FIN-650: Managerial Finance in Healthcare.


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Managerial Finance in Healthcare

FIN-650: Managerial Finance in Healthcare course discusses elements of business financial decisions, including financial forecasting and development of proformas, management of working capital, capital budgeting, capital structure, and raising funds in capital markets.

What is healthcare finance?

Healthcare financing refers to the management of funds for these medical resources. For instance, when patients cannot pay out-of-pocket medical expenses, healthcare financing works as credit and enables them to receive care.

What is managerial finance?

Managerial finance is like a combination of both corporate finance and managerial accounting. Therefore, it is an interdisciplinary approach that assists in putting business strategies into place and monitoring their effectiveness in relation to achieving the objectives of a company. Most importantly, when finances are properly managed, value is created and a company’s scarce resources are properly allocated.

What is finance management?

Healthcare financial management deals with the business side of healthcare by ensuring that facilities provide quality patient care in a financially responsible manner. Moreover, proper management of a health organization’s finances enables it to improve patient care, minimize risk, make needed investments, and explore new streams of revenue.

Role of financial management.

The key role of financial management in healthcare organizations is to manage money and risk in a way that helps to achieve the financial goals of the organization. A healthcare organization that has strong and organized financial management plans, will be able to provide efficient healthcare to all their patients.

Functions of financial management.

Careful Evaluation and Planning

Financial managers assess the organizations’ effectiveness and overall financial health. Careful planning enables them to plan for the future.

Generating Income

Another role of financial management is to invest in assets to ensure financial sustainability. Therefore, in order to generate income and still be competitive, financial managers regularly review the prices of health care services to reflect market rates. In addition, they also assess the effectiveness of the various departments within hospitals. Generating income may also include considering whether to launch new services.


Protecting Tax Status.

It’s vital for health care management teams to concentrate on adherence to tax-exempt laws and regulations. This is because federal and state governments are always interested in finding ways to secure additional funds and one of the methods they use is when a nonprofit organization loses its tax-exempt status. One strategy that a healthcare organization can use to support being a nonprofit organization, is limiting charges for indigent patients. Some organizations perform needs assessments for their communities and implement strategies to address their needs. Additionally, a healthcare organization can also build nursing schools in communities that have few educational institutions and charge affordable tuition rates to help build a skilled nursing workforce.

Monitoring Internal Spending

Healthcare finance managers monitor spending to detect fraud and the misuse of funds. Physicians influence much of the spending. This is because they may place purchase orders for medications or equipment that’s varying with a patient’s needs which would set the organization up for legal liabilities.

Moreover, finance managers in a healthcare organization also set up special committees to conduct monthly audits on all purchases for drugs and equipment to help prevent fraud and misappropriation of funds. If there is evidence of fraud, the healthcare organization can initiate disciplinary proceedings against the physician in line with the organization’s policies, launch an investigation, or proceed with disciplinary action according to federal fraud and abuse laws.

Influencing Third-Party Payers

Insurance companies and other third-party payers sometimes cover all or part of a patient’s medical bills. Insurance companies are profit-oriented and it’s common for them to pursue discounts when they insure large numbers of people. Therefore, healthcare finance managers negotiate fair rates so they can retain the most patients and still get the appropriate amount of payment for the care they provide. Additionally, the healthcare financial management teams also develop strategies to help facilities alleviate the financial risks that are associated with entering into agreements with third-party payers by negotiating the best possible contracts.

Long-Term Investment Decisions

Long-term investment decisions support the survival of healthcare organizations. Financial management teams take the lead on making big decisions around investments with input from managers at all levels. They use their knowledge to determine how various investments might positively or negatively impact their financial future.


Finance managers raise funds to meet their expenditures. They accomplish various ways such as,

  • Fundraising.
  • Getting loans.
  • Using other internal funds.

They make their decisions based on evaluations of the cost and the benefit of the investment.

Working Capital Management

Working capital is the organizations’ current assets minus its liabilities. Assets refer to cash, marketable securities, receivables, or inventories. By managing capital, organizations can reduce costs and increase effectiveness.

Contract Management

Many parties can be involved in contracts, so they must be carefully managed. Financial managers establish a defined process and flow for each type of contract which helps to prevent mistakes and ensure compliance.

Financial Risk Management

Many healthcare organizations have risk management teams that prevent or mitigate losses/risks. The risks in the healthcare sector have the potential to carry heavier risks than in other industries. This is because there are plenty of risks concerning patient safety, including life and death decisions.

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