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Leadership in Finance of Healthcare Research Paper

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Updated: Aug 23rd, 2021


Financial needs have become an important issue in healthcare, and budget cuts for medical organizations are a necessity to meet them. However, inaccurate and poorly managed cost reductions can affect both the productivity of medical personnel and the quality of patient care. Consequently, healthcare leadership is essential for providing the best service and treatment for people. Transformational leadership is most suitable for implication changes aimed at decreasing costs in healthcare that will not affect the quality of care, since its purpose is to motivate employees to efficient work by non-material means.

These changes should not affect areas that adversely affect the performance of employees or the material provision of medical organizations. Consequently, the best ways to decrease expenses in healthcare are the reduction of medical supplies cost, employee’s overtime, and their turnover.


The healthcare workers and the general public often hear that healthcare organizations are constantly under pressure since they are required to reduce costs. This demand is based on the common idea that costs reduction is the organization’s way of making profits. However, this process is challenging and tricky, since cost reduction efforts should be conducted in all parts of the organization under centralized supervision.

For this reason, healthcare needs leaders who can manage the finance area in hospitals or other medical institutions to save money for them with good management. This issue is critical because thoughtless cost reduction can impair the quality of service and patient care. However, there are three solutions to bring the cost down and keep or improve quality. The basic activities in financial management in health care organizations include reducing supplies cost, as well as increasing employee’s overtime and workers’ turnover, and transformational style of leadership can ensure them.

Main Body

In a supply chain system, purchasing a high volume at a low price can save money. According to Abdulsalam and Schneller (2017), supply expenses are the second-largest category of costs after labor. The supply chain has been a cost reduction target for hospital and health system leadership. Improvement of supply purchasing is vital for healthcare organizations because those expenses are typically operating expenses for facilities. Money saved by reducing supply ordering inefficiency could be directed to increase staff or other medical equipment.

The reduction of medical costs is also essential for the growth of profits. Poor supply chain management can result in wasted supplies, which increases spending. At the same time, a good supply management process allows for product use and supply levels to be tracked. This function means that there is less likelihood of expired supplies turning up due to a lack of inventory visibility. Finally, the use of standardizing medical inventory systems helps managers to monitor proper inventory levels (Agwunobi,& London, 2009).

Standardizing inventory in a hospital supply chain means that purchasing a specific type of gauze across the board can save money because hospitals buy more from one supplier. In contrast, ordering different kinds of gauze from different suppliers results in smaller orders and less cost-saving. Apply that same principle to all products and hospitals can reduce costs by deciding to use standard items.

It is also important to manage employees’ workforces for improving the financial situation. However, nowadays, overtime work is not only an economic concern anymore, since all payroll taxes, employees’ benefits, and regulations are involved. Overtime can be a cost-effective way to flex your workforce and increase your capacity to meet fluctuating demands. Nevertheless, increased working hours do not always boost productivity. Watanabe and Yamauchi (2018) noted that forced overtime work harms the working atmosphere, mental health, and level of involvement of medical staff in work, which decreases the quality of patient care.

Corporate leaders have to supervise all those activities to make sure that everything is working properly. It is necessary to hold a meeting regarding using overtime with automated communications to overcome overtime issues at the management level, give employees the right tools for efficient work, and assign tasks and employees’ responsibilities. Besides, it has to be met another solution that expresses in establishing one’s overtime policy. As a manager, a person can control how much overtime his or her team works by putting specific policies in place that emphasize work-life balance.

Employee turnover is an issue that every business that has workers experience. Employees come and go, and when they leave, it is costly for any business. A company needs time and money to find and train a replacement. For this reason, businesses should reduce their turnover as much as possible. The main goal of this approach is to create an encouraging and positive working environment. When employees are respected, acknowledged, desired, and motivated, they are more likely to stay. According to George (2015), positive organizational culture and working environment motivating employees to stay at their jobs longer and are one of the most important aspects of workers’ retaining.

