Hospitals are rendered as the most important organizations in the health care sector. Despite the fact that any organization can operate on a non-for-profit basis, common features can be observed regarding hospitals. In order to be profitable in current financially challenging and highly competitive environment, every hospital should search for best ways of delivering the best service to its patients. The given essay discusses the overall planning process of hospital management along with its key components, determines common issue and possible solutions which may be helpful for management of various organizations within and outside the health care system. Due to uniqueness of hospital facility it is also important to discuss the time value in decision-making process in order to understand the most significant issues that every hospital is faced with.
Hospitals play a major role in aiding care for human health and lives. Therefore, in order to render a qualified service and eliminate chances of any harm to one’s health, there is need for hospitals to employ the best qualified professionals. Thus, organization of decision making is a paramount issue that should be discussed by the management of any hospital. Proper decision making process allows administration of a hospital to organize daily operations within a hospital and prepare the basis for future strategic planning of hospital performance including the cost of services offered.
In order to evaluate the future pricing and service strategy of a hospital, the administration has to evaluate the most important issues that evolve in the course hospital performance. These include: staff recruitment and retention, tax-sheltered annuity plan compliance, use of internal resources, form 990 requirements and use of in-house pharmacies and providers (Alonzo, n.d.). These criteria help to establish a common picture of hospital performance and create the basis for future pricing and service decisions.
The administration should pay considerable attention to staff recruitment and retention which has become even more challenging in the times of a global economic recession. Due to the fact that most hospitals are non-profit organizations invested by the government, the level of compensation of the staff, particularly the nurses, is not high. Therefore, hospital administration should design attractive for job applicants programs in order to employ the required number of professionals, maintain a qualified service and retain its current staff. Thus, the initiatives to recruit new nurses may include offering additional bonuses, collaboration with clinical and internship medical schools and hiring new graduate nurses at the end of their internships. Hospital administration may also enhance professional skills of its employees by giving seminars and workshops. In order to strengthen the nurses’ desire to stay at their positions, the administration should maintain positive working atmosphere within the hospital. Social climate is the key factor that forces an employee to hold on the job or search for other position with better social settings. Negative social atmosphere may affect a patient along with the credibility of the hospital at large. Thus, it is necessary for the hospital to be aware of the new approaches to social infrastructure within the organization, create better conditions by giving such bonuses as care during pregnancy and benefits for large families, single mothers, and elderly people along with people with disabilities.
Tax-sheltered annuity plan compliance is crucially important for the hospital administration since all the latest updates can be easily tracked if requested. This allows the administration to ensure that it performs in compliance with the new plan design, administration and requirements for tax-sheltered annuity retirement plan. Furthermore, it the approach allows the hospital to be ranked in list of eligible employers and derive benefits from this position (Kaplan, 2011)
Use of internal resources can be considered as one of the key elements of future organization strategy. In order to gain profit and be fully independent, the hospital administration can use its internal resources as a major force to fill the treasury of the organization. Employees may be encouraged to open in-house pharmacies, engage in disease management programs, health facilities or programs and other activities. This will serve as one of major loyalty bonuses, which will retrain the employees at their positions and strengthen social atmosphere.
Additional disclosure requirements have been established for executive compensation including mandatory reporting expenses for housing and club membership fees among others.
According to Wolper (2004), the planning process is a set of actions and decisions taken by management, which favors development of specific strategies designed to help an organization achieve its goals. The purpose of the planning process is to provide innovations and changes in the organization. Strategic planning process encounters four main types of management techniques. These are: distribution of resources, adaptation to external environment, internal coordination and organizational strategic vision.
