This is a sample of the instructor materials for Michael Nowicki, Introduction to the Financial Management of Healthcare Organizations, sixth edition. The complete instructor matierals include answers to the end-of-chapter discussion questions, PowerPoint slides, and a test bank. This sample includes the answers to the end-of-chapter discussion questions and PowerPoint slides for Chapter 1. If you adopt this text, you will be given access to the complete materials. To obtain access, e- mail your request to hapbooks@ache.org and include the following information in your message: Book title Your name and institution name Title of the course for which the book was adopted and the season the course is taught Course level (graduate, undergraduate, or continuing education) and expected enrollment The use of the text (primary, supplemental, or recommended reading) A contact name and phone number/e-mail address we can use to verify your employment as an instructor You will receive an e-mail containing access information after we have verified your instructor status. Thank you for your interest in this text and the accompanying instructor resources. * * * PLEASE NOTE: This book is also available in e-book format at CourseSmart, CafeScribe, and Kno. Rental access is available at CourseSmart and Kno for 50% off the print list price. Perpetual access is available at CafeScribe and Kno at list price. For more information, please visit one of these preferred partners or contact us at hapbooks@ache.org.
Part I Discussion Questions Chapter 1 1. Why is financial management important to the organization? It helps managers accomplish the purpose of the organization. 2. Distinguish between the purpose of healthcare management and the purpose of healthcare financial management. The purpose of healthcare management is to survive economically. The purpose of healthcare financial management is to provide accounting and finance information necessary for healthcare managers to survive economically. 3. Prioritize the major objectives of healthcare financial management. To generate a reasonable net income To respond to regulation To facilitate regulations with third-party payers To influence methods and amounts of payments To monitor physicians and their potential liability To protect the tax status 4. Describe the major ethical theories and how they apply to the role of a healthcare manager. The utilitarian view of managers allows resource allocation decisions based on "the greatest good for the greatest number." The deontological view of clinicians allows clinical decision making to follow certain duties to patients. 5. Describe why financial managers should be concerned with quality initiatives. Quality initiatives not only keep patients and accreditation organizations like the Joint Commission satisfied, but also contribute to the profitability of the organization by reducing liability and cost and thereby increasing profitability. 6. Predict how financial management and the management functions will be important as healthcare changes in the future. Financial management and management functions, if performed well, will keep organizations in business in the turbulent economic environment predicted for the future.
Chapter 1
Financial Management in Context
Financial Management in Context Learning Objectives Understand the purpose of healthcare organizations. Relate the purpose of healthcare financial management to the purpose of the organization. Understand the objectives of healthcare financial management. Apply quality assessment to healthcare financial management. Apply organizational ethics to healthcare financial management. Examine the value of healthcare financial management to the management functions and the changing face of healthcare. Review background accounting, economics, and statistics information.
Organizational Purpose
Economic survival Organizational Purpose
Organizational Purpose Economic survival Nonprofit provide services to the community
Organizational Purpose Economic survival Nonprofit provide services to the community For-profit provide profit for the owner
Economic survival Organizational Purpose Nonprofit provide services to the community For-profit provide profit for the owner To be successful, both must identify and meet the needs of their customers.
Purpose of Healthcare Management
Purpose of Healthcare Management to provide the community with the services it needs, at a clinically acceptable level of quality, at a publicly responsive level of amenity, at the least possible cost
Purpose of Healthcare Management By planning, organizing, staffing, directing, and controlling while communicating, coordinating, and making decisions
Purpose of Healthcare Management By obtaining organizational accreditation Joint Commission
Purpose of Healthcare Management By obtaining basic educational requirements BHA from an Association of University Programs in Health Administration (AUPHA) approved baccalaureate program MHA/MBA from a Commission on Accreditation of Healthcare Management Education (CAHME) accredited graduate program
Purpose of Healthcare Management By obtaining certification and continuing education Certified as Fellows (FACHE) from the American College of Healthcare Executives (more than 9,000 Fellows from more than 36,000 members)
Purpose of Healthcare Financial Management
Purpose of Healthcare Financial Management To provide both accounting and finance information that assists healthcare managers in accomplishing the purposes of the organization
Purpose of Healthcare Financial Management By delegating authority for financial matters from the governing body and CEO to the CFO.
Purpose of Healthcare Financial Management By obtaining basic educational requirements
Purpose of Healthcare Financial Management By obtaining basic educational requirements BBA/MBA
Purpose of Healthcare Financial Management By obtaining certification and continuing education BBA/MBA CPA
Purpose of Healthcare Financial Management By obtaining certification and continuing education BBA/MBA CPA Healthcare Financial Management Association (HFMA): Certified Healthcare Financial Professional (1,034 CHFP) and Fellows (1,845 FHFMA) of more than 40,000 members
Accounting and Healthcare Financial Management
Accounting and Healthcare Financial Management Financial accounting provides accounting information, generally historical in nature, to external users.
Accounting and Healthcare Financial Management Financial accounting 1996 American Institute of Certified Public Accountants (AICPA) Audit Guide establishes the following four financial reports for external users: consolidated balance sheet, statement of operations, statement of changes in equity, and statement of cash flows.
Accounting and Healthcare Financial Management Managerial accounting provides accounting information, generally current or prospective in nature, to internal users.
