1. Al H 116/Rad T 216 Financial Aspects of Hospital Management

2. Function of a Budget Allocates funds for specific uses Helps prevent unnecessary spending Provides a measure of effectiveness of services Helps set goals Helps assure adherence to the facility’s mission Forces development of alternative plans Helps analyze percentage of effort and return Assess day to day operations Forces analysis of fund allocation Evaluate services on a per cost basis Evaluate organizational goals

3. Operational Vital Signs Admissions Average length of stay Patient days Average daily census Overall outpatient services Overall staffing based on patient activity

4. Elements of a Hospital Budget Direct expenses –Operating budget Salaries Benefits Drugs Supplies Minor equipment Misc expenses –Advertising/marketing

5. –Leases/rentals –Discretionary expenses –Debt/discounts

6. Indirect expenses –Building depreciation –Equipment depreciation –Utilities –Maintenance –Service contracts –Purchased services

7. Revenue –Operating income –Investments Funds –Gifts –Grants –Philanthropy

8. Relationship between Operating Costs and Patient Charges Managed Care demands anticipated costs be accurately assessed. These estimates form the basis for contract negotiations with insures to determine reimbursement rates. Once negotiated these costs are fixed and the hospital must stay within budget or loss money.

9. Health Care Insurance How pays the Bill? –Government 54.3% - Medicare and Medicaid 34.1 % third party payors

10. National Health Systems Only the US and South Africa don’t have national health systems. All other industrialized nations do. A major perceived advantage is lower health care costs relative to GNP

11. Managed Health Care Organizations HMO –The purest form Payor and provider are the same (Kaiser) –Today Typically, the payor contracts with physician groups

12. HMOs control costs Monitor –Inpatient/outpatient services –Doctor visits –Use of specialists –Diagnostic testing

13. Cost Controls Hospital days Results reporting Effectiveness of treatment Number of repeated tests Appropriateness of tests Paying only for services provided

14. PPO Preferred Provider Organization –Groups of providers who work together to provide services

15. Capitation Basically, prepayment for services

16. % of GNPCost per capita 1992 Cost per capita 2002 198019922002 Canada7%9.0%9.7%19492792 German y 8.6%8.7%10.7%17752808 Japan6.8%6.9%8.0%13762009 US9.1%13.6%15.2%30864887

17. Availability of Medical Technologies CanadaUnited States Open-Heart Surgery 1.233.26 Cardiac Catheterization 1.505.06 Organ Transplantation 1.081.31 Radiation Therapy 0.543.97 Lithotripsy 0.160.94 Magnetic Resonance Imaging 0.463.69

18. Health Status Indicators CanadaUnited States Infant Mortality Rate (per 1,000 live births, 1985)7.910.5 Maternal Mortality Rate (per 100,000 live births, 1984)3.28.0 Life Expectancy at Birth (men, 1985)71.971.2 Life Expectancy at Birth (women, 1985)79.078.2

19. Milestones: Health Care in the United States 1973 Health Maintenance Organization (HMO) Act encourages development of prepaid group plans to restrain providers and centralize health care delivery. 1982 to control Medicare costs the government introduces a fee schedule based on Diagnostic Related Groups (DRGs) and beneficiaries were encouraged to use Preferred Provider Organizations. 1992 President Bush proposed a tax credit and health insurance voucher program. 1993 President Clinton’s Health Security Plan which would ensure health coverage for all Americans and control costs through managed competition is defeated.

20. Milestones: Health Care in the United States 1935Social Security Act (does not include health insurance) 1939, 1943, Attempts to introduce a national health insurance late 1940s plan were defeated by the Congress Early 1960sPresident Kennedy’s attempts were unsuccessful 1964 Medicare and Medicaid programs pass