to ensure that every staff member was contacted by his or her manager in a timely manner to offer individual input and insight into the budget. Thus, the managers who undertook the process of obtaining feedback from their staff ended up experiencing delays that were caused by issues such as the unavailability of staff members who were required to provide the necessary feedback. The second challenge that was evident in the budget process at the health center was the lack of adequate support systems that could be used by the organization to automate some of the budget operations. For example, the forecasting process in budgeting was done using essential tools such as MS Excel, making the process lengthy and tedious compared to what it might have been with the use of financial software.

Despite the organization’s adoption of a reliable method for the preparation of the balance sheet, it is evident that the health center struggles with some of the fundamental ratios that are necessary to indicate the financial health of the health center. The only area where the organization needs to improve its operations is the percentage rate of return on assets, which stands at 3.7%, a figure that indicates the organization needs to increase its return to ensure that its operations are sustainable.

Solutions

The challenges that the health center faces regarding the budget process could be addressed through two main approaches. First, it is paramount to restructure the way the staff provides feedback during the budget process, perhaps through the use of emails, suggestion boxes, or online surveys (Sullivan et al., 2014). This approach would ensure that staff members’ feedback is provided in an innovative manner that saves time that would otherwise be spent by managers following up with staff members to gain their input on the different budgetary allocations. Secondly, the health center should allocate some funds to obtain reliable financial software to facilitate planning and fiscal processes. The adoption of a finance software application will enable the health center administration to track the budget process and have access to more reliable forecasting methods, which will, in turn, enhance the accuracy of the process.

With respect to the balance sheet, the health center needs to take measures that will ensure that there will be an improved return on assets. The enhanced strategies to increase the returns will also ensure that the health center continues to provide competitive services (Sullivan et al., 2014). The balance sheet would then need to be completed regularly to ensure that the actual performance of the organization is reflected. This would also enable the management to make the necessary decisions to guide the organization toward achieving its goals.

Main Challenges and Recommendations

Healthcare organizations must contend with various challenges in running different operations. The identification of these challenges as far in advance as possible is a critical step toward ensuring that they are addressed appropriately, in a manner that does not affect the organization’s operations. Health care is a labor-intensive industry; most organizations are likely to have challenges in regard to staffing, and the way work is distributed among current staff members (Kellermann & Jones, 2013). Modern health care is concerned with the delivery of quality services that are aligned with emerging research that shapes evidence-based care. Therefore, healthcare organizations need to continually review their training needs. Health statistics and reporting are fundamental in enabling healthcare organizations to determine the burden of disease they face and make appropriate decisions regarding the allocation of available resources. Therefore, this section of the report seeks to provide a summary of the challenges that are faced in the healthcare center and give the necessary recommendations that can be applied to enable the organization to deal with the challenges that it is facing. The following table provides a summary of the challenges faced by the health center in different areas:

Operational Area

Main Problems

Recommended Solution

Estimation of required staff and workload distribution

1. The adoption of institutional staffing is based on population and organizational size.
2. The health center faces a shortage in the number of staff that it needs to ensure that the workload is distributed equally.

For the health center to overcome the challenges that it faces regarding staff estimation and workload distribution, there is a need to adopt a model of recruitment that focuses on the utilization of healthcare services at the organization as opposed to the target population (Kellermann & Jones, 2013). For example, given that most of the patients who seek assistance at the health center have chronic illnesses, it would be prudent for the health center to increase the number of nurses who have specialized in medical-surgical nursing (Tabatabaee, Nekoie-Moghadam, Vafaee-Najar, & Amiresmaili, 2016).

Determination of training needs

1. The health center lacks the capacity to evaluate the training needs for the different cadres of healthcare staff that works at the organization.
2. The health center faces the challenge of aligning training needs with the overall organizational goals.

The health center can address the challenge of aligning training needs with organizational goals through the inclusion of staff participation in the identification of training needs. As opposed to having the administration determine the training needs for each area of work, it is prudent and time-saving to request the staff to provide topic suggestions regarding the items that they desire to learn about related to the challenges they face in their work areas. Based on the feedback obtained from the staff, the organization can prepare appropriate training materials.

Health statistics and reporting

1. The first challenge that the health center faces is the need to simplify health data into a form of information that can be used by the staff at the facility.
2. Given that the organization recently adopted a health administration system, there is a challenge in the determination of the integration of the extensive data from the system into the existing reporting formats.

