Finance Department in Healthcare Organizations: Role & Structure

Instructor: Orie Achonwa
The finance department does more than keep records of payments made to and by a healthcare organization. This lesson examines the role of a healthcare organization's finance department, it's structure, and the functions carried out by the team.

What Does the Finance Department of a Healthcare Organization Do?

You would think that collecting payments and paying bills is all that a finance department does, but in reality, the responsibilities of this department are no cup of tea. Since the Affordable Care Act took effect, finance departments in healthcare organizations have experienced a lot of changes.

Today, most finance departments continue to fulfill general bookkeeping duties, such as fulfilling purchase orders for equipment or supplies, finalizing sales of merchandise and services, maintaining receipts from purchases for the business, and managing payments made by or to the healthcare organization. The finance department is also responsible for negotiating contracts with service providers and contractors, running payroll, and maintaining cash reserves for unexpected or planned expenses.

Most finance departments maintain these records electronically with databases or specialized accounting software. There are still a few departments that use ledgers to record this information. The latter is usually seen in smaller healthcare organizations.

Communicating Financial Information to the Senior Executive Team

Oftentimes, individuals in leadership positions in the finance department will met with the senior executive team of a healthcare organization to review the books. For example, John Smith, the chief financial officer of Community Healthcare, may have an annual standing meeting with the chief executive officer and/or the c-suite in the fourth quarter to provide an overview of the earnings to date and the current financial statement and balance sheets. The chief executive officer and the c-suite will use this information for strategic planning, including budgeting, evaluating the performance of various sectors of the business, making investment decisions, and determining if there is enough working capital to approve projects for the upcoming year.

Challenges Finance Departments in Healthcare Organizations May Face

Timely and accurate reimbursement for services rendered continues to be one of the most pressing problems for managing financial records. Also, electronic medical records and Medicare's coding system for billing may present some challenges to the efficient management of finances for some healthcare organizations. Many finance departments have been taxed with updating plans and premiums to incorporate the changes brought about by the Affordable Care Act and new healthcare legislation. These types of changes are inevitable and unpredictable, so the finance department of a healthcare organization must stay abreast of current health policies to ensure that the company is in compliance with the latest health law and operating efficiently at all times.

The Structure of the Finance Department in a Healthcare Organization

The structure and size of the finance department varies by the type and size of the healthcare organization. However, for many healthcare organizations the general model is that the accounting functions are managed by the comptroller and treasurer under the direction of the chief financial officer. The specific responsibilities of the finance department staff members are detailed below:

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