Resource allocation involves allocation of organizational resources, such as funds, scare managerial talent and technological expertise. Adaptation to the environment implies taking into account the strategies aimed at improving the company adaptation to environmental conditions. . Strategic planning of a successful hospital, hence, would encounter creation of new opportunities through improved productivity, working with the government and the society as a whole and other organizations from external environment. Internal coordination involves coordination of strategic activities to show the strengths and weaknesses of the hospital in order to achieve an effective integration of daily operations. Ensuring of effective internal operations is an integral part of the hospital administrative activity. Organizational strategic vision includes implementation of systematic development of the managers though the performance process and creating an organization that can learn from its own past strategic decisions. The ability to learn from experience enables an organization to properly adjust its strategic planning and to increase professionalism of its management in the field of strategic management (Wolper, 2004).
In this regard, the first major planning decision will be establishment of organizational goals. The main goal is to define the mission of an organization. The goals are established to implement the mission. The value of the mission is then formally expressed and effectively represented to the employees of the organization. The mission of the organization details the status of the business and provides the direction and guidance to define the objectives and strategies at different organizational levels. It should include explanation of what business activities the company is engaged with, definition of the company external environment, which determines the working principles of the company and its culture. The culture of the hospital should resemble the type of the existing working environment (Wolper, 2004).
The hospital administration should as well determine the factors of external environment. Environmental analysis is the process by which developers of the strategic plan control the external factors with the respect to the organization in order to determine the opportunities and threats for the company. This analysis gives an organization time for forecasting the available opportunities, to plan for emergencies, to develop the system for early warning of potential threats and to establish the strategies that can turn those threats into profitable opportunities. Thus, in its endeavors, the hospital administration should answer three specific questions. Where is the organization at the moment? Where, according to top management, the organization must be in the future? What should the administration do to move the organization from the current position to the position it wants to be it in the future?
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Financial plan encounters such components as forecast of balance sheet, forecast of profit/loss reports, forecast of financial budgets and forecast of the main financial indicators along with reporting the results of financial planning (Francis & De Souza, 2000).
Forecast of the balance sheet and earnings report are referred to as long-term financial plans; these two items are of a strategic importance to a company. The main goal of financial planning is reflection of the real data on the expected financial performance of the organization. It allows foreseeing the future income, which is a great importance for the investor and understand the actual state of affairs of the debt payment by the borrower. In order to create a capital budget, a hospital should organize its investment projects, evaluate and compare other investment projects by assessing the current net cost, as well as the other methods of analysis so as to choose the most efficient project.
Financial plan includes profit and loss statement, plan-balance sheet and cash flow statement. Profit and loss statement reflects the amount of income earned for a certain period of time. Plan-balance sheet reflects the financial condition of the company at the end of the billing cycle that allows controlling the growth of assets and finances within a certain period. Cash flow statement describes the movement of cash and demand balance of the organization in dynamics.
Financial indicators are used to characterize financial position of the company. They are profitability, return of capital and financial stability of the company among others.
Effectiveness of involved investments in the project is evaluated with time-to-benefit, net profit and income term of the organization along with the rate of return of credit funds. Time-to-benefit indicates the timeline for which the invested funds are paid off along with possible risks. Net profit reflects profitability of the new or planned services of goods. Income term of the organization and rate of return of credit funds are the major criteria in evaluating the effectiveness of investments (Francis & De Souza, 2000).
The specific forecasting horizon is another way of establishing effective goals. It is necessary to precisely determine the desired implementations of the organization. However, an organization should establish the time when the result is to be be achieved. Objectives are usually set on a long or short period. Long-term objective is the forecasting horizon established for about a five year period. Short-term objective is mostly a part of the plans of the organization, which should be completed within a year. Medium-term objectives have a forecasting horizon from one to five years (Cortada, Gordon, & Lenihan, 2012).
Long-term objectives usually have a broad outline and must be formulated by the organization first. Consequently, medium- and short-term objectives are established in order to achieve long-term goals. The closer forecasting horizon of the target is, the narrower is its outline. For example, the given organization is planning to improve the overall performance by 25% over five years. According to this, the hospital administration will set medium-term objectives of improving the performance at 10% in two years. It will also set short-term objectives in specific areas, such as staff development, more efficient use of available capacities, improving of management, negotiations with the union etc. This group of targets should provide long-term objectives with which it is directly connected, along with other objectives of the hospital. In order to conclude a contract with the union for a year, hospital administration should include the corresponding bonus, if, for example, any employee performance increases by 10% over the year. This strategy, regarded to as a short-term objective ensures a long-term objective of increasing productivity as well as the objectives relating to human resources.
