Financial Management in Healthcare

A collection of key terms and definitions related to Financial Management in Healthcare to aid in exam preparation.

Financial Management

The process of providing oversight of the health care organization’s day-to-day financial operations and planning long-range financial direction.

Net Income

The reasonable income generated by the organization that is a major objective of financial management.

For-Profit Organizations

Healthcare entities that serve private interests, maximize profits, pay taxes, and also must serve the community.

Not-For-Profit Organizations

Healthcare entities that serve public interests, are tax-exempt, and focus on community benefit and optimal patient care.

Operating Budget

An annual budget forecast of cash inflows, outflows, and net lending or borrowing needs.

Capital Budget

A financial plan for long-term assets whose useful life is more than a year.

Activity-Based Costing

A method for determining product costs based on cost drivers, which provide more accuracy than traditional methods.

Accounts Receivable (AR)

Current assets consisting of revenues recognized but not yet collected as cash, critical for cash flow management.

Cost Allocation

Determining the total cost of producing a healthcare service by assigning costs from non-revenue-producing departments into revenue-producing departments.

Just-in-Time (JIT) Inventory

A method where products are delivered right when needed, minimizing holding costs and waste.

Ethics in Healthcare

The principles governing what individuals believe to be right or wrong, distinct from legal obligations, with implications for patient care.

Medical Malpractice

Negligence or carelessness by a healthcare professional that can result in legal action if certain criteria are met.

Advance Directives

Legal documents that allow individuals to outline their preferences for medical treatment in case they are unable to communicate.

Charity Care

Care provided by healthcare organizations knowing the patient cannot pay, which is part of community benefit obligations.

Cost Control

Strategies employed to manage and reduce expenses in healthcare organizations while maintaining care quality.

Third-Party Payers

Entities such as insurance companies that pay healthcare providers for services rendered to patients.

Health Care Rationing

The allocation of scarce healthcare resources, often a topic of ethical discussion in relation to fairness and equality.

Cash Flow Management\n\n

The process of monitoring, analyzing, and optimizing the net amount of cash receipts minus cash expenses in healthcare organizations.\n\n

Financial Ratios\n\n

Metrics used to assess the financial health of an organization, helping in decision-making and performance evaluation.\n\n

Revenue Cycle Management\n\n

The process of managing the administrative and clinical functions associated with claims processing, payment, and revenue generation.\n\n

Patient Billing\n\n

The process of invoicing patients and collecting payments for services rendered in a healthcare facility.\n\n

Health Insurance Portability and Accountability Act (HIPAA)\n\n

A U.S. law designed to provide privacy standards to protect patients' medical records and other health information.\n\n

Utilization Review\n\n

A process that evaluates the necessity, appropriateness, and efficiency of healthcare services, procedures, and facilities.\n\n