¶ … Strategic Budgeting Applies in Healthcare Organizations More often than not, the budgeting process is the annoyance that exists for healthcare financial managers. More so, it can be such a process that is not only time consuming, but also one that is unfulfilling and involves conflict, concession and politics. The budget process has proved to be the main challenge for financial managers in health care. It is a complex process that requires a mix of activities, including intensive discussions, political trade-offs, and negotiation. It also consumes a large chunk of time for many organizations. It may last up to half the fiscal year. What are the effects? The financial management team is therefore, unavailable to offer support to essential needs, in the meantime. Furthermore, the budget is usually in disconsonance with the organizations' central strategic pursuits. These blunders must be discouraged in modern healthcare set ups. Decisions ought to incorporate all stakeholders, including the main players in the financial teams, and should involve a holistic analysis and a well thought out economic blueprint (Kaufman, 2006).

To understand the health care business model, it is imperative to know the major interconnections that drive the value generation of the organization, the general criteria that determine long-term performance and the points of departure for value creation. Taking this into consideration highlights the importance and application of strategic budgeting in healthcare organizations. The following section will outline the steps in strategic budgeting as outlined by Sussman (2003) and applied in healthcare organizations. The first step is for the healthcare organization to develop the financial and strategic plan. This takes into account delineating the goals and objectives the organization sets to achieve, and its financial plan aimed at assessing the apprehension of such goals (Ehrhardt and Brigham, 2010). This is integral in financial and budget planning. To start with, financial planning of any organization revolves around its different strategic objectives set for the short-term and the long run as well. It is through these objectives that a financial plan is able to be formulated with respect to the different resources required by the organizational departments. The financial plan is created subsequent to the accomplishment of the strategic plan.

Secondly, there is the communication and conveying of the objectives. This encompasses the communication of the set goals and objectives by the healthcare organization to the different leaders of the diverse departments within the enterprise. For instance, the healthcare organization has to include the heads of different departments, such as cardio, orthopedics, general surgeons and the like, in order for all departments to be in sync with the objectives of the organization in general. Subsequently, these different departmental heads provide their feedbacks regarding targets and the major assumptions fundamental to the strategic and financial targets. In particular, the managers offer a justification of whether the goals and objectives delineated in the financial plan are essentially operational or not. This incorporates different features, such as the undertakings happening in the different departments that enable the understanding of the organization's strategic and financial objectives for the forthcoming financial year, as well as the activities that might encumber and obstruct such realizations (Sussman, 2003).

The subsequent step is for the healthcare organization to develop the first pass budget. The original budget lays down the basis for the financial planning of the financial year, taking into account the targets set to be achieved. This is integral in financial planning as it sets the basis, and the different needs and requirements from the departments, which can be altered and adjusted. The specific targets set in place for the financial plan are employed to generate the original budget. This budget makes sense of the prospects of the overall strategy into perceptible statistical proclamations and departmental financial plans. Thereafter, the review and assessment of the first pass is undertaken. At this phase, the different departmental heads are invited to evaluate the original budget that contains their distinctive targets. The key role that they play is finding out exceptions and outlining comprehensive, quantifiable replacements that will balance such exceptions in order to put up with the departmental and organizational budgets that are well-adjusted (Megginson and Smart, 2011).

Once this is accomplished, adjustments are made and the budget is finalized. This phase takes into consideration operating with the different departmental heads to make changes to the budget, emulating the financial influence and alternates, in addition to finalizing the budget. This is done, especially with the departments that have an issue, regarding the original budget, which needs considerable changes (Sussman, 2003).

A health care provider or institution ought to utilize the budget as a tool for management....

The budget can be used for day-to-day allocation, apportionment and management of organizational resources that are set for a certain period (Rice and Smith, 2002). The association between the budget and the financial plan of the organization should continue being dynamic throughout the course of the fiscal year (Kono and Barnes, 2010).
In addition, the budget will enable the departmental heads and the organization as a whole to ascertain whether it is on course with the original plan set or not, and also what is necessitated to be adjusted and corrected. Once this is attained, the healthcare organization is able to ascertain that it is in line with the strategic plan that was initially set. Finally, once the end of the financial year comes in, the entire process starts again with the assessment, review and update of the strategic plan for the healthcare organization, in the following financial year (Bukh and Nielsen, 2011).

The Key Methodologies for the Application of Financial Management in Healthcare Organizations

The application of financial management in healthcare organizations encompasses the use of key methodologies. For starters, there is capital cycle management, which takes into account three important elements of healthcare organizations. There has to be a broad-minded and incorporated financial planning technique that takes into account the strategies of an organization and its financial strong suit.

Secondly, there has to be a capital structure that is in tandem with the prevailing financial and capital position of the healthcare organization. Lastly, the healthcare organization has a plan for allocating resources, which offers room for placing spending options in order to improve healthcare service delivery, even as it safeguards longstanding financial capability (Kaufmann, 2006).

Another component is the analysis and boosting of the credit worthiness of an organization. The ability of an organization to raise capital from the debt market is an indicator of its competitive status. There should be a set minimum credit rating for any organization in order to maintain its competitive edge on the market. There ought to be an integrated financial planning that is done hand-in-hand with strategic budgeting techniques.

It is essential to identify and select the strategies to help an organization realize its goals. The viability of such strategies requires sober and solid financial planning, in addition to an active support for the selected strategies, together with the necessary capital resource. Finally, the healthcare organization has to ascertain how to achieve the appropriate capital structure (Kaufman, 2006).

The Future of Financial Management in America's Healthcare Sector

There are numerous elements that bring about longstanding credit risk and restricted capital access in the healthcare sector. One apparent aspect is that the cost of healthcare is incessantly rising. Taking this into account, endeavors and initiatives for enhancing healthcare in local communities ought to come with sound financial plans that make certain that there is an incessant profitable bottom-line into the forthcoming fiscal periods. There is a great need for a managerial reaction that is ready to tackle and deal with the financial challenges in the industry (Kaufmann, 2006).

In a nutshell, the employment of the best practice budgeting procedure assists healthcare organization to make certain a direct association between the healthcare organization's strategic and financial plans as well as everyday operations. This particular tie is vital to the future success of the healthcare organizations (Sussman, 2003). In the past, the most vital finance function was cost accounting, for the reason that it was more significant to account for and justify costs compared to controlling them. However, in the present day and in the forthcoming periods, healthcare providers and organizations are bound to face a mounting hostile setting, and any business that takes no notice of the financial function is bound to experience and undergo the risk of financial decline, which at the end of the day, can result in bankruptcy and closure (Gapenski, 2007).

References

Bukh, P. N., Nielsen, C. (2011). Understanding the Health Care Business Model: The Financial Analysts' point-of-view. J Health Care Finance 37(2):8-26.

Ehrhardt, M., Brigham, E. (2010). Corporate Finance. Ohio: South Western Cengage.

Gapenski, L. C. (2007). Understanding Healthcare Financial Management. Fifth Edition. New York: Health Administration Press.

Kaufman, K. (2006). Best Practice Financial Management: Six Key Concepts for Healthcare Leaders. Health Administration Press.

Kono, P. M., Barnes, B. (2010). The Role of Finance in the Strategic-Planning and Decision-Making Process. Graziadio Business Review, Volume 13 Issue 1.

Megginson, W., Smart, S. (2011). Introduction to Corporate Finance. Ohio: South Western Cengage.

Rice, N., & Smith, P. C. (2002). Strategic resource allocation and…