EXHIBIT 13.1 Functions of the Finance System (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.1 Functions of the Finance System (continued) (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.1 Functions of the Finance System (continued) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.2 Availability of External Price Information, by Type of Transaction and Level of Aggregate © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.3 Integrating Strategic and Operational Goal Setting © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.4 Major Budgets and Their Relation to Strategic Goals © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.5 Annual Goals and Budget Cycle © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.6 Major Steps in Developing Operations Budgets (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.6 Major Steps in Developing Operations Budgets (continued) (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.6 Major Steps in Developing Operations Budgets (continued) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.7 Tests and Adjustments in Financial Planning © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.8 Pricing Structures for Healthcare Contracts (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.8 Pricing Structures for Healthcare Contracts (continued) (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.9 Implications of Alternative Funding Sources for an Ambulatory Care Project © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.10 Organization of the Finance System © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.11 Operational Measures of Finance and Accounting (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

EXHIBIT 13.11 Operational Measures of Finance and Accounting (continued) (continues on next slide) © 2016 Foundation of the American College of Healthcare Executives

© 2016 Foundation of the American College of Healthcare Executives EXHIBIT 13.11 Operational Measures of Finance and Accounting (continued) © 2016 Foundation of the American College of Healthcare Executives

Questions for Discussion 1. Why are performance measures so complicated? Concepts like cost per case or percent postoperative infections seem simple enough. Why must we use Financial Accounting Standards Board rules and National Healthcare Safety Network definitions, and maintain internal and external audits? What would happen if we didn’t do these things? Would an HCO ever design its own measures that were different from the national ones? © 2016 Foundation of the American College of Healthcare Executives

Questions for Discussion 2. Suppose you are on a PIT to evaluate an HCO’s goal-setting processes. What criteria should the processes meet? How could the criteria be measured? How hard would it be to benchmark them? Beyond the measures, what else would you do to identify opportunities for improvement in the process? © 2016 Foundation of the American College of Healthcare Executives

Questions for Discussion 3. A hard-working associate says to a senior manager, “Our unit just got the bill for human resources. It was huge! We had to pay for the mandatory training for our new supervisor, plus the annual HIPAA, harassment, and disaster management training. Why do we have to pay for this? How do we know we’re getting a fair price?” How does the senior manager respond? © 2016 Foundation of the American College of Healthcare Executives

Questions for Discussion 4. How much should the audit functions cost? The system described is expensive; many organizations complain that it is excessive. What exactly are the benefits the organization gains from those expenditures, and how are they measured? How will the organization judge whether the investment is wise? © 2016 Foundation of the American College of Healthcare Executives

Questions for Discussion 5. How does the organization evaluate its capital and liquid asset management program? What questions would you ask, and what numbers would you ask for, if you were exploring this question with the chief financial officer and her financial management team? © 2016 Foundation of the American College of Healthcare Executives

Critical Issues in Financial Management Supporting an evidence-based culture: How accounting Identifies and reports costs Supports the annual goal-setting process Provides analysis and forecasts for performance improvement teams (PITs) © 2016 Foundation of the American College of Healthcare Executives

Critical Issues in Financial Management Providing adequate financial resources: How finance Identifies long-term financial needs Manages debt and liquid assets to meet needs Negotiates contracts with health insurers to maximize revenue Develops ownership structures that facilitate strategic partnerships © 2016 Foundation of the American College of Healthcare Executives

Critical Issues in Financial Management Promoting integrity: How internal and external auditing Ensure accuracy of numbers, even those involving complex calculations Support a culture where honesty is expected Protect the organization’s assets © 2016 Foundation of the American College of Healthcare Executives