The health center should re-evaluate the current reporting format that it uses to ensure that it accommodates the new information obtained from the newly installed administration system. Among the changes that the health center should undertake is the inclusion of simplified charts and tables that can be easily understood by the staff without having to evaluate the enormous amount of data that is available.

Facility international accreditation

1. One of the challenges that the health center faces regarding accreditation is environment and appearance as the international accreditation process has failed to clear the facility because of cracks that appear on the walls of the emergency room.
2. The lack of a systematic staff training plan that is used to enhance the skills of the healthcare providers is another challenge that the facility faces regarding accreditation through international bodies.

The health center should adopt a comprehensive staff training plan as the international accreditation bodies demand that the clinical staff in a healthcare organization be provided opportunities to ensure that they can continually update their skills (Liebler & McConnell, 2016). The accreditors are always keen to determine if the organization is educating its staff in line with the emerging evidence.

Appointment system for outpatient system

1. Given that the health center has started to accept third-party payers, the appointment system that is used in the outpatient department requires these patients to have their insurance status verified by the finance department, leading to unnecessary delays when providing services.
2. The adoption of the new health administration system at the health center has led to the need for the front desk staff to input patient data into the system as they serve patients, which leads to delays, especially when there is a system or internet down-time.

The health center should offer more training for staff members who are responsible for keying in data during patients’ visits to ensure that they can more quickly address emerging issues and avert any increase in patients’ waiting time (Kellermann & Jones, 2013).

Recommendations Summary and Impact

Through the participation in the field practicum, various recommendations have come to the fore as a way of resolving the issues that existed at the health center. Each of these recommendations has an impact on the various operations that take place within the facility and may affect multiple aspects of care. The aim of this section is to provide a summary of the proposed improvements and identify the anticipated effect of the progress:

Recommendation

Impact

Increase training sessions

The training will help to improve the provision of clinical services as the staff will be able to make decisions that are aligned to the emerging evidence. The increase in staff training will also lead to higher operational costs, and hence, the finance department will be required to direct more resources toward the implementation of staff training (Liebler & McConnell, 2016). The increased amount of exercise will also increase the operational costs of the human resource department as more staff will be required to facilitate training, which will, in turn, increase the costs of operation.

Adoption of more straightforward methods to acquire staff feedback

The organization must invest in providing the staff with innovative platforms through which they can share their feedback, and hence, the finance department will be required to review its budgetary allocations to meet this need. The human resources department will also be affected by the introduction of new systems of operations that will require that the staff members are provided with adequate training to ensure that they can use their tools effectively.

Adoption of new reporting dissemination formats

The change will require that the records management department allocates time to develop a workable structure for new reports, using input from members of the staff. The department will also be required to conduct comprehensive training of staff members to ensure they can integrate and make use of the information that will be contained in the new reports (Liebler & McConnell, 2016). These processes will place increased resource requirements on the records department as it might be necessary to hire consultants to facilitate the development of the new report formats. The department will also require increased staff to help implement the training sessions. The previous forms that have been developed for use in the reporting of organizational data will also be discarded, which may increase the strain on the departmental staff in providing the new reports.

References

Burgess, N., & Radnor, Z. (2013). Evaluating Lean in healthcare. International journal of health care quality assurance, 26(3), 220-235. Web.

Delmatoff, J., & Lazarus, I. R. (2015). The most effective leadership style for the new landscape of healthcare. Journal of Healthcare Management, 59(4), 245-249.

Foshay, N., & Kuziemsky, C. (2014). Towards an implementation framework for business intelligence in healthcare. International Journal of Information Management, 34(1), 20-27.

Kellermann, A. L., & Jones, S. S. (2013). What it will take to achieve the as-yet-unfulfilled promises of health information technology. Health Affairs, 32(1), 63-68. Web.

Liebler, J. G., & McConnell, C. R. (2016). Management principles for health professionals. Massachusetts: Jones & Bartlett Publishers.

Sullivan, S. D., Mauskopf, J. A., Augustovski, F., Caro, J. J., Lee, K. M., Minchin, M.,… Shau, W. Y. (2014). Budget impact analysis—principles of good practice: Report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force. Value in Health, 17(1), 5-14. Web.

Tabatabaee, S. S., Nekoie-Moghadam, M., Vafaee-Najar, A., & Amiresmaili, M. R. (2016). Barriers against required nurse estimation models applying in Iran hospitals from health system experts’ point of view. Electronic Physician, 8(12), 3348–3356. Web.