Within Healthcare organisations, the primary role of the financial department revolves around mitigating financial risk and managing cost so that the financial goals of the organisation would be met. Although financial goals may vary between public and private hospitals, the reality is that leakage and wastage are areas that trouble healthcare institutions and limit the acquisition of finances to be re-invested or applied elsewhere to more prioritised areas or departments. This is where financial reporting in healthcare assists – providing evidence-based data to fix or apply strategies to reduce leakage and wastage within the healthcare system. We are outlining some areas within healthcare organisations where financial reporting can help in identifying wastage and how it can be reduced.
1. Proper Stock Management
In most countries, one procurement, storage and distribution unit is usually used to supply healthcare organisations with pharmaceuticals and pharmaceutical items. In most cases, these figures are produced in bulk and via a demand response. Financial Reporting can assist based on the data entered into the system at hospitals. For example, entering stock should consist of cost per unit for items at both a retail and selling price, this helps monthly review reports of cost intensive pharmaceuticals for treatment of such areas as Oncology or drugs for treating sexually transmitted diseases. These pharmaceuticals or treatment items should be procured based on consumption patterns and trends. Additionally, triggered re-ordering based on minimum thresholds help with procuring based on need. Cellma has alerts for stock levels, expiry dates and minimum thresholds to be triggered to inform the pharmacist of items that are likely be out of stock. This process can be manual or automatic, in that it can alert the pharmacist who can then approve the request OR an automatic request can be sent to the Central Store for a minimum threshold amount determined and authorised by the management team.
2. Revenue Leakage
Financial Statistical analysis becomes available with proper reporting systems. With the availability of this data, revenue leakage as it pertains to uncompensated care can be tightened. A continuous issue has been the inability to collect earned revenue. In some countries such as Trinidad and Tobago, public health is free to nationals. However, non-nationals are required to pay for healthcare. This is not the case however, and revenue leaked for non-nationals are in the millions per year at the Regional Health Authorities, representing a huge financial burden on the local Health sector and reducing the quality of care available to nationals. Financial Reporting can provide the top departments or specialties where these leakages occur and set up automated billing processes that bill the patient based on care episodes, prescriptions, examinations, lab/ imaging requests etc. Payment can be generated upon discharge status. Regarding, insurance claims and retroactive payments, proper costing per episode of care allows for accurate billing and claims to be generated.
3. Identifying and Reducing Overhead Costs
Firstly, in order to reduce overhead costs that is; the cost of processes, administration or materials that do not contribute directly to patient care, all costs must be defined. This again refers to proper stock management and the cost attached to each item AND processes. By assessing consumption, the cost of consumption of materials and attaching cost to processes, it helps to quantify overhead costs. For example, digitising processes leads to less use of paper processes, by calculating the cost of paper usage
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over a year, the management can assess cost reductions and redistribute revenue elsewhere based on these cost savings. Additionally, implementing a HMIS system means less administrative cost, provides cost transparency and increases cost efficiency across the board leading to the focus being placed on patient quality healthcare.
All in all, financial reporting and the benefits attached to it are only available through proper reporting structures which allow for the overview and miniscule detailed running of the healthcare organisation. The effective running of a healthcare institution is heavily based on making a profit to cover the quality of care for patients whilst constantly improving the standard of care, improving financial management through reporting guarantees this. Stay tuned for Part 3 of our Reporting series next week Monday!
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