quality in healthcare

1. Financial Management of
Healthcare Organizations
BY / MAHMOUDSHAQRIA
‫شقريه‬ ‫محمد‬ ‫محمود‬
Quality
Management

2. Introduction to Health Care
Financial Management

3. Learning Objectives
1. Recite the massive amount of dollars that flow through the health care
industry
2. Describe the Egyptian healthcare system and insurance for it
3. Define management and its functions
4. Describe the importance of health care financial management
5. Define Accounting
6. Describe the twofold purposes of financial management
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4. DO I REALLY NEED TO UNDERSTAND Financial
management TO BE EFFECTIVE IN MY HEALTH CARE
ORGANIZATION?
 Today’s health care system, with its many different types of health care organizations,
is extremely complex,
 The science of health care is complex,
 the physical maintenance of the facilities is complex,
 the interactions and human behaviors within the organizations are complex,
 and so too are the financial requirements.
 The complexity of today’s environment has resulted in the spread of financial
management to all areas within a health care organization.
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5.  financial management is no longer the sole purview of the finance department.
 Nurse managers are being held responsible for the financial management of their
units,
 pharmacy directors are making significant financial management decisions on a
daily basis,
 operating room (OR) managers must maintain efficient utilization rates and keep
patients flowing through the OR to maintain the financial health of the organization.
Mahmoud shaqria
DO I REALLY NEED TO UNDERSTAND Financial
management TO BE EFFECTIVE IN MY HEALTH CARE
ORGANIZATION?

6.  To be successful, health care managers and executives
(regardless of what specific area within a health care
organization they lead) must all have a firm understanding
of financial management.
 It is clear that not everyone will become the Chief Financial
Officer, but everyone is making financial decisions and
needs to be able to communicate effectively with financial
managers.
Mahmoud shaqria
DO I REALLY NEED TO UNDERSTAND Financial
management TO BE EFFECTIVE IN MY HEALTH CARE
ORGANIZATION?

7.  Health care is the field concerned with the maintenance or
restoration of the health of the body or mind.
 This may seem obvious, but maybe it’s not. The health care
industry currently encompasses much more than just hospitals
and doctors.
 Although together they are associated with the majority of
industry expenditures, a considerable number of other reputable
health care providers make up the remainder
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WHAT IS HEALTH CARE??

8. Mahmoud shaqria
35
40
45
50
55
60
65
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%
General government expenditure on health (GGHE) as % of THE Private expenditure on health (PvtHE) as % of THE
Healthcare Expenditure in Egypt

9. Mahmoud shaqria
Healthcare Expenditure in Egypt
Maeet said that EGP 98.7 billion are
allocated to the health sector
Egypt implements 2018/19 budget with
more expenditures on health,

10. Mahmoud shaqria
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11. Mahmoud shaqria
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12. Mahmoud shaqria
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13. The Egyptian health care system
 Technically speaking, Egypt offers a universal health care system. Still,
quality of care in public hospitals is far lower than in private and foreign
clinics.
 The main government bodies governing Egypt’s health care system are the
Ministry of Health (MoH) and the Health Insurance Organization (HIO).
Decades ago, the HIO was created as the umbrella organization that would
provide all Egyptians with insurance and care. Today, it covers only
government employees and school-age children.
 On the whole, Egyptians prefer to see private doctors for check-ups and
outpatient care (provided that they can afford it). In a recent government
survey, over half of the respondents said that they attempted to obtain
private care before government care.
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14. Egyptian health insurance
 The Egyptian insurance landscape is, by and large, populated by a labyrinth of government ministries.
Egyptians who can afford it prefer to pay for care out of pocket.
Non-governmental insurance schemes
 Egypt has two main insurance providers that operate under government supervision but with independent
administration and financing. They are the Health Insurance Organization (HIO) and Curative Care
Organization (CCO).
 The HIO covers employed persons, students and widows through premiums deducted from employee
salaries and employer payrolls. The HIO operates an entire network of hospitals, and at times will contract
with private health care providers in order to fill gaps in its coverage network.
 The CCO, on the other hand operates in specific Egyptian governorates (Cairo, Alexandria, Port Said,
Kalyubia, Damietta and Kafr el Sheikh). It contracts with individuals, companies and government agencies
for the provision of care and arranges premiums accordingly.
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15. Out of pocket payments
 Those Egyptians that can afford it gladly prefer to make out-of-pocket payments for medical
services. Indeed, it would not be at all unusual to go into a clinic for an elective procedure (such as
Lasik eye surgery) with a stack of cash. Such procedures are well within the reach of upper-class
Egyptians and most expats (the aforementioned Lasik surgery costs about LE4500 depending on the
clinic).
 If you are moving to Egypt from a European country, the United States or Canada, this practice may
unnerve you. If you hate the idea of paying up front for medical services, you may opt for and
international insurance provider instead.
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Egyptian health insurance

16. International health insurance for Egypt
 As an expat, you will almost certainly be limiting your ventures into the Egyptian health care
system to upscale private clinics. As such, you would probably do well to invest in
international health insurance. International providers offer a variety of plans geared toward
expats – these range from comprehensive packages to catastrophic emergency insurance
only, with prices varying accordingly.
 Insurance packages can be purchased specifically for the length of your stay in Egypt, and
they can even be renewed if you decide to extend your stay.
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Egyptian health insurance

17.  Before looking for a definition of financial management, it is
important to define general management.
 In most for-profit, investor-owned firms, management’s overarching
objective is to maximize the owners’ or shareholders’ wealth.
 To accomplish this goal, management has been assigned certain
roles and responsibilities, involving the skills of leading, planning,
organizing, coordinating, motivating, and controlling.
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WHAT IS MANAGEMENT?

