Being responsible for the most vulnerable population during the COVID-19 pandemic has put an extreme financial strain on senior care facilities. Between the cost of PPE, implementing social distancing procedures, a staffing shortage, and a decreasing number of residents, financial management is challenging at best.

Healthcare providers and insurance companies need to be aligned to navigate post pandemic with the possibility of an ongoing endemic. Skilled financial management skills are a necessity for healthcare boards now and as we move into the future. To help you sort things out, we’ll define financial management, provide an overview, and list best financial practices for healthcare organizations.

Defining Financial Management

Financial management for healthcare organizations means applying general management principles to your organization’s financial resources. It entails organizing, planning, controlling, and directing your organization’s financial activities, including procurement and how you allocate funds.

These are some of the activities that fall under financial management:

• Handling routine financial activities
• Negotiating contracts
• Reserving funds for payroll
• Reserving funds for unexpected costs

It’s the responsibility of your CEO and executive team to use data to make strategic plans for the present and for the future, even in times of uncertainty.

That’s where strong financial management and best financial practices for healthcare come into play. Strong financial management makes it possible for healthcare organizations to introduce new treatments, purchase new equipment, and hire skilled staff with the goal of providing high quality healthcare.

Overview of Financial Practices for Healthcare Organizations

Business strategies and financial management are inherently interconnected. In your healthcare board’s role as an overseer, it has to consider both issues together.

These are some of the other issues that go into establishing financial practices for healthcare organizations:

• Larger healthcare organizations have greater bargaining power with insurance companies then smaller organizations, which affects decisions about mergers and partnerships.
• Pharmaceutical companies are highly influential with drugs and research.
• Insurance companies establish a list of drugs and treatment guidelines for physicians, and they have specific requirements for paying claims.
• Insurance companies have two goals-ensuring that treatments are cost effective and preventing even higher costs later on.
• Boards and executives need to find the balance between making profits and ensuring quality of care.
• Boards also have to consider the impact of the risk of malpractice lawsuits which can negatively impact financial goals and overall sustainability.

Best Financial Practices for Healthcare Organizations

To get a better understanding of the best financial practices for healthcare organizations, you can take some cues from the data that your healthcare organization collects.

These are some of the statistics for your board to review:

• Number of cases where there were complications
• Death rates
• Readmissions after 30 days
• Lengths of stay
• A patient safety index
• Hospital Consumer Assessment of Healthcare Providers and System scores

The strength of your healthcare organization’s financial situation is an indicator of whether you will be able to invest in improving the quality of care and how much you’ll be able to invest toward achieving that goal. It stands to reason that healthcare systems that are in a position to regularly invest in improvements are the most likely organizations to see a higher return on their investments.

Now, let’s take a look at some of the best financial practices for healthcare organizations:

• Using your audited financial statements, calculate your operating margins, expendable cash, and long-term debt-to-capitalization ratio.
• Perform a short-term and long-term debt equity analysis.
• Identify all sources of funds-shares, loans, bonds, etc.
• Review investments to determine if they’re profitable and prudent.
• Establish a value-based model that you can share with government agencies, insurance agencies, and other stakeholders to demonstrate value.
• Gather feedback from direct providers and your patients to gauge the quality of care.
• Review data and the quality of care versus your expenditures.
• Consider how much money you can reinvest to make additional improvements from the savings realized from providing a higher quality of care.
• Consider how preventative measures will help your healthcare organization save money for the long term.
• Use a balanced scorecard method to set targets for making improvements and the quality of care, financial accountability, staffing productivity, and staffing engagement.
• Determine how to dispose of surplus funds-dividend declaration, retained profits, etc.
• Review financial controls using tools like ratio analysis, forecasting, cost and profit control, etc.

Utilizing a Board Management System to Ensure Accountability for Best Financial Practices

Establishing best financial practices for your healthcare organization will surely be a work in progress. A board management system by BoardEffect provides a secure platform to support this very important work. Here is our Board Portal Buyer’s Guide to help you select the best solution for your board.

BoardEffect provides a secure platform for the confidential and sensitive nature of a healthcare board’s work. It’s a safe place to collaborate, create online board meeting books, and store your board meeting agendas and meeting minutes. Your board portal is the perfect solution for storing articles on health care trends, technology, and innovations.

As a member of a healthcare board, it’s your responsibility to ensure that your organization has adequate funds for all the organization’s needs. Best financial practices lay the groundwork to ensure that your organization strikes a reasonable balance between incoming and outgoing funds. Sound financial practices will help position your healthcare organization to grow and expand its programs and treatments with the ultimate goal of serving your community.

What’s more, good financial practices will help eliminate or reduce the uncertainties that are brought about by our communities and society, in general. Also, sound financial practices will help your organization mitigate risks and ride the wave of changing market trends as they occur.

No matter what size your financial organization is, finding the perfect balance between capital and debt will always be tough, but with perseverance and a solid commitment to best financial practices, you can get the job done.

Written by Lena Eisenstein