Financial Problems Confronted Healthcare Organizations, Capstone Project Example

Introduction to the Topic

The concept of financial management is equally trading as well as non-trading organization as it enable the organization concerned to effectively managed its sources and uses of funds thereby increasing the effectiveness of organization. Healthcare organizations are also confronted with various financial challenges; this paper will identify some of the critical challenges that may lead to be potential problem for healthcare organization. The significance of problems is based on the study conducted by Ache (2010). The identification of such dilemmas could then helps financial management staff at healthcare concern to take appropriate steps to meet such challenges and accomplish the organization’s long-term goals and objectives. These different challenges confronted healthcare organizations and their relative significance are discussed next:

Medicaid Reimbursement

In USA under the Federal State health Insurance Program the state provides medical facilities to low income and people with known disabilities. When a healthcare organization provides such services to poor and/or disable people, the total cost of such services are reimbursed by districts authorities. However a healthcare organization has to undergo through different procedures and red-tape before the reimbursement took place. In fact in certain cases, although the financial manager initially recorded full amount for the services thus rendered, however the organization receives partial payments from the government authorities.

Medicare Reimbursement

Under the social Security Act of 1965 the US government is required to provide free health insurance coverage to US citizens aged 65 and above. The services are usually by a healthcare concern however the coverage is provided by the US government. As in case of Medicaid reimbursement, the financial management is also confronted with timely reimbursement of Medicare service charges.

Bad Debts

As healthcare services are provided first irrespective of whether the payment for the services are made or not because saving a life is more important than asking patient to make payment. Thus the chances of bad debts where the patient is unable to pay the amount owed as a result of services rendered by the healthcare organization are more than other service providing organizations.

Increasing Cost of Staff, Supplies and other Inputs

US is experiencing consistent inflation during the past few year, particularly after the global economic crises that has resulted in increasing the cost of inputs and thus decrease the amount of profit  a healthcare concern earned. The cost of salaries, inputs and maintenance cost has increased remarkably during the recent past, while due to rising competition healthcare concerns are in very dismal position to pass on such cost to their patients.

Inadequate Funding for Capital Improvement

As the technological revolution is continued in the country shaping our daily lives, in order to maintain their efficiency in the market a healthcare organization is required to adapt new technology that usually enable the organization to provide existing services incurring lesser cost while boosting the quality of services. However such equipments usually require enormous capital outlay while financial managers at healthcare organizations are usually not having the desired funds to purchase such equipments.

Managed Care Payment

The term is used to denote a healthcare organization practice to boost its quality of services and decrease its operational cost. As most of the cost incurred by the healthcare concern are fixed cost, the dilemma confronted the financial manager  at healthcare concern is how to effectively managed the healthcare concern so there could consistent demand for the organization services enabling the organization to get consistent revenue to pay the fixed charges (Kongstvedit, 2001).

Other Commercial Insurance Reimbursements

The last problem confronted financial management at healthcare organization is the reimbursement from commercial insurance organization for services rendered to their clients. Usually the processing of such invoices and amount takes an extended period of time that financial manager should appropriately handled in order to manage the financial affairs of the healthcare concern in an effective manner.