The Comparative Summary of Financial Environments

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TheComparative Summary of Financial Environments


Various factors determine the success and efficiency of firms. Someof these factors include political, social and economic status underthe environment that these firms are operating. The financialstructure of a business is considered as one of the most importantareas to the success of any business. Some of the areas discussedbelow revolve around policies formulated by institutions andfinancial management. This paper examines the financial structures ofdifferent health care environments. It also brings out a comparisonbetween three different types of financial healthcare environmentsthat are nonprofit, for profit and the government.

TheComparative Summary

Firstly, profit entities in the hospital industry include privatehospitals, group patient care, and outpatient surgical. The RegionalMedical Center of San Jose is an example of the profit orientedhealth entities. Secondly, not for profit organizations include thecharitable community hospitals, educational hospitals, and theAmerican Red Cross. The government healthcare organizations areold-timers hospitals, resident health centers and health and humanservices. The Washington hospital is an example of the governmenthealth care organization.

Physicians who operate in offices are considered as good examples offor-profit operators in the health care industry. Such people operatewith a sole objective of maximizing their profits. They work justlike other employee to earn a living through serving other people inthe health care context. Some of these physicians and firms chargehigh costs for purposes of earning more income and the purchase ofequipment. However, most of the private hospitals allow the use ofcommercial insurances, Medicare, and self-pay patients (Berger,2008).

Diverse administrations and services differ in cost and charges thatset by most social insurance suppliers and health care providers.This is mostly motivated by some of the exploration done and presumedthat revenue driven hospitals have gone to the degree of giving moreproductive administrations and care For instance, the open-heartsurgery and brain surgery (Song et al., 2010). On the other hand, itengages in less provision of unprofitable services such as substanceabuse care and treatment or even psychiatric care emergency services.It is worth noting that these healthcare providers always havenegotiated rates resulting to contractual allowance with theinsurance companies on the rates to be charged as well as thegovernment in the case where they have had an agreement in the use ofMedicare programs.

Scalesse (2013) confirmed that for the nonprofit entity, even thoughit is referred to as not for profit organization, they charge toobtain revenue for their survival. These institutions do not getexternal funding to pay their staff, bills and purchase equipment.However, a number of charges charged as the cost is little for theclients to feel the impact. These charitable community hospitalsparticipate in the Medicare programs as well as other insurancecompanies.

In government financial environment, all services are run by thestate from the entry of the data to healthcare delivery. This is astructure in a way that it handles the needs of the employees of thegovernment through the provision of quality services. Veteran’shospital, for example, allows that government employees together withveterans of the past and present wars can get service from thishospital.

Policiesin the Financial Environment

All of the three entities have different policies surrounding theirfinancial environment. For-profit entities, policies are differentfrom nonprofit and the government in that for the private hospitalsor physicians, they must follow certain specific agency policieswhich are regulated. They can also have additional policies andregulations that are specific and distinctive to their institution`soffices. In this kind of own specific operational arrangement, theycreate their billing department that facilitates insurance billingoperations as well as debt management. Some prefer the co-pay beforethe patient is attended to and it is only after they receive paymentfrom the insurance companies that they bill the patient for thebalance. A for-profit organization is more responsive to thefinancial incentive rather than service provision.

However nonprofit hospitals can go through a similar change but notas fast as in the case of a for-profit organization. On the otherhand, nonprofit hospitals must follow stated regulatory policies, forexample, the affordable act. This act, for example, compels thehospitals to have a kind of written financial assistance policy thatclearly outlines availability, eligibility, and application of thehealth assistance. The role of nonprofit hospitals is to promote andpublicize this kind of policy especially in the area of theiroperations. In addition to this, they also need to have collectionand billing policy to smoothen their operations. These policies mustalways be easy and readily available to ensure a successful adoption.Another important aspect of the nonprofit organization is thatprovision of emergency services is a must even though the patient maynot have the ability to pay. All of this cannot apply to for-profithospitals.

The government can come up with their policies about their patient ofconcern. A good example is the department of defense military and theDepartment of VA health care system whereby they operate incomparable but in concurrence with each other. Their policies ensureeasy and simple transition especially for the service members fromactive duty to the non-active duty.


All these entities have different styles of financial management. Forinstance, the utilization of ratios is the most common financialadministration tool in the not-for-profit and revenue drivenorganizations. According to Berger (2008), the use of these ratiosenables the organization to compare themselves financially with otherorganizations of the same category. This helps an entity indetermining whether to lower or raise charges. Furthermore, anobservation of the tangible and intangible assets is necessary. It isimportant for both nonprofit and for-profit hospitals to have a goodamount of cash on hand and cash flow and to ensure that there aresmooth operations, investment in long-term investment which isprofitable is necessary.

In the administration of the short-term financial management,feasibility is important in ensuring that money earned is notmisappropriated (Song et al., 2010). Different costs that arecritical to the institution are promotion charges and cost requiredin support of the group outreach programs. The success of thefor-profit and nonprofit organization they must participate incommunity and charity programs. On the government financialmanagement, the success lies with the financial team of thegovernment. Maintenance of the correct level of liquidity isnecessary. The government financial management depends on somesituation in that they depend on the tax dollars and the cash iscoming in. Sudbury et al. (2011) noted that there is a challenge onhow money is spent on various health organizations.

EffectiveFinancial Management in the Healthcare

Effective financial management in health care industry is a challengeand often difficult to some organizations. The main cause of thissetback is the use of third payment system (Ward &amp Finkler,2006). It is recommended that healthcare providers across of healthinstitutions should pay for their services directly once they areearned.


In conclusion, financial management proves to be one of the mostimportant features for the development of any firm. The healthcareindustry`s financial environment is not any different since thesefirms operate under a strict and sensitive environment whereembezzlement or misappropriation may risk the wellbeing of thepatients. Therefore, more strict and applicable rules should beinstituted to ensure that funds and all the other financialcomponents are well safeguarded through policy formulation andmanagement.


Berger, S. (2008). Fundamentals of Health Care Financial Management.A Practical Guide to Fiscal Issues and Activities. John Wiley &ampSons

Scalesse, M. (2013). The great healthcare debate: For-profit vs.not-for-profit. Nursing Management (Springhouse), 38-43, 44 (11).DOI: 10.1097/01.NUMA.0000432220.71510.72

Song, P.H., Cleverly, J.O., &ampCleverey, W. (2010).Essentials ofHealth Care Finance. Jones &amp Bartlett Learning

Sudbury, MA: Jones and Bartlett. (2011).Modules/Military and Veterans health care

Ward, D.M., &amp Finkler, S.A. (2006).Accounting fundamentals forhealth care management. Jones &amp Bartlett Learning