Financial Information in Healthcare Systems

Financial Information in Healthcare Systems

Ponchie McCollough

Tera Weets

HC 380

Health Care Accounting

3rd August 2019

Financial Information in Healthcare Systems

Financial information is critical in any institution that relies on finances to aid in the progress of its functions, the healthcare system well included. For any healthcare system to achieve their stipulated goals and visions there has to be an effective financial system organization that deals with the money matters regarding the institution. This money may be obtained in different ways depending on the type of institution in question. The use of the funding may also be variable from one type of institution to the other. In all this, the financial system has to run effectively to ensure that patients receive the best healthcare that can be provided by a particular facility.

Importance of financial information in healthcare organizations

The importance of financial information in healthcare organizations are varied and these include the following. First, it aids in the planning of activities undertaken by the institution. Issues like annual budgeting for a specific healthcare unit are important in guiding an organization on how it should rub in a particular year in question. This also helps the company to plan further on how to achieve their goals stipulated for a given year.

Next, it aids in making of the long-term financial investment decisions of a particular company. With financial information, the main stakeholders can easily plan for and organize their thoughts regarding long-term investment decisions to draw more capital to the company. They can thus decide to purchase imaging equipment that in turn will bring more finances to the hospital. They can also invest in several computers with good information systems to help in the smooth running of the hospital and further profit margin realization.

Thirdly, it allows the stakeholders to follow keenly on their financial decisions. They will therefore be able to determine whether their expenditure is more than the income or vice versa. They can also use this information to determine whether they could apply for grants or loans from other facilities. A good record of the finances will also ensure that the company is able to foresee and even avoid going into debt at any particular moment.

Finally, good financial information enables the company to manage their treatment costs very effectively. It allows them to determine which types of treatments are good for the patient and at the same time cost effective. This prevents the patient from spending money unnecessarily especially in the cases where the patient is uninsured and has to pay from pocket. Previous information obtained from the financial documentations will then guide such circumstances based on the cost of the medications and any other need of the patient.

Financial Statement Analysis

Financial statement analysis is the process in which a particular company’s financial statements are carefully analyzed to aid them in critical decision making regarding the facility. There are several uses of financial statement analysis in healthcare including but not limited to the following. To begin with, it helps to determine the previous performance of the organization. Using the previous statements, decisions can then be made based on whether there is an improving trend or whether changes need to be made within the company to improve profit margins. In this manner, it can also be used to avoid mistakes committed in the past that could lead to better outcomes in the facility.

Next, the analysis ensures that there are no shrewd occurrences and cases of finance embezzlement within the facility. This can save the company millions since a failure to analyze this may lead to inappropriate use of funds by certain members of staff. This also helps in the follow up by the auditing team to ensure only what is within the budges is obtained and accounted for.

Thirdly, it ensures correct assessment of the status of the facility at any given time. With this, the company can then determine whether their financial status allows further purchases. It also helps to inform financial decisions such as whether certain activities can be done within the facility. By so doing, it also helps reduce the instances of obtaining debts and unnecessary loans due to good financial management and effective planning before big decisions are made.

Next, financial statement analysis can aid in determining a facility’s future potential. The stakeholders can use the information obtained to determine whether they can advance and expand their facility. Depending on the initial status of the hospital, they can use this information to assess whether they are moving forward and whether they can even change the level of their healthcare cadre. At the same time, this information can determine whether they are able to make further purchases within the hospital for instance improving the imaging machines and laboratory equipment. They can gain more profit and provide better services to their patients in these effective ways. In addition, they can also increase the healthcare personnel to help in improving service delivery to patients.

Finally, a critical analysis of the financial statement enables the stakeholders to determine ways in which to maximize their resources and by so doing, their profits. They can therefore avoid situations that previously led to losses. Other than that, they can come up with better ideas aimed at improving their profits in entirety. For example, they may expand certain areas within the hospital that are known to bring more profit and therefore improve their outcomes. They can also increase their bed capacity based of the evaluation of returns obtained from the inpatient department.