Financial Management in Healthcare

The process of financial management assists in making decisions and involves the use of concepts, tools, and theories to make the most efficient monetary decisions. Therefore the process should consider planning, acquisition, and utilization of funds with the aim of improving the efficiency of an institution. In healthcare organizations, financial management ensures the health needs of people are met within a limited capital envelope. Since the resources are scarce, it is important to set some priorities and make sound choices regarding the allocation of funding to projects. Health care organizations need to use data analytics as well as monitoring and evaluation tools to improve their performance.

The health care organizations should consider fundamental economic principles that help in priority setting, and one is an opportunity cost. As a result, this policy helps in understanding ways of investing resources to gain benefits in places where resources have been lost. On the other hand, the other principle is the margin that allows shifting the supply mix. When the budget increases, the financial manager can find the best ways to spend the additional resources (Mitton, 2014). However, when the budget decreases, he or she can take funds from areas that produce the least benefits, and when the budget is constant, some resources can be relocated to increase benefits to the population. Therefore, the marginal analysis helps in determining the relative advantages and costs of various options and outline tradeoffs that help decision makers evaluate proposals for change based on the marginal benefits and costs of particular options (Swayneet et al., 2012)

Budgets are the operating plans for an organization for the fiscal period. In monetary terms, they express the decisions of boards and staffs regarding the way the team will accomplish their purpose. The employees and boards decide projects that will be completed in particular fiscal years since resources are allocated to ensure the activities are delivered. According to Saunders and Cornett (2014), budget charts provide the direction for resource allocation as well as identification of possible financial problems that are likely to arise in the fiscal year. Once adopted, the budget should be a management tool to the staff that gauges the operational performance (Saunders & Cornett, 2014). It should also establish a criterion that signals the control when changes are needed or when a course of action should be altered or refined. Since unforeseen conditions can arise, the budget should be designed to respond to unexpected changes…

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