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Mission statement of the hospital may include the following statements. First, the hospital administration maintains a positive work environment that promotes self-esteem, personal development and success of its employees. Second, highly responsive marketing attracts and maintains consumers with flexible approaches that reflect people’s expectations and wishes. Third, the administration follows its employees at all levels as they are to take effective decisions in response to the rapidly changing conditions. Next element of the mission statement is promotion and reward of the employees based on their performance and personal contribution to the results. Fifth is a constant gain of trust and respect of the patients, shareholder and employees. Sixth is the winning reputation of a hospital as a good neighbor in local communities that caters to the in-house pharmacies.
Insurance payment, government grants and loans serve as the sources to finance the hospital, ensuring payment of hospital and ambulatory services. Government grants can be used on construction or purchase of new equipment. Loans will increase the liability of the hospital for the expenditure of borrowed resources. However, the price for the services will also increase.
Financial calculations used by insurance companies, when providing services to hospitals, are based on the actual cost or payment for the assembly services. In the first case, each visit to the hospital is kept in a record, including treatment in a hospital, rehabilitation center and health-resort treatment with a further counting of the cost of full course of treatment according to the hospital price list and invoices. A pitfall of this method is the increasing amount of overhead costs. The number of personnel engaged in performance, the cost of transport and services of accompanying character increase with the growing number of the patients (Lane, Longstreth, & Nixon, 2001).
In order to avoid these pitfalls, it is relevant to use the method of payment for assembly services. The personnel must perform and render a number of regulatory actions, services, manipulations, without which the treatment will be ineffective upon the occurrence of a disease. The knowledge of the range of the number and cost of these actions may help the hospital administration to establish the average cost of the disease treatment and pay not individual services, but groups of services. The approach enables standard treatment schedule of the patient depending on the disease and, therefore, makes calculation of the average treatment cost more accurate.
In order to develop and establish an effective policy for the hospital administration it is necessary to understand the mission of the hospital, its future strategy and evaluate possible risks that can affect profitability of the organization.
Thus, it is necessary to evaluate the future pricing and service strategy of a hospital. Hospital administration usually pays attention to the most important issues that evolve within the performance process, such as staff recruitment and retention, tax-sheltered annuity plan compliance, use of internal resources, new form 990 requirements and use of in-house pharmacies and providers. These criteria enable to see the common picture of a medical facility performance and create the basis for future pricing and service decisions.
Strategic planning process includes four main types of management: distribution of resources, adaptation to external environment, internal coordination and organizational strategic vision.
It is also necessary to determine organizational goals of the hospital and the factors of its external environment. Thus, the hospital administration should answer three specific questions regarding its endeavors. Where is the organization at the moment? Where, according to the top management, the organization must be in the future? What should the administration do to move the organization from the current position to the position it wants to be it in the future?
Financial plan is the major force and tool of determining the future strategies of the hospital. Forecast of balance sheet, forecast of profit/loss reports, forecast of financial budgets and forecast of the main financial indicators along with recording the results of financial plan are the main criteria of this tool.
Specific forecasting horizon is necessary to precisely determine the desired implementations of the organization and establish the timeframes of achievement the desired result. Objectives are usually set on a long or short period. Long-term objective is the forecasting horizon established for about a five year period. Short-term objective is mostly a part of the plans of an organization, which should be completed within a year. Medium-term objectives have a forecasting horizon from one to five years.
Insurance payment, government grants and loans serve as the sources to finance the hospital, ensuring payment of hospital and ambulatory services. Government grants can be used on construction or purchase of new equipment. Loans will increase e liability of the hospital for the expenditure of borrowed resources. The method of payment for assembly services will help to avoid the increasing amount of overhead costs.