Operating Budget Over the last several years, the issue of rising health care costs has been having a dramatic impact on a variety of facilities. Evidence of this can be seen with a study that was conducted by the Kaiser Foundation, where they found that prices have risen by 47% since 2005. (Ableson, 2010) This is important, because it showing the budgetary challenges that many hospitals are facing. In the case of Patton Fuller Community Hospital, they are dealing similar kinds of problems. To fully understand how administrators can adapt to them requires examining effective financial management practices that can be utilized and ineffective policies. Once this takes place, it will provide specific insights as to what challenges are facing the facility.

Effective Financial Management Practices of Patton Fuller Community Hospital

In general, the financial management strategy that has been utilized (over the last year) is working. Evidence of this can be seen with the fact that the hospital had a reduction in the total operating loss by 66%. This is a sign that management has engaged in a strategy of: maintaining tight financial controls, they have strategically made investments in select areas and they are taking advantage of the deflationary environment. These different elements are important, because they are highlighting how the strategy is addressing the problems facing Patton Fuller.

Ineffective Financial Management Practices at Patton Fuller Community Hospital

Despite the tremendous amounts of progress that have taken place at the facility, there a number of issues that could have a dramatic impact...

A few of the most notable include: rising costs, declining customer demand and poor collection methods. These factors are significant, because if left unaddressed they could lead to major problems for the hospital in the future.
The way rising costs could have an impact on health care environment is by, negating any kind of improvements that were made over the last year. The operating budget of the hospital is indicating that the biggest advantages that they have are the 3% deflation rate (thanks to the weak economy). This is problematic, because once the economy begins to improve is when inflationary pressures will begin to have an impact on the cost structure. As, this will affect everything ranging from: the fees that are charged for services to the underlying costs for supplies. The negotiated long-term contracts could hurt the ability of the company to adjust to these changes, as they have little room for upward price increases. This is significant, because it showing how the facility is facing major challenges from: their poor cost structure that is in place. To prevent this from spiraling out of control in the future requires that the hospital use an approach that will give them greater flexibility for making adjustments.

Declining consumer demand is a sign that the underlying quality of care is decreasing. This is troubling, because demand for these services has been continuing to increase due to large segments of the population becoming older. Evidence of this can be seen by looking at the total number of Baby Boomers (78 million). As, this segment of the population ages, they will continue to…