Financial Management Processes in Health

This article discusses financial management processes in the health sector, including revenue and expenditures, activity-based funding, and case mix. It also explores how hospitals are funded based on the number and mix of patients they treat, and how allocation of funds is targeted to services that provide responsive and effective care.

Running head; Financial management processes in health 1
FINANCIAL MANAGEMENT PROCESSES IN HEALTH
Student’s name
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Financial management processes in health
There is a significant difference between revenue and expenditure in the health system.
Revenue in the health system involves the various forms of income and finances obtained by
hospitals and other players in the health sector so as to maintain sustainable progress and
welfare within the health system (Titman, et al (2017)). The sources of revenue within the
health system include insurance billing for patient’s care services, federal, state and private
grant funding which mainly fund medical services and research and any other financial input
that flows into the health sector. Expenditures on the other hand involves financial output and
transactions that revolve around the health system. This involves expenses incurred by
hospitals and other players within the sector to ensure the well running of activities within
hospital setting and the health system. This expenditures may utilize the revenue collected and
include labor costs, liability costs and costs used for research and tests involving the health
sector to bring advancement. The number of patients and the types of services given are some
of the factors that affect hospital revenues and expenses.
Activity based funding refers to a way in which hospitals are funded based on the
number and mix of patients that they treat. Since patient care and treatment requires funding,
the more the number of patients a particular hospital receives, the more the funding it receives
(Zietlow, et al (2018)). Since patients are also not the same, some conditions are complicated
to treat than others hence activity based funding also takes this into account. The NSW health
system sets a platform where allocation of health funding is based on priority concerns. It
comprises of a number of state-wide or specialist health services. According to Finkler, et al
(2016), allocation of funds is targeted to services that provide responsive and effective care and
has been aimed at services such as NSW ambulance services, improvement health

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infrastructure, NSW health pathology and eHealth. Funding allocations are therefore done with
regards to necessity as well as how much finances important health projects require to be put
into place and to be effective enough.
Case mix is used to describe any system that compiles information about patients into
groups based on the type and mix of the patients treated. According to Cashin, et al (2017), it
groups patients statistically. It is used in health facilities and hospitals to enhance easier
treatment of common complications and allocation of resources in a more effective way.
Diagnosis related group classifies patients according to similar complication so as to ensure
effective maintenance and treatment of the patients. The Australian DRG system of
classification has proven to be effective since it is easier to retrieve data relating to a certain
case of a patient for purposes of follow up and treatment. For example, patients diagnosed
with similar complications are placed within the same group and are allocated similar amount
of resources as well as equal access to facilities aimed at improving their conditions. Allocation
of resources also varies with the different types of groups since not all cases are the same and
some conditions require a greater amount of resource than others.

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REFERENCES
Cashin, C., Bloom, D., Sparkes, S., Barroy, H., Kutzin, J., O'Dougherty, S., & World Health
Organization. (2017). Aligning public financial management and health financing:
sustaining progress toward universal health coverage. World Health Organization.
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management
for public, health, and not-for-profit organizations. CQ Press.
Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and
applications. Pearson.
Zietlow, J., Hankin, J. A., Seidner, A., & O'Brien, T. (2018). Financial management for
nonprofit organizations: Policies and practices. John Wiley & Sons.