While healthcare focuses on caring for the patient’s physical and mental well-being, it has also become a business where margins tell organizations how viable and effective they are at delivering care. The management of healthcare organizations has made it possible to provide quality healthcare more cost-effectively. In recent times, though, the healthcare industry has found itself needing more healthcare personnel while operating at a loss, a contradiction of sorts. However, a few factors are influencing the current state of healthcare.
A November 2022 Healthcare Business Trends article reports hospitals are facing a slow recovery, forcing many healthcare organizations to cut costs. Some of these cost-cutting measures are department or service line closures, and in the worst-case scenario, hospital organizations must close permanently. Some of the issues that experts state are obstacles to the industry recovering quickly include being short-staffed, costs being higher than payment rates, and disruptions in patient volumes, particularly for elective procedures.
In the middle of these measures to reduce negative margins, healthcare organizations need workers. Outside of the pandemic that stressed the entire industry, there is a demand for healthcare professionals at all levels. More significantly, as healthcare has expanded, many other roles have defined the industry, especially in the business of running a healthcare organization.
Healthcare financial management’s import to all healthcare organizations is that it determines the quality and type of care patients receive and determines whether the organization can give care at all. In a nutshell, the financial management of any organization, much less healthcare, involves overseeing the daily operations of a business.
In managing the finances of a healthcare organization, management teams provide hospital leaders with the information needed to make strategic decisions. For example, negotiating contracts, maintaining a cushion for unexpected costs, and overseeing payroll funding are just a few of the activities involved with healthcare financial management. Healthcare financial management encompasses a few other objectives as well.
Major healthcare financial management objectives
The overarching goal of healthcare financial management is to create a cost-effective financial system that allows a hospital to sustain itself. The following are just a few objectives that healthcare financial managers must maintain for a healthcare organization to be financially fit.
Objective 1 – evaluation and planning
Healthcare financial managers play a role in assessing the organization’s effectiveness and financial health for future planning. An instance where evaluation and planning are essential is when an organization loses patients to competing healthcare organizations because those healthcare providers offer patients better service, whether the competition has installed new technology or is providing a different service. By assessing their offerings, financial managers in the healthcare setting determine the changes needed to remain current and retain patients.
Objective 2 – financial risk management
Many healthcare organizations invest in risk management teams to reduce or prevent financial losses. Unlike other industries, the risks are higher because they are usually related to the safety of the patients, for example, making decisions related to the quality of life. These teams assess and devise policies that mitigate losses.
An example of how financial risk management is used in healthcare is with third-party payers (insurance companies), organizations that pay the patient’s bill in full or in part. Mainly profit-oriented businesses, these organizations are well-known for asking healthcare organizations for discounts in exchange for providing the healthcare organization with large volumes of patients. At the same time, however, if hospitals are not adequately paid for delivering care, they sustain losses. These financial management teams devise ways to mitigate risks associated with these agreements between hospitals and insurance companies.
Objective 3 – financing objectives
Handled by finance managers, raising funding is a primary objective in healthcare financial management. These managers oversee applying for financing, fundraising, and accessing internal funds. Determining which route to take depends on assessments of the cost benefits of investing in a financing vehicle or investment.
Objective 4 – managing working capital
This involves assessing how much money the healthcare organization has at its disposal. The finance professional accomplishes this by comparing the organization’s assets with its liabilities. Some of the assets a hospital organization might have include cash, inventory, securities (stocks and bonds, for example), and receivables. Essentially, by knowing the value of the healthcare organization, financial managers use this information to take steps to reduce costs and improve care provider effectiveness.
Objective 5 – generate money
Healthcare financial management objectives also involve generating income so the organization can sustain itself. The purpose is to ensure the organization is not just to make money for investors, as with most businesses. Instead, the focus is on financial objectives related to ensuring the services provided reflect market rates and relate to evaluating the efficacy of the departments within the hospital or healthcare center.
Objective 6 – secure tax status
While healthcare organizations try to generate income, they are not like most businesses, with many holding non-profit statuses, allowing them to remain tax-exempt. They must pay state and federal taxes if they lose their tax-exempt status. For this reason, an objective of financial management in the healthcare setting relates to making sure that the organization is in compliance with tax-exempt laws and regulations.
Objective 7 – overseeing internal spending
Healthcare financial managers must oversee spending to ensure funding is not misused or stolen through fraud. An example of the way financial management oversight works in the hospital setting includes paying attention to the technology and equipment that physicians order. For instance, the organization could face legal liabilities if a physician orders equipment and materials inconsistent with patient needs.
Objective 8 – engaging in long-term investments
In making sure the hospital can support itself, healthcare financial management teams are also involved with making decisions that help the organization to remain viable in the long term, which includes investments, projects, and programs. The role of the financial manager determines whether purchasing new technology or launching new programs has a positive or negative impact on the organization.
