Health Care

Financial Information in Healthcare Organization

Introduction

Financial information entails a written record of the activities and financial performance of a healthcare organization. The main role of financial management within healthcare organizations is to manage money and risks that enable the organization to achieve its financial goals. Considerably, a health organization with organized and strong financial plans can offer efficient and quality healthcare. This paper will discuss the use of financial information in healthcare and how financial statement analysis addresses the financial issues within healthcare organizations.

Financial Information in Healthcare Organizations

Financial information is an essential part of an organization’s financial and strategic management. Over the years, keeping financial records has been more detailed due to the increased demand for accuracy and better performance. Ethical standards and guidelines have been established to ensure that the financial management competencies are upheld within healthcare organizations. The financial information is used in planning, evaluation, risk management, and contract management (Baker, Baker, and Dworkin, 2017). For instance, financial information enables a healthcare organization to measure its financial effectiveness in its current healthcare practices.

Evaluating an organization’s financial condition is one of the most common uses of financial information within healthcare organizations. Ideally, the financial condition of an organization is measured with the capacity and viability to continue achieving its goals through a consistent level of activities (Baker, Baker, and Dworkin, 2017). Financial information allows assessment of the business’s financial status, which is essential in efficient and smooth operation.

Financial information has played a great role in fiscal stewardship, which entails considering the well-being of the patient and financial responsibility. This allows the management of quality care, thus removing unnecessary costs. The financial and accounting information is designed to prevent the loss of resources and assets through activities such as embezzlement and employee fraud. For instance, the healthcare managers ensure the financial well-being of the organization through evaluating the financial reports and making decisions, and planning investments that will facilitate long term financial success of the organization.

Financial information offers healthcare with current and accurate data that can be used to get a better understanding of margins and costs in various markets (Baker, Baker, and Dworkin, 2017). This helps in assessing the effectiveness of operations as well as the attainment of goals. Additionally, efficiency is becoming increasingly necessary within healthcare organizations for decision-making. Therefore, healthcare organizations have relied on financial information to determine their efficiency and effectiveness in the industry.

Financial information has also been used to determine whether the healthcare organization has complied with the directives such as budget and utilization of resources. Therefore, the financial information offers details on how resources have been utilized and the organization’s adherence to the budget. For instance, financial statements such as statements of expenses and revenues and balance sheets offer financial information regarding the utilization of assets and resources. Financial information ensures that decisions that involve the procurement of fixed assets such as equipment and facilities are made strategically (Baker, Baker, and Dworkin, 2017). Therefore, the financial statements help organizations in activities such as budgeting and planning.

Financial Statement Analysis to Address Financial Issues in Healthcare Organizations

The financial statement analysis is an accounting report utilized in examining and understanding the performance of an organization. The financial statement analysis offers essential data that helps organizations to see improvements and better choices. The financial statements include income statements, balance sheets, and cash flow statements. Tracking and analyzing financial statements is a vital practice for healthcare organizations. The financial statement analysis includes ratios that indicate the direction of the operating costs and cash flow. The financial statements indicate the results of operations and offer valuable information about the healthcare organization’s revenues, liabilities, assets, and expenses (Bergeron, 2017). The information from financial statements is used by decision-makers to monitor performance and evaluate optimal investments, strategies, and changes for constant growth.

The financial statement analysis enables healthcare organizations to realize weak areas concerning financial performance. The healthcare organization relies on the financial statement analysis to identify areas in which they are losing their competitiveness and offer basic recommendations on how they can address the situation through strategic decision making (Hayward, 2016). The financial statement analysis allows the organization to develop effective strategies and investment priorities to facilitate growth and accomplishment of objectives.

The financial statement analysis enables the organization to understand their overall spending to improve their financial performance. For instance, a healthcare organization experiencing high operating costs and increased cost of healthcare can rely on the financial statement analysis to determine their overall spending. Understanding their overall spending will enable the healthcare organization to determine the causes of high operating costs and causes of financial problems. The financial information from the statements will be used to determine risk and money management, thus achieving the organization’s financial goals (Bergeron, 2017). For instance, a healthcare organization might be experiencing reduced revenue and a drop of patients due to equipment or high healthcare costs, while another cost-effective organization with the most recent equipment is gaining more patients. The cash flow statement can be used to analyze the reduced revenues and help make strategic decisions regarding the purchase of the best and most recent equipment, which will boost the organization’s overall operations.

Conclusion

In conclusion, financial analysis is vital for the survival and growth of a healthcare organization. This is because the financial information offers current and accurate data that acts as a scorecard for the healthcare organization. The financial information obtained from financial statements is relevant for strategic decisions, investments, long-term profitability, and growth. Therefore, healthcare organizations should focus on proper financial statement analysis to gain information about recent and future financial health.

References

Baker, J. J., Baker, R. W., & Dworkin, N. R. (2017). Health care finance. Jones & Bartlett Learning.

Bergeron, B. P. (2017). Performance management in healthcare: from key performance indicators to balanced scorecard. Productivity Press.

Hayward, C. (2016). Healthcare facility planning: Thinking strategically. Health Administration Press.

Stephens, J. H. (2019). HADM 7300–Healthcare Financial Management II.