NURS 6211: Finance and Economics in Health Care Delivery | Week 6

Health care organizations attempt to stay as current as possible with equipment and resources, but today, this can be a costly effort. Just one Magnetic Resonance Imaging (MRI) machine costs millions of dollars. Major purchases such as these are included in capital budgets, and ultimately have an impact on the clinical, operational, and financial budgeting process of an organization.

This week, you focus on major expenditures such as equipment and facilities. It is important for nurse managers to understand how capital budgets function so they can make informed contributions to the decision making process.

Learning Objectives – NURS 6211:Week 6: Budgeting–Part 2 Assignment

Students will:

• Apply principles of capital budgeting to management decision making
• Justify expenditures on a capital budget

Learning Resources

Note: To access this Week’s required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

Required Readings

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and Bartlett Learning.

• Chapter 17, “Capital Expenditure Budgets” (pp. 197-203)The focus of this chapter is capital expenditure budgets and how they differ from operational budgets. It discusses how to develop and evaluate capital expenditure proposals.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

• Chapter 8, “Capital Financing for Health Care Providers” (pp. 329–373)This chapter explores two types of financing—equity financing and debt financing—as well as the bond issuance process that can be used to finance capital expenditures. Additionally, the authors discuss the option of lease financing, a possible alternative to the two other types of financing.

Danna, D. (2014). Essential business skills for nurse managers. Health Leaders Media. Retrieved from http://www.strategiesfornursemanagers.com/ce_detail/204441.cfm#

This article discusses the need for nurses to understand the business skills necessary in healthcare today.

Himmelstein, D. U., Jun, M., Busse, R., Chevreul, K., Geissler, A., Jeurissen, P., & Woolhandler, S. (2014). A comparison of hospital administrative costs in eight nations: US costs exceed all others by far. Health Affairs, 33(9), 1586-1594.

This article compares the hospital administrative costs in several nations.

Zismer, D., Sterms, J., & Claus, B. (2011). Capital efficiency and integrated health system designs. Healthcare Financial Management, 65(7), 88–90, 92, 94.

In this article, the author examines how system designs play a crucial role in capital efficiency and return on investment. The author also analyzes how this role may change in the future.

Discussion: Making the Case for Capital Budget Expenditures

As a nurse, you are probably very aware of and can speak to the emotional reasons behind the need for certain major expenditures such as a new nurse’s lounge or replacing the current patient information system with a new digital system. You would love to see your nurses have a comfortable area where they can rejuvenate from a stressful day with patients. Alternatively, nurses carrying around PDAs would certainly ease the recording and transmission of vital patient information. However, as a nurse manager you need to be able to support those emotional appeals with reliable financial data. Having a place to refresh will help nurses be more efficient, and could reduce sick days and nurse errors. Being able to quickly access doctor’s orders and previous nurse’s comments allows for a more timely response to patients. As your responsibilities expand, you may find yourself at the table when decisions about capital expenditures are being debated. It is therefore to your advantage to understand the workings of a capital budget.

In this Discussion, you consider the impact of both financial and emotional factors in making a capital budget decision,

To prepare:

• Review the information on capital budgets in this week’s Learning Resources.
• Consider why it is important for nurse managers to understand the capital budget of an organization. How are capital budgets used in your own organization (or one with which you are familiar)?
• Reflect on the importance of thinking strategically when developing this type of budget.
• Identify a new piece of equipment you would like to see purchased by the organization. Consider how knowledge of capital budgeting could influence your approach to making the request.
• Develop strategies for demonstrating the need for this capital expenditure that take into account both financial and emotional considerations.

By Day 3

Post an analysis of why it is important for nurse managers to understand principles of capital budgeting. Describe a costly new piece of equipment you would like your organization (or one with which you are familiar) to purchase. Explain strategies for demonstrating the need for this equipment to decision makers. Briefly outline how you could use financial data and emotional appeals to demonstrate the benefits of this purchase.

Read a selection of your colleagues’ responses.

