Introduction to Healthcare Finance Assignment

Introduction to Healthcare Finance Assignment

Introduction to Healthcare Finance Assignment

4. Decision making. The financial manager makes choices among available alternatives. Decision making actually occurs parallel to planning, organizing, and controlling. All types of decision making rely on information, and the primary tasks are analysis and evaluation. Thus, the purpose is to make informed choices.

THE ORGANIZATION’S STRUCTURE

The structure of an organization is an important factor in management.

Organization Types

Organizations fall into one of two basic types: profit oriented or nonprofit oriented. In the United States, these designations follow the taxable status of the organizations. The profit- oriented entities, also known as proprietary organizations, are responsible for paying in- come taxes. Proprietary subgroups include individuals, partnerships, and corporations. The nonprofit organizations do not pay income taxes.

There are two subgroups of nonprofit entities: voluntary and government. Voluntary nonprofits have sought tax-exempt status. In general, voluntary nonprofits are associated with churches, private schools, or foundations. Government nonprofits, on the other hand, do not pay taxes because they are government entities. Government nonprofits can be (1) federal, (2) state, (3) county, (4) city, (5) a combination of city and county, (6) a hospital taxing district (with the power to raise revenues through taxes), or (7) a state university (perhaps with a teaching hospital affiliated with the university). The organization’s type may affect its structure. Exhibit 1-1 summarizes the subgroups of both proprietary and nonprofit organizations.

Organization Charts

In a small organization, top management will be able to see what is happening. Extensive measures and indicators are not necessary because management can view overall operations. But in a large organization, top management must use the management control system to understand what is going on. In other words, to view operations, management must use measures and indicators because he or she cannot get a firsthand overall picture of the total organization.

Introduction to Healthcare Finance Assignment

Exhibit 1–1 Types of Organizations

Profit Oriented—Proprietary Individual Partnership Corporation Other

Nonprofit—Voluntary Church Associated Private School Associated Foundation Associated Other

Nonprofit—Government Federal State County City City-County Hospital District State University Other

manager can stay in close contact with all aspects of the operation. Otherwise, a formal system is required. In the context of health care, therefore, a one-physician practice (Figure 1-2) could use an informal method, but a hospital system (Figure 1-3) must use a formal method of management control.

The structure of the organization will affect its financial management. Organization charts are often used to illustrate the structure of the organization. Each box on an organization chart represents a particular area of management responsibility. The lines between the boxes are lines of authority.

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In the health system organization chart illustrated in Figure 1-3, the president/chief executive officer oversees seven senior vice presidents. Each senior vice president has vice presidents reporting to him or her in each particular area of responsibility designated on the chart. These vice presidents, in turn, have an array of other managers reporting to them at varying levels of managerial responsibility.

The organization chart also shows the degree of decentralization within the organization. Decentralization indicates the delegating of authority for decision making. The chart thus illustrates the pattern of how managers are allowed—or required—to make key decisions within the particular organization.

The purpose of an organization chart