Financial Concerns for Healthcare

The primary item of significance gleaned from Needleman’s “Assessing the Financial Health of Hospitals” is the value of revenues and expenses associated with medical care facilities. Balancing these two financial concepts (and their tangible realities in a hospital) is one the main reasons such institutions are able to remain operating. When one considers medical facilities, one immediately thinks about equipment, personnel, and attempting to achieve patient objectives. However, there is a very pragmatic reality associated with maintaining the operations of such facilities. Perhaps the most demonstrable way to measure that reality is by subtracting expenses from revenues to preserve a positive balance so the facility in question can continue to serve its constituents.
In the context of this reality, it was elucidating to learn about the various ways medical clinics have to earn revenues. Again, most people simply consider various facets of billing, insurance companies, and co-payments forms of revenue within this vertical industry. Nonetheless, there are also other viable options outside of simply providing variations of these type of healthcare services. The clinic’s ecosystem is readily supported by a number of other amenities which readily supply revenue streams. Perhaps the best example of this is cafes and restaurants in which people dine. Patrons not only include those attempting to procure healthcare services from the clinic in question, but also those who work there and who need to eat. Essentially, basic human necessities which occur at a clinic provide sources of revenues. Needleman referred to this concept as providing “services to those who using the hospital (parking, cafeteria and so on)” (Needleman, 2013).
Read “Assessing the Financial Health of Hospitals”.
Still another way in which medical facilities can generate the revenues required to sustain operations is by catering to other businesses. The business to business paradigm which occurs outside of the medical field also applies to those involved in this vertical as well. For instance, there are those who specialize in producing and selling medical equipment to clinics. Similarly, clinics can provide a variety of services to others within this industry. The patients seen in such settings make a valuable source of data for research for which some parties are willing to pay. Alternatively, there are more basic ways to generate revenues by concentrating on selling to other businesses to produce revenues. These include “selling laboratory services, laundry, or catering services, for example, to other hospitals or healthcare providers” (Needleman, 2013).
Despite the variation in sources of revenues, another critical component of maintaining a favorable balance between revenues and expenses involves explicitly keeping track of expenses. Again, the purpose of this need is to ensure that there are enough revenues to support expenses. When doing so, there is a selection of different methods organizations can use to affirm that there accounting practices are able to underpin the basic goal of balancing revenues and expenses. One of the more efficacious of these is likely accrual accounting, in which “revenues and expenses are charged against the fiscal year to which they apply” (Needleman, 2013). This method reduces the tendency to inflate revenues and expenses by applying them to the proper year, even if they occurred in a different year.
This accounting method is just one of the ways to accurately track expenses and revenues for clinics. It is an integral aspect of maintaining a favorable balance between these two staples which are vital to the operation of medical facilities. Generating revenues is equally as important.
References
Needleman, J. (2003). Assessing the financial health of hospitals. https://archive.ahrq.gov/ Retrieved from https://archive.ahrq.gov/data/safetynet/needleman2.htm#references