The company has to hire the right people first to retain productive employees. Leaders must choose workers who fit the job by their behavioral and cultural features. Managers can conduct a behavioral interview for candidates to find out how they react in certain situations. It is also necessary to show the workplace culture and characteristics of business to a future employee to make sure that they are aware of their future job.

Furthermore, competitive pay and benefits are an essential part of employee keeping. The correct distribution of benefits and salaries is a piece of important knowledge for leaders, since relying on payment in the past, the manager can more clearly determine the current salary. According to Greene (2019), the part of compensation, or wage, for an employee has to be based on his or her working experience. Also, a salary change can correlate with their performance. However, the determination of salary size can be difficult if a manager asks job applicants questions that require confidential information about the previous job.

Finally, the leader has to give praise to his or her subordinates. Employee recognition is the concept that may seem easy to deride at first glance, but the right praise at the right time may be crucial for retaining great employees and maintaining a positive working environment. Workers get motivated if they feel that their work is appreciated because they understand that they perform their job well but not just waste their time. Employees who go above and beyond may warrant some extra recognition. As Pregnolato, Bussin, and Schlechter noted (2017), “The most important rewards that retained talented workers from the fields of science, technology, financial services and information technology were financial rewards, recognition and developmental opportunities ” (3). Matching the praise to the scale of effort helps reinforce the employee’s desire to go above and beyond for your organization. Demonstration of appreciation for hard work is the tool for employees to retain.

The transformational leadership style is most appropriate for taking steps to reduce healthcare costs as it seeks to improve employee performance. A leader who uses this style motivates staff to do the job better by his or her example and non-financial rewards. In addition, transformational leadership expands the structural capabilities of nurses, since they take more responsibility for patients, which leads to greater job satisfaction and retention (Sfantou et al., 2017).

This approach improves work efficiency and therefore reduces the time it takes to complete tasks and processes. Thus, transformation leadership fully ensures the implementation of two measures aimed at reducing costs. However, the manager also needs to be authoritarian to create and regulate a beneficial supply chain because this part of organizational work does not depend on medical personnel.


In conclusion, the primary role of financial management in a healthcare organization is to manage money and risk in a way that helps to achieve financial goals. Transformational leadership in the finance of healthcare can minimize medical supplies cost, reduce employee overtime and turnover. The right choice and establishing the supply chain that focused on one seller but in large volumes decreases the value of purchasing medicines and equipment.

The absence of overtime hours increases employees’ productivity and minimizes the cost of paying extra time. This step, together with other changes for improving the working environment, slows down staff turnover, thereby reducing the cost of training new employees. Transformational leadership can ensure all these changes since it is aimed at providing a positive working environment and motivating employees to perform their work more efficiently. However, this kind of leadership is not universal for healthcare as different organizations face a variety of challenges that can be overcome by a combination of approaches. Therefore, it is necessary to study this issue from different sides to understand how different styles of leadership correspond to various problems of healthcare.


Abdulsalam, Y., & Schneller, E. (2017). Hospital supply expenses: An important ingredient in health services research. Medical Care Research and Review, 76(2), 240–252.

Agwunobi, J., & London, P. A. (2009). Removing costs from the health care supply chain: Lessons from mass retail. Health Affairs, 28(5), 1336–1342.

George, C. (2015). Retaining professional workers: What makes them stay? Employee Relations, 37(1), 102–121.

Greene, R. J. (2019). Rewarding performance guiding principles, custom strategies. New York, NY: Routledge.

Pregnolato, M., Bussin, M. H., & Schlechter, A. F. (2017). Total rewards that retain: A study of demographic preferences. SA Journal of Human Resource Management, 15(1), 1-10.

Sfantou, D., Laliotis, A., Patelarou, A., Pistolla, D. S., Matalliotakis, M., & Patelarou, E. (2017). Importance of leadership style towards quality of care measures in healthcare settings: A systematic review. Healthcare, 5(4), 1-17.

Watanabe, M., & Yamauchi, K. (2018). The effect of quality of overtime work on nurses’ mental health and work engagement. Journal of Nursing Management, 26(6), 679–688.

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