Effective Financial Management in Healthcare

This assignment provides a comprehensive overview of effective financial management in healthcare. It discusses the importance of managing financial resources in healthcare, preparing budgets, analyzing expenditures, and controlling costs to ensure revenue is earned. The assignment also highlights the need for integration of funds for health and social care, public-private partnerships, and secured loans in healthcare finance.

Managing finance resources
in health and social care

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Discuss principles of costing and control systems...........................................................1
1.2 Information required for managing financial resources...................................................1
1.3 Regulatory requirements for managing financial resources.............................................2
1.4 Discuss systems for managing financial resources in HSC..............................................3
TASK 2............................................................................................................................................4
2.1 Illustrate sources of income in HSC.................................................................................4
2.2 Factors influencing availability of financial resources.....................................................4
2.3 Various types of budget expenses in HSC.......................................................................5
2.4 Decisions about expenditures in HSC..............................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Managing financial resources in the healthcare sector is quite essential. The enclosed
report deals with BUPA healthcare which is UK's largest care home committed to provide
quality services to patients. The report deals with managing financial resources so that efficiency
can be maintained in the best possible way. Various sources of income that can be used by
healthcare is also discussed in this report. The importance of preparing budgets is also discussed
so that costs may be estimated with much ease and revenue may be earned quite effectively.
TASK 1
1.1 Discuss principles of costing and control systems
The basic principles of costing are job costing, actual cost ascertainment and
transparency. BUPA (British United Provident Association) healthcare is required to manage
costs in effective way so that it can provide quality services to patients such as medical test and
many more. Actual cost ascertainment is required so that planned costs are effectively matched
with that of actual costs and as such, control is observed quite easily in the healthcare. Job
costing is another principle of costing which focuses on reducing inefficient jobs so that
healthcare can ensure cost effectiveness and this will result into increase in efficiency of other
jobs performed (Drummond and et.al, 2015). Transparency will help to control costs on
installation of various diagnose related equipments in BUPA healthcare.
Data accuracy is required so that patients record may be maintained effectively which is
the basic business control system. It has data accuracy as major principle as patients record
should be maintained with due care so that in event of any emergency, they may be treated.
Another principle of control system is management and control in the healthcare. It is required
that management should be effective so that patients can be treated with much care and this will
help care takers to provide better services to them and will also help to avoid duplication of work
in the healthcare. These above principles should be followed by BUPA care home to provide
quality services and controlling overall costs as well.
1.2 Information required for managing financial resources
1. Accurate accounting information-
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Managing financial resources is not an easy task. As such, it requires that transparent and
accurate accounting information is listed and been provided to management so that it may be
able to analyse costs of various equipments and machines installed in the healthcare. It will help
BUPA healthcare to maintain resources in that way so that it may be able to control additional
expenditures and thus, financial resources may be maintained quite effectively with the help of
accounting information to take viable decisions.
2. Risk management-
Risks related information is utmost required in the healthcare so that effective measures
may be taken quite effectively. Risk management helps to forecast uncertainty in the healthcare
and as such, management takes measures and steps so that risks can be reduced up to high extent
and business can avoid risks up to maximum possible manner (Mason, Goddard, Weatherly and
Chalkley, 2015). This will help to identify risks and taking viable steps and thus, financial
resources can be managed with much ease.
3. Audit reports-
Audit reports is another way to manage financial resources. As, BUPA healthcare runs on
large scale, audit is mandatory to be carried out. Thus, auditor expresses his views on the
financial statements and give advices to healthcare so that it may implement those opinions in
daily operations. This helps care home to have clarity about how costs are to be controlled in
effective way. Thus, financial resources are managed with much ease as expenditures are
monitored by auditors.
1.3 Regulatory requirements for managing financial resources
1. CQC (Care Quality Commission)-
CQC professional body requires that providers of services must meet financial
requirements and quality of healthcare is adequate for the patients so that they may be treated
quite effectively. As such, providers must have adequate financial resources to meet required
standards and provide services to patients. Moreover, BUPA healthcare should have insurance
and related arrangements so that in event of any liabilities and financial risks, resources can be
effectively managed (Krachler and Greer, 2015).
