Healthcare organizations strive to manage working capital in such a way that they can reliably cover their short-term expenses while also getting the best possible benefits from their capital. In managing working capital, healthcare organizations face some common challenges, as well as other challenges that are particular to the institution. What do you think the main capital management challenges would be in a for-profit facility that has a constant stream of revenue? How do you think these challenges would differ from a military hospital that is given its funding at the beginning of the year?
ANSWER THE ABOVE DISCUSSION AND THEN REPLY TO MY CLASSMATE’S RESPONSE TO THE ABOVE QUESTION AND EXPLAIN WHY YOU AGREE? (A MINIMUM OF 125 WORDS EACH)
As already stated, capital management is a difficult but important task in the health care industry. For profit hospitals are just that, for profit, and this requires careful management of assets vs costs. Insurance companies pay for services on a regular set schedule and can be accounted for in planning purposes by considering volumes of different services and expected future volumes. The challenge is determining payer mix and ability to pay the remainder above what insurance companies cover. Even a for profit hospital must provide at least lifesaving stabilization prior to referring a patient and it is illegal to ask ability to pay prior to providing life saving measures. This added expense must be taken into consideration. We must remember it is not how much you have coming in but how much you have left over at the end of the day once the bills are paid. It is for this reason that budgeting becomes extremely important when determine potential assets for expansion and growth.
On the other hand, military hospitals know how much they must spend at the beginning of the budget year. These budgets that are received are typically enough to cover fixed costs but leave little if any room for expansion or growth unless specifically asked for at the beginning of the budget year. There is currently a trend of some military hospitals becoming state and ACS verified trauma centers. In doing so the emergency departments have to open their doors to the public. This is challenging because now you must figure this new civilian payer mix into the equation and their ability to pay for services rendered. Operating on a fixed budget with a non-controllable variable such as that is challenging.