Accounting and Healthcare Financial Management Cost accounting the study of costs, including methods for classifying, allocating, and identifying costs.
Finance
Finance Borrows and invests the money necessary for the organization to accomplish its purpose.
Financial Management
Financial Management Analyzes the information provided by financial accounting, cost accounting, managerial accounting, and finance, as well as other disciplines, in order to evaluate past decisions and make better decisions in the future.
Objectives of Healthcare Financial Management
Objectives of Healthcare Financial Management To generate a reasonable net income (difference between collected revenues and expenses) by investing in assets and putting the assets to work.
Objectives of Healthcare Financial Management To respond to the myriad of regulations in a timely and cost-effective manner.
Objectives of Healthcare Financial Management To facilitate the organization s relationship with thirdparty payers, who account for about 79 percent of a healthcare organization s revenues.
Objectives of Healthcare Financial Management To influence the method and amount of payment thirdparty payers choose.
Objectives of Healthcare Financial Management To monitor physicians and their potential financial liability to the organization in terms of their ordering patterns and possible negligence. Utilization review Credentialing and risk management
Objectives of Healthcare Financial Management To protect the organization s tax status.
Case Study You were recently hired to manage a new primary care physician s office. The physician s office will be located downtown in a major metropolitan area with significant competition. You need to establish the organization s purpose and financial objectives. What items should you consider in establishing the organization s purpose? What organizational purpose should you suggest to the physician owners? What would be the financial objectives of the organization?
Quality Assessment and Healthcare Financial Management
Quality Assessment and Healthcare Financial Management Direct measures of quality
Quality Assessment and Healthcare Financial Management Direct measures of quality Goal-based measures Responsive measures Decision-making measures Connoisseurship measures
Quality Assessment and Healthcare Financial Management Indirect measures of quality
Quality Assessment and Healthcare Financial Management Indirect measures of quality Resource measures Outcome measures Reputational measures Value-added measures
Quality Assessment and Healthcare Financial Management Joint Commission the [healthcare organization] has a planned, systematic, [organization]-wide approach to process design and performance measurement, assessment, and improvement.
Quality Assessment and Healthcare Financial Management Goals Outcomes & Indicators Key Processes Assessment Improvement
Quality Assessment and Healthcare Financial Management Joint Commission Sentinel indicators measure processes so important that every time they occur, the manager initiates a case review.
Quality Assessment and Healthcare Financial Management Joint Commission Rate-based indicators measure processes and allow for an error rate.
Quality Assessment and Healthcare Financial Management Joint Commission In response to a 1999 IOM report that as many as 98,000 Americans die each year in hospitals as a direct result of hospital errors, Joint Commission adopted initial patient safety goals that went into effect on July 1, 2001, and Joint Commission has added patient safety goals almost every year since 2001.
Quality Assessment and Healthcare Financial Management Joint Commission Patient Safety Goals for Hospitals as of January 2014 1 Improve the accuracy of patient identification 2 Improve the effectiveness of communication among caregivers 3 Improve the safety of using medications 4 Reduce the risk of healthcare-associated infections 5 Improve the safety of clinical alarm systems Financial Copyright 2015 Management Health Administration Context Press
Effects of Quality on Profitability
Effects of Quality on Profitability Deming argues that quality improvements lead to higher profitability Chain reaction Improved quality & productivity Lower costs & prices Improved market position Increased volume and profitability
Case Study You are the administrator of a nursing home owned by a for-profit parent corporation that owns 30 nursing homes. You have been asked by the board of directors of the parent corporation to explain how your quality initiative will improve profitability. What is your presentation?
Organizational Ethics and Healthcare Financial Management
Organizational Ethics and Healthcare Financial Management Utilitarianism greatest good for the greatest number
Organizational Ethics and Healthcare Financial Management Deontology decisions are governed by duties to one another that take precedence over ends-based thinking of utilitarians.
Organizational Ethics and Healthcare Financial Management Conflicts of interest owing duties to two or more parties and fulfilling a duty to one somehow harms the other.
Case Study You manage a four-physician office practice in a competitive neighborhood. Vendors often bring lunches and gifts for your staff and samples of prescription medications that the physicians give to patients.. Could this be a problem?
Value of Healthcare Financial Management
Value of Healthcare Financial Management Supports the management functions and connective processes.
Value of Healthcare Financial Management Predicts which organizations will survive the competition starting in the 1990s Falling prices Restrictions on credit Reduced production Bankruptcies, mergers, acquisitions
Review Appendices 1-1 on Financial Accounting 1-2 on Economics 1-3 on Statistics which includes the AHA definitions of statistical terms
Chapter Key Points The difference between the organizational purpose and the financial purpose of the organization is important. The major objectives of financial management, & which one is most important, is relevant to any healthcare manager.. Quality is important and understanding its impact on profitability makes good managers great managers. Sound ethical reasoning should affect every decision, even financial decision making.
Discussion Questions 1. Why is financial management important to the organization? 2. Distinguish between the purpose of healthcare management and the purpose of health care financial management. 3. Prioritize the major objectives of healthcare financial management. 4. Describe the major ethical theories and how they apply to the role of a healthcare manager. 5. Describe why financial managers should be concerned with quality initiatives in the healthcare organization. 6. Predict how financial management and the management functions will be important as healthcare changes in the future.