By Day 6

Respond to at least two of your colleagues on two different days. Suggest an additional strategy for demonstrating the need for the equipment they described and why you believe it might be successful … NURS 6211:Week 6: Budgeting–Part 2 Assignment

ADDITIONAL INFORMATION;

Discuss finance and economics in healthcare delivery

Introduction

In the healthcare industry, finance and economics play an important role. They are used to help in getting a better understanding of how healthcare delivery works and can help in improving it. The entire exercise is geared towards cutting cost while maintaining quality

Sourcing of Funds

Sourcing of funds includes patient fees, government subsidies and private donations.

The source of funds depends on the health care organization and its mission. The main sources which are generated from within an organization include:

• Receiving patient fees

• Government subsidies (federal or state)

• Private donations

Cost Control

Cost control is a part of the process of managing healthcare delivery. It helps in maintaining quality of care, improving access to treatment and reducing waiting time for treatment. The following are some ways in which cost control can be achieved:

• Limiting expenditure on unnecessary services or products (e.g., drugs with no clinical role)

• Improving efficiency through technology adoption and use of information systems like electronic medical records (EMRs) or patient portals that provide real-time feedback on performance indicators such as number of visits per day etc.,

• Reducing waste by adopting best practices such as bundling services or combining expenses across multiple patients

Price Sensitivity

Price sensitivity is the extent to which individuals and groups have an interest in keeping the price of goods and services low. In other words, if you were shopping at a supermarket, how much would you pay for your groceries?

There are two sides to this coin:

• One side sees price sensitivity as a good thing because it helps drive down costs for consumers; however, on the other hand there are those who believe that having too many suppliers (or producers) will lead to lower quality products or services being offered at higher prices than necessary. This can also happen when there’s no competition between these companies—for example, if one company has all their supplies produced overseas while another company has their supplies made locally but under different conditions such as minimum wage laws or safety regulations (which may vary depending on where each supplier works). So what does this mean for our healthcare system?

Financing of Health Care

Healthcare financing is a complex process. It has evolved over time, and it can be described as the process of collecting money to pay for healthcare services.

The health care system in America is based on private insurance coverage, which means that individuals and businesses must purchase their own policies or rely on public programs such as Medicaid or Medicare. These public systems provide financial assistance for those who cannot afford coverage themselves. However, because these programs are not fully funded by tax dollars (they are funded through premiums), people may wait months before being able to see a doctor; this makes them less efficient than other countries’ systems where there’s no waiting period at all and therefore less expensive overall!

Financial Polices and Procedures

Financial policies and procedures are a set of rules that guide the allocation and use of financial resources. Financial policies are guidelines that govern how an organization will manage its finances.

Financial policies may include:

• The goals for which you plan to spend money; this includes things like paid time off, health insurance premiums, etc.

• How much time it takes to pay bills on time; this is called working capital management (WCM).

• Who has authority over what types of expenses are allowed in your budgeting process. For example, if you want more flexibility when deciding which services should be funded by employee contributions versus outside sources such as philanthropy donations then make sure everyone knows who has access rights because this can help prevent conflicts later down road when budgeting decisions need made about these items again!

The entire exercise is geared towards cutting cost while maintaining quality

The entire exercise is geared towards cutting cost while maintaining quality. Cost control is the key to healthcare delivery, as it can help you maintain high standards of patient care and reduce wastage in resources.

Achieving financial sustainability through cost-effectiveness requires that you figure out how much money your hospital spends on each patient and what they get out of it when they leave—that is, how many times do they come back? What’s more important: how much did we spend on them or how well did we treat them? The latter will determine whether or not this hospital will survive over time; if people have good experiences here then there will be word-of-mouth advertising about our services among friends who might be interested in coming here themselves!

Conclusion

In this post we have discussed financial management in healthcare. We have looked at the role of finance in healthcare delivery, how it works and how to manage finances in hospitals. We also looked at some of the challenges facing financial managers and discussed how to overcome these challenges.