Assignment: Governing Boards

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Assignment: Governing Boards

Assignment: Governing Boards

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Decision making is important to financial management as a direct measure of quality. Governing boards, CEOs, and outside sources such as independent auditors often judge the quality of financial management on the basis of the decisions and recommendations made by financial management. The advantage of this view of quality is that it holds the decision maker accountable. The disadvantage is that it assumes rational decision making. Decisions made in healthcare financial management are often based on politics or other criteria that are unknown to the evaluator of the decision. Therefore, a decision may be evaluated as bad on the basis of the known facts, but it may be evaluated as good on the basis of other criteria unknown to the evaluator.

effect of fInAncIAl mAnAgement on tHe cHAngIng fAce of HeAltHcAre Many observers say that financial management is the most important predictor of whether healthcare organizations will survive in the current competitive climate and beyond. Health- care is one of several industries that society has allowed to grow beyond the industry’s ability to produce efficiently—other industries include agriculture during the 1970s, the auto industry during the 1980s, the petroleum industry during the 1990s, the financial services industry during the first decade of the twenty-first century, and higher education during the 2010s. The recession that began in 2008 affected healthcare organizations as much as it affected many other industries, and the passage of the Affordable Care Act in 2010 created entirely new financial challenges. The implications of this reform on healthcare finance may not be fully known for many years, but at least three elements of the legislation were expected to profoundly affect the financial situation of healthcare organizations: the increase in the number of individuals with health insurance; the changing reimbursement structures; and the explicit linking of reimbursement with quality measures.

Clearly, only the well-managed healthcare organizations will survive this changing situation; financial management will be instrumental in their survival.

➤➤ Whereas➤an➤organization➤may➤have➤more➤than➤one➤organizational➤purpose,➤



➤➤ Among➤the➤major➤objectives➤of➤financial➤management➤relevant➤to➤any➤healthcare➤



cHAPter key PoInts

00_Nowicki (2339) Book.indb 16 5/17/17 10:57 AM

C h a p t e r ➤ 1 : ➤ F i n a n c i a l ➤ M a n a g e m e n t ➤ i n ➤ C o n t e x t 1 7



➤➤ Understanding➤the➤impact➤of➤quality➤on➤profitability➤can➤turn➤good➤managers➤into➤


➤➤ Sound➤ethical➤reasoning➤should➤affect➤every➤decision,➤even➤financial➤decision➤making.

1.➤ Why➤is➤financial➤management➤important➤to➤the➤organization?

2.➤ What➤is➤the➤distinction➤between➤the➤purpose➤of➤healthcare➤management➤and➤the➤ purpose➤of➤healthcare➤financial➤management?

3.➤ How➤would➤you➤prioritize➤the➤major➤objectives➤of➤healthcare➤financial➤management?

4.➤ What➤are➤the➤major➤ethical➤theories,➤and➤how➤do➤they➤apply➤to➤the➤role➤of➤a➤healthcare➤ manager?

5.➤ Why➤should➤financial➤managers➤be➤concerned➤with➤quality➤initiatives➤in➤the➤healthcare➤ organization?

6.➤ How➤would➤you➤predict➤that➤financial➤management➤and➤the➤management➤functions➤ will➤be➤important➤as➤healthcare➤changes➤in➤the➤future?

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