These are just a few of the many objectives that are a part of healthcare financial management. The profession encompasses the contributions of various healthcare professionals, for example, a board of directors, accounting managers, finance managers, and other senior roles. Even with the slow recovery in the healthcare sector, there is a demand for healthcare financial managers.
Skills a healthcare financial manager needs
Healthcare financial managers need computational skills because they must work with numbers. They must have a working knowledge of basic financial equations related to subtracting expenses from income to calculate net profit and to more advanced understanding of equations associated with performing cost analysis and budgeting activities. Healthcare financial managers must also have a foundation in economics and finance to oversee healthcare organizations. These professionals usually are well-grounded in market trends, financial risk, investment, profits, and taxes, among other concepts.
Healthcare managers must also have excellent communication, strategic planning, and leadership skills. The professional must speak with external and internal members of the healthcare community that they serve clearly and succinctly. Leadership skills that are needed include being able to collaborate with others and knowing how to build teams. Finally, these professionals must also see the entire picture, focusing on short- and long-term goals. First and foremost, they must know how to set objectives that lead to future goals.
How to prepare for a field in healthcare financial management
Students and mid-career professionals can approach moving into healthcare financial management using the strategies below:
Attending a university program
Students or professionals who aspire to start or advance their careers in healthcare financial management usually begin with a bachelor’s degree in economics, finance, accounting, business administration, or statistics. While a bachelor’s degree might suffice for entry-level positions, many healthcare organizations prefer professionals who hold a Master of Science or Master of Business Administration in finance, accounting, information management, and economics, among other related fields.
Further, nurses who want to move into healthcare financial management also have options. This profession does not necessarily require the professional to hold a degree in nursing; however, increasingly, academic institutions are providing a way for nurses to move into healthcare management, in this case, healthcare financial management. Attending an online doctor of nursing practice program such as Marymount University’s, for example, makes it possible for nurses to work full-time, take care of personal obligations, and work toward a degree that will prepare them for a job in a healthcare financial management field.
Go for certification
Another way to prepare for a career in healthcare management is to earn one of several certifications. Some of the certifications employers find attractive are certified public accountant (CPA), revenue cycle representative, healthcare financial professional, chartered financial analyst (CFA), and certified specialist accounting and finance, among others. Earning any of the applicable certifications opens the door to more significant earning potential and job opportunities.
Gain experience in the area
These positions typically require the professional to have at least five years of relevant experience in business roles, specifically within the healthcare setting. To get your foot in the door, consider working in entry-level positions (accountant, budget analyst, or financial clerk). Positions related to managing money and working with numbers in healthcare settings are attractive to prospective employers.
Networking is and has always been a way to advance in a profession. One way to expand your professional network is to consider becoming a member of professional organizations such as the Healthcare Financial Management Association. Professional organizations allow access to information related to earning certifications, attending healthcare management conferences, and connecting with industry professionals.
Reach out to professors
While still enrolled in school, students should consider their professors as a resource for accessing employment opportunities in healthcare financial management. Such people can help plug you into the right organizations, serve as mentors with whom you can speak, offer excellent career counseling, and become lifelong friends. More importantly, they can be a source of recommendation letters to advance in graduate school or employment.
Speak with a career counseling center
At any stage of embarking on a career in healthcare financial management, students and mid-career professionals should use the services of the local career center. Usually installed within the community or at an academic institution, the career counselor has a lot of information on ways to enter the field and provides job leads. These counselors are found in a career counseling center that prepares job-seekers for employment, whether it involves a job search or preparing for an interview and drafting a resume, among other services the career center provides.
The field of healthcare financial management makes it possible for someone with a head for business and a passion for healthcare to work in several occupations. While the sector is demanding, it presents opportunities for individuals to make lateral and upward moves in the industry. In preparation for interviewing for the role, applicants should consider freshening up their resume by adding and emphasizing relevant working and educational experiences.
Applicants should thoroughly prepare for the interview. One person handles most interviews for employment; however, because these jobs are higher-tiered positions, job seekers should prepare to be interviewed by a committee. To get comfortable speaking before others, consider practicing before friends or family.
Another suggestion for pulling off a winning interview is to do your research. No, you do not have to know the organization’s entire history. However, basic knowledge of the organization’s mission and the people it serves can go a long way in landing the job.
Finally, to prepare for your healthcare financial management interview, consider driving by, even visiting, the building to become familiar with the area. The worst thing is to find oneself looking for a building or office and arriving at the interview rushed or harried. By finding the interview site, you can spend the extra time you have while waiting for your interview preparing yourself or simply relaxing before the storm.