18.  In the case of the health care industry, an overwhelming
majority of hospitals and skilled nursing facilities are classified
as not-for-profit.
 Still, even though their employers are not-for-profit, health care
industry managers should be required to produce the best
possible bottom line. They simply need to do so in the context
of providing optimal patient care outcomes in the most efficient
and satisfying manner.
Mahmoud shaqria
WHAT IS MANAGEMENT?

19.  In the for-profit world, “management must administer the
assets of the enterprise in order to obtain the greatest wealth
for the owner”
 Therefore, management’s goal is to find the
combination of earnings and risk associated with
producing those earnings that yields the highest
possible value.
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WHAT IS MANAGEMENT?

20.  In the not-for-profit world, earnings or profits are called margin.
 In the case of both for-profit and not-for-profit health care firms, the profit
or margin is what remains after expenses, or costs, are subtracted from
revenues.
 To reiterate, the role of management is to produce the best possible
financial outcomes while minimizing risk to the organization.
 Not-for-profit health care providers place a somewhat greater emphasis on
social goals than for-profit providers, but in the end, management’s
success or failure—as defined by each organization’s board of directors—
is primarily related to the quality of its bottom line.
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WHAT IS MANAGEMENT?

21.  Financial Management helps to manage the finances and economic resources of
the organization. It is about managing the economic activities of the organization
efficiently to achieve financial objectives. Financial management aids the
management in better decision making.
 A key objective of Financial management is to
1. create wealth for the business and investors,
2. generate cash,
3. earn good returns at adequate risk by using the organizational resources efficiently.
Key elements of financial management are
 financial planning,
 financial control, and
 financial decision-making.
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What is Financial Management?

22.  Financial management can now be defined as
strategizing the organization’s financial direction as well
as the performance of its day-to-day financial operations.
 Therefore, financial management has a dual purpose.
1. The first is to determine the strategic financial direction
of the organization. This function is usually performed at
the executive level of the financial ladder by the chief
financial officer (CFO).
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What is Financial Management?

23.  The primary job is to prepare and present the
organization’s strategic financial plan to the board for
endorsement and approval.
 In many organizations, this job may also include the
treasury function, which is charged with investing the
organization’s financial assets in the most prudent
manner as set down in board approved investment
policies.
Mahmoud shaqria
What is Financial Management?

24. 2. The second purpose is management of day-to-day
financial operations.
 The organization’s second-in-command finance officer,
often called the controller, usually carries this out.
 This function means making sure that the payroll and the
suppliers are paid and that the revenues generated by the
operation are billed out in an accurate and timely manner
and collected efficiently with a minimum of write-offs.
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What is Financial Management?

25. Financial management functional
levels
Financial
executive
officer
Finance
officer (
controller)
treasurer accountant
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26.  Accounting is measuring, processing and recording of financial
transactions of an organization. The process is to summarize,
analyze and record such information to be reported to management,
creditors, shareholders, investors and the oversight officials or tax
officials.
1. Measuring the financial transaction into monetary units and,
2. Reporting the financial information or transactions using Generally
Accepted Accounting Principles (GAAP).
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What is Accounting?

27. Major Objectives of Healthcare
Financial Management
 Health care finance management teams focus on helping
organizations such as hospitals and nursing homes run
efficiently and profitably.
 Finance professionals provide general managers with
accounting and other financial information that helps them
make smart decisions,
monitor internal spending and
 figure out areas of financial strength and weakness.
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28. Major Objectives of Healthcare
Financial Management
Generating Income
 Health care finance managers develop and implement strategies to help health facilities
generate sufficient revenue to offset expenses and finance future development. This
typically involves
 investing in assets,
 reviewing the prices of health care services to reflect market rates,
 evaluating the effectiveness of hospital departments and
 launching new services.
 For example, finance managers working in an outpatient hospital might advise senior
management to invest in inpatient services as a new source of income. If senior
managers approve of the idea, the health care finance management team prepares a
project proposal indicating the estimated costs of launching the service, potential
funding sources and annual profit projections.
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29. Major Objectives of Healthcare
Financial Management
Protecting Tax Status
 With federal and state governments consistently looking for new revenue
sources, non-profit health facilities must protect their tax-exempt status. A
health facility’s health care finance management team focuses on ensuring
compliance with tax exemption requirements.
 It might do this by limiting charges for indigent patients, or conducting a
community needs assessment and implementing a strategy to address
those needs. For example, if the hospital operates in a community with few
educational institutions, it might build a nursing school for local students to
pursue diplomas in nursing at affordable rates.
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30. Major Objectives of Healthcare
Financial Management
Monitoring Internal Spending
 Health care finance managers monitor spending within a health system to detect
fraud or misuse of funds. In particular, physicians are closely monitored because
they influence much of the spending attributable to hospitals and nursing homes.
For instance, a physician might place a purchase order of medicine and equipment
that is inconsistent with patient needs, exposing the facility to unnecessary
expenses and legal liabilities.
 To combat this practice, the health care finance management team can set up a
special committee to conduct a monthly or annual audit on all drugs and equipment
purchases to detect misappropriation of hospital funds. If there is evidence of fraud,
the hospital can initiate disciplinary proceedings against the physician in line with
institutional policies, or launch criminal proceedings in accordance with federal
fraud and abuse laws.
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31. Major Objectives of Healthcare
Financial Management
Influencing Third Party Payers
 Third party payers are insurance companies and other organizations that
cover all or part of a patient's medical bills. Third party payers are largely
profit-oriented and often aggressive in asking healthcare facilities for
discounts if they provide large numbers of patients.
 However, hospitals can lose money if they don't receive the appropriate
amount of payment for the care they provide. The health care financial
management team develops strategies to help the facility mitigate financial
risks associated with entering into agreements with third party payers by
negotiating better contracts with insurance companies.
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32. The End
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