Importance of Financial Management in Healthcare

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HEALTH FINANACIAL MANAGEMENT
Name of the Student:
Name of the University:
Author note:

1HEALTH FINANCIAL MANAGEMENT
Answer number 1:
A capital expenditure is defined as the major investments that is done by the health
care organization to maintain their business and also generate further profits in the form of
long-term assets. The healthcare organization have to make huge investment in buying any
health equipment’s but once the equipment is used, they seek huge profit, as they use the
similar equipment for assessing different patient’s (Connolly & Wren, 2016). On the other
hand, revenue expenditure refers to the short-term expenses that the healthcare organization
have to make and is generally classified under two different categories. The initial category is
expenditure for producing revenue, which includes the expense that the healthcare
organization have to make to fulfil the prevailing operational cost of the organization such as
tax deduction. The other category includes expenditure for preserving the revenue-producing
assets, which includes the cost for maintenance and repair of the asset. Hence, the factors that
influence the expense and revenue in the health system are total number of patients, source of
insurance, the services offered by the health system and the prevalence of practicing different
types of health services (Mossialos et al., 2016).
Answer number 2:
The total well-being expenditure of Australia is subsidized by the government, either
by Australian government or state and territory government. The funding distribution among
the non-government and government sector differs and primarily depend on the kind of
services and health goods that is being provide to the organization. The community hospitals
is subsidized by the Australian, territory and states government, although, they are
extensively managed and owned by the territory and state government. The government of
Australia provide huge amount of funds for the subsidised medication and medical services,
maintaining the balance with non-governmental sector. The flow of federal and state funding

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by the health care system of Australia is followed by a structure consisting of there different
components in a form of ring (Australian Institute of Health and Welfare, 2019). The outer
components of ring exhibit the funding sources, middle component of the ring exhibit the
comparative expenditure depending on different types of services and outer component of the
ring exhibit primary sector of funding and the services provide by the organization.
Source: (Australian Institute of Health and Welfare, 2019)
Answer number 3:
Casemix classification system offer the healthcare organization with a constant
procedure of patient classification type, their management and the related costs. Hence,
casemix classification primarily explains the mixture of different kinds of patients who are

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treated in the hospital or any other associated healthcare amenities and is therefore useful for
explaining the associating between the cost of treatment and the type of healthcare facility.
On the other hand, Australian DRG (Ar-DRG) system of classification is practiced to
categorize the patients admitted to the acute care setting in the hospital. The AR-DRG profile
of the hospital replicates the mixture of patients with critical care managed in the hospital.
The patient admitted to the hospital are provided with an admission code as
ICD-10-AM/ACHI/ACS. The admission code associated with the demographic data of the
patient is used for the AR-DRG classification system (National Casemix and Classification
Centre, 2019).

4HEALTH FINANCIAL MANAGEMENT
References
Australian Institute of Health and Welfare. (2019). Australia’s Health. Retrieved 26 August
2019, from https://www.aihw.gov.au/getmedia/f2ae1191-bbf2-47b6-a9d4-
1b2ca65553a1/ah16-2-1-how-does-australias-health-system-work.pdf.aspx
Connolly, S., & Wren, M. A. (2016). The 2011 proposal for universal health Insurance in
Ireland: potential implications for healthcare expenditure. Health Policy, 120(7), 790-
796.
Mossialos, E., Wenzl, M., Osborn, R., & Sarnak, D. (2016). 2015 international profiles of
health care systems. Canadian Agency for Drugs and Technologies in Health.
National Casemix and Classification Centre. (2019). About CaseMix. Retrieved 26 August
2019, from https://nccc.uow.edu.au/casemix/aboutcasemix/index.html