Chamberlain College of Nursing: NR-533- Financial Management in HC Org

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Chamberlain College of Nursing: NR-533- Financial Management in HC Org

Long-term Financing
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Chamberlain College of Nursing: NR-533- Financial Management in HC Org
Long-term Financing (graded)
As we begin this weeks lesson it is important for the nurse leader to have an understanding of how financial risk relates to the long-term financing for a healthcare organization.
Last week provided a brief introduction to pro formas and their role to assist in the budgeting process. Understanding aspects of long-term financing in healthcare can assist nurse leaders in the financial management of their responsible budget and the overall organization budget.
After reading this weeks article by Niemand discuss the benefits of developing a business plan to secure long-term financing in a healthcare organization.
Long-Term Financing in Healthcare
As we begin this weeks lesson it is important for the nurse leader to have an understanding of how financial risk relates to the long-term financing for a healthcare organization. Last week provided a brief introduction to pro formas and their role to assist in the budgeting process. Understanding aspects of long-term financing in healthcare can assist nurse leaders in the financial management of their responsible budget and the overall organization budget.
For a healthcare organization to thrive and be competitive maintenance of equipment and facilities must be considered as part of the budget process. In addition new equipment will need to be purchased and expanded facilities may also be part of the short- or long-term plan for a healthcare organization to ensure their future financial viability. With these required current and future requirements the long-term financing for the healthcare organization must be considered and a plan should be in place to ensure that the needed resources are available to pay for needed expenditures. Nurse leaders should be involved in the decision making for specific long-term financing.
Long-term financing is a source of money available to the organization that can be used for longer than 1 year (Finkler Jones & Kovner 2013). The major sources of long-term debt include: mortgages leases bonds and long-term notes. Sources of equity financing for healthcare organizations include philanthropy grants stocks and retained earnings. Philanthropy refers to gifts or donations provided to the organization (Finkler Jones & Kovner 2013). Gifts may range from small to large amounts. In some cases philanthropic departments can secure millions of needed funding dollars for an organization.
Historically government grants were a financing option for healthcare organizations. However many healthcare organizations do not consider this a viable financing option. In 2009 the American Recovery and Reinvestment Act provided some funding to healthcare organizations to assist with the needed health-information expansion (Finkler Jones & Kovner 2013).
Some healthcare organizations also employ a specific grant writer or a grant-writing department to focus on securing grant funding from a variety of sources. The organization and the grant department may target certain funding opportunities or sources for a specific expansion project a new service line a research study or to assist with creative nurse recruitment and retention efforts. This is not considered a stable and secure funding source by the organization.
Another option for long-term financing of healthcare organizations is the issuance of corporate stocks. The issuance of corporate stocks is generally available to for-profit organizations rather than nonprofit organizations due to the financial risk. When company stock is issued a benefit to the stock owners is that they can receive dividends or a distribution of profits. Many for-profit organizations have a mixture of stocks and debt as some of the payments for financing can become tax deductible which lowers the payment of taxes to the government (Finkler Jones & Kovner 2013).
Retained earnings are another source of financing for healthcare organizations and are a critical factor for the long-term survival of a healthcare organization. In retained earnings the profit a healthcare organization makes each year is paid to the owners in a dividend or retained in the company (Finkler Jones & Kovner 2013). The money retained can be used to finance the organization where it is deemed necessary.
Financial Risk
As with any business there is a risk that certain pledged resources may not be available as projected. For example an organization is pledged a certain amount of money which is factored into the future organization resources only to discover there may not be the full amount available. In order to secure the promised funds organizations have now hired their own lawyers to have legal documents signed by the individual(s) who will have oversight over these funds to ensure that the promised funds are paid to the healthcare organization. This legal agreement will ensure that the healthcare organization receives the funding for the set amount and over the set period to help secure the long-term financing of the organization and avoid future financial risk of the organization. For example one persons estate indicated a certain healthcare organization would receive $5 million. However the organization was to receive $1 million per year for 5 years. These dollars may be designated for a certain department for research or scholarships or the general organizational budget. This type of funding is extremely important to a healthcare organization and in order to ensure the total funds will be received the needed legal documents must be signed.
Many organizations also have annual fundraising asking their employees to donate to the organization. Generally these donations can be withdrawn directly from the employees paycheck which can make the process easier for the employee who is donating and also ensure that the organization receives the pledged funds which reduces the financial risk of not receiving the pledged dollars.
Summary
This week we discussed aspects of long-term financing in healthcare and the nurse leaders role. Next week we will discuss business plans which are helpful to plan for future projects and review for current projects.
References
Finkler S. Jones C. & Kovner C. (2013). Financial management for nurse managers and executives. (4th ed.). St. Louis MO. Saunders.
Chapter 20: Long-Term Financial Resources
Required Articles:
Niemand T. (2013). Do all business plans provide a recipe for success? Finweek 5052.
Wong-Hammond L. & Damon L. (2013). Financing strategic plans for not-for-profits. Healthcare Financial Management: Journal of the Healthcare Financial Management Association 67(7) 7076.
Finkler S. Jones C. & Kovner C. (2013). Financial management for nurse managers and executives. (4th ed.). St. Louis MO. Saunders.
Page or paragraph numbers must be included with quotes per APA. See APA re how to format references and in-text citations i.e. capitalization issues and use of the ampersand versus the word (and).
Including at least one in-text citation and matching reference.
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