Term Paper on "Healthcare Financial Management"

Term Paper 4 pages (1387 words) Sources: 4

[EXCERPT] . . . .

Chief Financial Officers, Comptrollers, Treasurers, Reimbursement Directors, and Internal Auditors to name some positions. Why (or why not) are all of these positions necessary in today's health care setting? There are a significant number of facets in today's healthcare system. Therefore, it is important to have enough people to cover all the different areas required in health care especially when it comes to the financial aspect. Each individual plays an intricate role in how money is utilized by the company, how money and funding is obtained as well as ways to utilize funding better year to year. First, let us start by understanding the role of each person mentioned above.

The chief Financial Officer's (CFO) primary job function is to manage the financial risk of the company he/she works with. Along with this pertinent job function, this position is also responsible for financial planning, record keeping, and reporting all of these findings and information to upper management. Bresnahan (2000) explains that the role of the CFO has grown to include forecasting and communicating financial performance. On the other hand Comptrollers are described as the individuals that oversee and supervise cash flow within a company, organization etc. Usually the comptroller is the accountant within the organization.

Netterville & Dennis (1996) explain that a treasurer is the individual that often records contributions and pays the bills within an organization. Additional staff depending on the amount of work and the amount of money being handled often also accompanies this position. Reimbursement Directors however play an extremely pertinent roll. These individuals aid in assuring that individuals i.e. physicians are paid for their services.

Moreno (1991) expresses how though we as patients may not like it; patient care is inevitably influenced by decisions regarding payment. In fact, society uses reimbursement as a mechanism to promote other social values, such as efficiency, cost containment, and the just allocation of health care resources, which may be at odds with benefit to the individual patient. In an effort to allocate resources wisely, physicians have been identified as gatekeepers who can be pressured, primarily through reimbursement mechanisms, to make cost-conscious decisions within a framework of advocacy for the welfare of individual patients. (p. 13)

Trampe (1998) states that Auditors can provide senior management with vital information about the value of the company being acquired, its financial condition, any weaknesses in its financing or internal controls as well as its history, customer base, property conditions and management practices. However, due diligence is only one aspect of the services an internal audit department can -- and should -- perform in specific instances. Frequently, internal auditors are overlooked as players on that team. Management often sees them only as fact checkers and not as a source of important new information. This is not the case. Because internal auditors already have in-depth knowledge of the operations and employees in every important area of the acquiring company, they can be extremely valuable as key advisers to senior management throughout the process, resulting in both calculable and incalculable savings.

First one must decide which system best suits the organization.Cook, Grove & Coburn (2000) explains that Activity-based costing (ABC) systems were developed to provide more accuracy in assigning indirect and support costs to activities, business processes, products, services, and customers. ABC systems have recognized that organizational resources are needed both for direct production of goods and services and for indirect or support activities. The goal of ABC is to measure and then price out all the resources used for activities that generate the production of goods and services for customers. An ABC system first traces costs to support activities and then to products. Traditional product costing has also involved two stages; however, in the first stage, costs are traced to departments, not activities. In both traditional and ABC cost systems, the second and last stage consists of tracing costs to the products or services. The principal difference between the two methods is the number and type of cost drivers used. The traditional product costing systems used allocation bases that may or may not have been cost drivers. For example, many companies have found that direct labor was… READ MORE

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