2. NHS Commissioning Board-
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NHS Commissioning Board regulates approval of budgets and allocations of it in the
healthcare. It helps in identifying and formulating financial strategies. It also defines financial
arrangements which consist of obtaining money for operations with much ease. Thus, it helps
BUPA to follow all these legal requirements to initiate proper services in the institution. The
board also assigns responsibilities and powers to CEO (Chief Executive Officer).
3. GAAP (Generally Accepted Accounting Principles)-
GAAP provides various legal requirements which are to be followed by organisation for
effective functioning (Torchia, Calabrò and Morner, 2015). It provides guidelines related to
financial statements such as financial position, income statement, cash flow statement. Thus,
BUPA has to follow above requirement of financial statements so that transparency can be
maintained and this can provide effective accounting information to creditors and investors for
taking decisions.
1.4 Discuss systems for managing financial resources in HSC
Various systems that may be used in managing financial resources are as follows-
1. Financial accounting system-
Financial accounting system is quite useful in managing financial resources with much
ease. This is important in BUPA healthcare as it operates on large scale. Financial reporting,
collection of payments i.e. accounts receivable, managing risks through proper management etc.
As such, BUPA uses all the above elements so that proper accounting system can be maintained
by recording daily business transactions in effectual manner.
2. Investment system-
Investment management system is quite important to protect interest of investors who
provide funds to organisation for meeting financial resources requirements. In simple words, it is
management of various securities for meeting investment criteria for mutual benefit to investors
on one side and organisation at another. BUPA healthcare is maintaining small investment
portfolio as risks are less in comparison to market. Moreover, it has launched treasury unit to
effectively manage various investments (Cotlear and et.al, 2015).
3. Funds related system-
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Short-term sources of finance is required by BUPA so that it may be able to meet
requirements in effective way. This is essential so that liquidity and solvency position of the
healthcare may be maintained with much ease. Furthermore, BUPA has taken certain crucial
financial ratios such as debt and equity, current, liquid and interest coverage ratios to kept at
adequate limits so that funds may be effectively managed and financial position may be
strengthened with much ease.
TASK 2
2.1 Illustrate sources of income in HSC
The major sources of income for BUPA healthcare is revenue earned from health and
services provisions from goods supplied. In addition to this, it also receives rental income which
is attained by it on the property. Moreover, BUPA holds enough of investments and receives
dividends. Other external source of income for BUPA can be secured loan on which collateral is
offered by it which may be any asset or related security (What is a Secured Loan?, 2018). The
secured loans are less risky than unsecured loans as if healthcare defaults in payment of the loan
taken, bank has the right to take collateral security under its possession. Lower interest rate and
lower risk is the main essence of this type of loan. Thus, it is another good source of income for
BUPA to carry out activities.
Internal sources of income can also be taken by healthcare such as retained earnings is
the effective source of income. Some part of profits is not provided to shareholders' and is
retained in the business for future use. Moreover, sale of fixed assets is another internal source of
income. The sale of asset such as machinery or land can be source of income. Thus, above
various sources of income be it external and internal are useful for BUPA to fulfil financial
resources needs and demands in effective way.
2.2 Factors influencing availability of financial resources
There are various factors be it internal or external which adversely influences BUPA
healthcare policies and affects financial resources as well. Among this, if government enacts
employment legislations, then financial resources are difficult to manage as staff costs tend to
increase. This results in maximisation in salaries of employees which have adverse impact on
financial resources of organisation (Connolly and et.al, 2015). If government regulates on
constant basis various laws such as health and safety legislations, clinical one, then healthcare is
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affected negatively. This increases expenditures to be incurred on such safety and health related
legislations and impacts on revenue as it costs tend to increase which provides complexity in
managing financial resources.
Moreover, if healthcare implements ineffective investment strategies, then it will be
severe trouble as profits will be impacted negatively and investors' money will go in waste. This
will impact profitability up to high extent and will evolve complexity in managing resources in
effective manner. Furthermore, credit risk also impacts financial resources as healthcare will not
have enough of cash to pay credit facilities and unable to extract source of income from the
financial instrument (Bradley and et.al, 2016).
