Eight Question About Health Care Finance

Healthcare Finance

Effectiveness refers to hitting targets that are set. When an organization is reaching its goals, it is effective. Efficiency is the level of effectiveness divided by the effort to get there. In essence, how much does the organization get out of its resources. Both can be applied to operations, financials and any other organizational metric.

The four phases of management control are programming, budget preparation, execution and evaluation (Barnat, 2014). The programming element involves choosing what programs or lines of business an organization will pursue, i.e. the strategic direction. The budget is how the resources will be allocated within the organization. . The execution refers to the operating tactics used to implement the strategy. Lastly, evaluation is a control process where management examines what worked, what didn't, and whether or not the organization hit its objectives.

A forecast budget is typically built on the previous budget, where estimates are assumed to be similar to past performance, with some basic adjustments. A flexible budget allows for the budget to vary depending on the activity levels. One of the ways a flexible budget manifests, therefore, is when a company notices after one quarter than business is higher than usual. At that point, the flexible budget system allows for the subsequent quarters to assume that this increase will continue. . Building flexibility into the budget allows for more efficient allocation of resources because more information is used in the formation of the budget (Accounting Tools, 2016).

4. If all of our cardiovascular surgeons are departing, this will clearly affect the volume. We will lose the bulk of our cardiovascular work. We will not only need to budget what that means for that department, and the organization overall, but what amount of business for other departments those surgeons contributed to. The organization therefore needs to look at the opportunities to invest some of that capital might be, to replace that revenue. But yes, the forecast volume would have to take into account that evisceration of the cardiovascular department, which would not be yielding very much revenue at all.