I have to respond to the following statements of my classmates. Please provide 75-100 words to each statement with a reference to each if applicable.
posted by Jasmine W. at Mar 18, 2015, 1:57 PM
Last updated Mar 18, 2015, 1:57 PM
An organization or person should consider how much money currently had before beginning to divvy out what to spend on. Knowing how much is available to spend would stop a person from getting in unwanted debt. Money can be appropriated to the desired operations like new services, paying bills, or building a savings. But simply knowing how much finding is available is not all that goes on when planning a budget for a strategic plan. The way a healthcare organization finds the amount fund available it to view the financial statements. These financial statements let the organization assess how they spend, the opportunities of spending, limitations of spending, and savings.
Without knowing how much is there to use, how a healthcare organization would decide on which services, equipment, renovations, trainings, or amount of pay increase to use. For example, if a clinic wants to expand its repertoire of services then they need to consider what actually is needed. Once that is figured out the clinic must know how much is available to spend so that a proper budget can be created. This is when financial strategies can be employed. The types of strategies can be level of debt, equity financing or leveraged buyout (Hunger and Wheelen, 2007). Once that is figured out then the budget is completed and put in the finalized portion of the clinic’s strategic plan.
posted by CLEO WILLIAMS at Mar 18, 2015, 3:49 PM
Last updated Mar 18, 2015, 3:49 PM
According to Hofstrand (2013, p.1) “Profitability is the primary goal of all business ventures.” Revenue is critical for the sustainability of a company. Therefore, the most important budget consideration in strategic planning is profitability. Profitability or net income is calculated by subtracting a company’s total expenses from the company’s total income. Such calculation can be found on a firm’s income statement. A firm that is highly profitable has the potential to reward investors with a significant ROI. For this reason, knowing a firm’s financial strength aids health administrators with making decision regarding the budget to project profitability for a specific period or over a span of years. Health administrators must always seek to find ways to improve the operations and profitability of an entity. Strategic plans established can be analyzed when developing a draft or partial budget. By doing so, executives can analyze the impact on profits thereby assessing small or increment changes before the strategic plan is implemented to eliminate costly risks. Managers must know how much debt a company owes and the company’s resources to create strategic goals that are within the budget to increase the possibility of reaching set goals. Therefore, “measuring current and past profitability and projecting future profitability “is critical (Hofstrand, 2013, p.1).
posted by ALESHA FLOYD at Mar 19, 2015, 9:10 AM
Last updated Mar 19, 2015, 9:10 AM
I think the most important budget consideration in strategic planning is trying to budget long-term with really conducting research and cost analysis. With strategic planning there are usually many goals to work towards and this can actually aid in cost analysis, because any costs that show up in the analysis that are not aiding in reaching the goals and are able to be cut, should be. This can help eliminate necessary funds being spent on something that may not actually be true focus of the facility. Another benefit that is a part of cost analysis is that by the facility showing that it is done regularly with budgeting, can give the stakeholders a sense of confidence that their best interests are being looked after by the facility not wasting money on areas that are not beneficial to the mission, vision, goals, or values they are a part of. “Multicriteria decision analysis and cost analysis offers a scientifically sound evaluation framework for health care management, where stakeholder interests are of crucial concern and complex criteria that cannot easily be reduced to simple monetary expressions, can be assessed in resource limited settings” (Landova, 2014, p. A406).
One of the main points to strategic planning is to provide a road map for the facility to move forward following leading their role in the future. If a budget is planned for long term, it will help show areas that may need additional funding and those that are no longer necessary and can be let go.
posted by JANELL ALSTON at Mar 18, 2015, 8:18 PM
Last updated Mar 18, 2015, 8:18 PM
Some strategic financial issues are becoming a low cost provider, underlying current reimbursement trends by CMS and insurers are driving the need to reduce cost in specific service lines, for an episode of care, and across a care continuum. Strategic planning is driven by an organization’s mission and objectives. This process is inherently iterative as alternative strategic paths are considered and compared. Because of the financial-centric nature of current strategic choices, effective scenario financial modeling is an important part of the process. Capital structure choices have always been important. However, recent fluctuations in availability and cost of capital have highlighted the importance of strategic and tactical financial decisions. In the current environment, the impact that capital decisions have on embedded fixed costs must be carefully considered since they can either impair or preserve strategic flexibility. Existing financial models used by healthcare providers are not well suited to the new strategic alternatives being considered by many institutions. Nonetheless, there is significant predisposition to force these models into use for current strategic planning efforts. Consideration should be given to starting over with a clean sheet of paper for financial modeling of strategies that do not fall into traditional structures or involve new payment methodologies. It is more important than ever that board members and executive leadership have a well-developed understanding of the financial issues associated with strategic decisions. In particular, financial risk must be well understood in the context of today’s environment. The extreme pressure to reduce healthcare expenditures while expanding access is likely to increase the average risk profile and could pose existential threats for some providers.
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