2.3 Various types of budget expenses in HSC
The various types of budget expenditures that can be prepared by BUPA are as follows-
Sales Budget-
BUPA healthcare can easily prepare budget so that it can estimate overall beds in the
hospital wards will be filled up in the future time period. This will help management to estimate
how many care takers will be required so that patients may be provided with quality of services
in the institution. As such, predicting upon occupancy rate of beds, staff may be allocated tasks
so that quality services may be provided and no duplication of work may be made with much
ease.
Labour Budget-
BUPA needs to formulate direct labour budget so that it effectiveness may be achieved
by the healthcare quite easily. Medical staff is required to be deployed in the hospital and this is
done by estimating occupancy rate of beds. Thus, optimum utilisation of workers may be
accomplished.
Cash Flow Budget-
Cash requirement is important in BUPA so that operational activities may be done with
much ease. If any cash requirement is needed in the future, then management may assist in
meeting needs. Thus, if any deviations exist, then corrective actions will be taken by the
management so that daily activities may be run quite effectively (Pang and et.al, 2015).
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2.4 Decisions about expenditures in HSC
The timeline of budget can be prepared by BUPA and as such, several expenses related
decisions can be easily made. The management prepares budget by analysing goals and targets of
BUPA so that it may be achieved quite effectively. Budget expenditures are also incurred buy
analysing financial health of institution and as such, expenses are required to be incurred so that
goals can be effectively accomplished with much ease. Next decisions can be taken by assigning
responsibilities to various personnels so that they may be able to predict budget expenditures in
the most effectual way.
Furthermore, decisions can be taken by assessing whether funds are available in adequate
manner or not (Folland, Goodman and Stano, 2016). As such, decisions can be taken with much
ease. Annual budget can be prepared for meeting requirements of daily cash for operational
purpose so that business may be run quite effectively. Results can be measured with planned
output and if in the event of any deviations, corrective actions may be taken with much ease.
This is essential so that solvency position of healthcare may be strengthened easily.
CONCLUSION
Hereby it can be concluded that financial resources are required to be managed
effectively by the healthcare. This is quite important so that costs can be easily recognised and as
such, revenue can be earned with much ease. Moreover, preparation of budgets is also necessary
so that expenditures may be analysed and assessed so that revenue may be earned by controlling
costs.
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REFERENCES
Books and Journals
Bradley, E. H. and et.al, 2016. Variation in health outcomes: the role of spending on social
services, public health, and health care, 2000–09. Health Affairs. 35(5). pp.760-768.
Connolly, S and et.al, 2015. Health and social care costs of managing amyotrophic lateral
sclerosis (ALS): An Irish perspective. Amyotrophic Lateral Sclerosis and
Frontotemporal Degeneration. 16(1-2). pp.58-62.
Cotlear, D. and et.al, 2015. Overcoming social segregation in health care in Latin America. The
Lancet.385(9974). pp.1248-1259.
Drummond, M. F. and et.al, 2015. Methods for the economic evaluation of health care
programmes. Oxford university press.
Folland, S., Goodman, A. C. and Stano, M., 2016. The Economics of Health and Health Care:
Pearson International Edition. Routledge.
Krachler, N. and Greer, I., 2015. When does marketisation lead to privatisation? Profit-making
in English health services after the 2012 Health and Social Care Act. Social Science
& Medicine. 124. pp.215-223.
Mason, A., Goddard, M., Weatherly, H. and Chalkley, M., 2015. Integrating funds for health and
social care: an evidence review. Journal of health services research & policy.20(3).
pp.177-188.
Pang, Z. and et.al, 2015. Design of a terminal solution for integration of in-home health care
devices and services towards the Internet-of-Things. Enterprise Information Systems.
9(1). pp.86-116.
Torchia, M., Calabrò, A. and Morner, M., 2015. Public–private partnerships in the health care
sector: a systematic review of the literature. Public Management Review. 17(2).
pp.236-261.
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Online
What is a Secured Loan?, 2018 [Online] Available Through:
<https://www.debt.org/credit/loans/secured/>
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