DB #7: Strategic Financial Planning and Managing RiskA major activity of the strategic financial planning process is an assessment of the organization’s external and internal environments. The external environment of most healthcare organizations is quite complex, and an environmental analysis must include surveying the international, national, regional, and local environments for changes that may occur in a variety of areas including the economy, regulation, technology, and health status of populations. Failing to thoroughly and correctly assess even one of these domains could lead to major problems for the organization.To prepare for this Discussion:Identify one example of an event that has changed the operations of your organization or an organization with which you are familiar. If you are not currently working in a healthcare organization (HCO), you may choose a case study from a reliable source from which to work.Review this week’s Reading and Learning Resources.Post a cohesive response to the following:Assess the current role of the strategic financial planning and analysis (SFP&A) as a key function is to provide accurate, timely financial analysis and advice to the leaders of the organization. What are the Value-Added Contributions that can be obtained from aligning the organization overall strategy to financial planning? Respond and continue the Discussion through Day 7: Expand on this Discussion by highlighting differences between your posting and your colleagues’ postings. Provide additional insights or alternative perspectives.The initial post must require a minimum of four (4) current quality references, two (2) of them from peer-reviewed articles from the UC online library. Including references in your replies to classmates is optional but recommended.Your initial answer must be 250-300 words, not counting the list of references.You must post at least two (2) participation replies to other classmates’ posts, and they need to be at least 100 words per post.Focus on presenting in your posts critical thinking ideas and synthesis and less on stating and describing.
Managing
Financial
Risk
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Chapter
12
Objectives
• Upon completion of this chapter, you will
be able to:
– Discuss the basics of risk management
– Explain the financial impact of safety
programs in the workplace
– Describe legislation related to job applicants
and employees
– Describe the use of insurance to transfer
financial risk
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2
Introduction
• Organizations face risks to do business
– Property damage or loss
– Injuries to workers, customers, or visitors
– Violations of employment-related laws
– Professional negligence
• Healthcare faces unique risks
– Medical malpractice
– Implied consent and confidentiality violations
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3
Introduction (cont’d.)
• Our litigious society
– Many civil legal actions (torts) for injury to
someone’s person, reputation, or property
– Large organizations have professional risk
managers, safety officers, and employment
law experts to reduce risks
– Insurance purchased to reduce financial
losses from torts
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4
The Framework of Risk
Management
• Risk management techniques and
procedures minimize risk of liability and
minimize the impact
• Addresses these questions:
– What can go wrong?
– How do we respond if something goes
wrong?
– How will we pay the financial losses from a
risk management issue?
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5
The Framework of Risk
Management (cont’d.)
• Identification of risk
– Review of incidents
– Information from professional organizations
– Information provided by insurers
• Evaluation of risk (by risk manager)
– Areas of exposure to risk outlined
– Potential severity of each risk is assessed
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6
The Framework of Risk
Management (cont’d.)
• Reduction and elimination of risk
– Use of best practice procedures
• Industry-specific, standardized processes
• Procedures adapted to organization
• Staff trained on the procedures
• Stringent controls established and monitored
• Transfer of risk
– Insurance is the most common method
– Coverage tailored to organization’s needs
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7
Maintaining a Safe Work
Environment
• Safety of physicians, staff, patients, and
visitors is critical part of risk management
• Sources of information and guidelines:
– Centers for Disease Control and
Prevention
• Standard Precautions for medical care
– Occupational Safety & Health
Administration
• Workplace safety requirements and guidelines
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8
Maintaining a Safe Work
Environment (cont’d.)
• Workers’ compensation
– State-mandated financial protection for
employees injured on the job
• Payments for treatment and rehabilitation
• Compensation for lost wages until employee is
cleared to return to work
– Employer pays premium based on:
• Number of employees and size of payroll
• Known risks of specific occupations
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9
Legal Issues in the Workplace
• Laws that protect employees
– Title VII, Civil Rights Act of 1964
• Equal Employment Opportunity Commission
• Protected classes: minorities, women, people over
40 years old, people with disabilities, people with
special religious beliefs
• Employers have restrictions on questions they can
ask of job applicants
• Law covers sexual discrimination and harassment
© 2013 Delmar/Cengage Learning. All Rights Reserved.
10
Legal Issues in the Workplace
(cont’d.)
– The Equal Pay Act of 1963
• Similar wages must be paid for similar work
– Age Discrimination in Employment Act
(1967)
• Workers over 40 years old are members of a
protected class
– Pregnancy Discrimination Act of 1978
(PDA)
• Pregnancy must be treated the same as any other
medical or personal leave
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11
Legal Issues in the Workplace
(cont’d.)
– Family and Medical Leave Act of 1993
• Expanded rights of PDA by forcing employers to
grant up to 12 weeks of unpaid family leave for the
birth or adoption of a child or for caring for a family
member with a serious health condition
– The American with Disabilities Act of 1990
• Employers cannot discriminate against anyone
who can perform the essential tasks of a position
• Employers must make reasonable accommodation
for employees with disabilities
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12
Financial Risk Transferred to
Others
• Financial risk exposure types that can be
transferred to insurers:
– Property
– General liability
– Automobile liability
– Crime losses
– Medical malpractice
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13
Summary
• Risk management processes safeguard
finances of healthcare organizations
– Risks identified and evaluated
– Procedures developed and implemented to
reduce or eliminate risks
– Insurance bought to transfer financial risks
• A growing body of legislation protects job
applications and employees
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14
Summary (cont’d.)
• Healthcare professionals and facilities face
risks that could be financially devastating
– Transfer of risk provides protection
• Risk management, workplace safety,
human resources, and quality
management are recognized professional
careers in healthcare
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15
Financial Management
of Health Information
Technology
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Chapter
13
Objectives
• Upon completion of this chapter, you will
be able to:
– Define health information technology
– Define a qualified electronic health record
– Describe the financial incentives for adopting
health information technology
– Identify the costs of adopting ICD-10
– Identify the five requirements for a qualified
electronic prescription (eRx) system
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2
Introduction
• Health information technology (HIT)
refers to the hardware and software used
to create, store, access, and exchange
health information
• Government laws and regulations affect
paper records and HIT
• Federal government provides financial
support for switching from paper to HIT
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3
Health Insurance Portability and
Accountability Act of 1996 (HIPAA)
• HIPAA has multiple requirements:
– Employee healthcare insurance is portable
– Patient privacy standards
– Consistent billing and coding formats
– Secure transmission of protected health
information (PHI)
– Use of national identifiers for providers,
insurers, employers, and individuals
© 2013 Delmar/Cengage Learning. All Rights Reserved.
4
Medicare Improvements for
Patients and Providers Act of 2008
• MIPPA established the Physician Quality
Reporting System
• MIPPA also contains an electronic
prescription (eRx) incentive program
– Physicians receive payments if their use of
electronic prescriptions exceeds a target
– By June 2010, only 13% of eligible providers
were participating
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5
Health Information Technology for
Economic and Clinical Health Act
• HITECH is part of the American Recovery
and Reinvestment Act of 2009
– HITECH offers financial incentives for using
electronic health records that meet standards
• Base incentive of $2,000,000 for hospitals
• Up to $44,000 per physician for use of a certified
electronic health record (EHR)
• Medicaid also offers incentives to physicians who
meet state guidelines on use of EHR
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6
Health Information Technology for
Economic and Clinical Health Act
(cont’d.)
• In 2015, Medicare payments will be
reduced for providers that do not use EHR
• Studies show that costs of implementing
EHR major barrier to adoption
– In 2008, only 4% of physicians had an EHR
system that met qualification standards
– Productivity did not increase significantly in
medical practices that adopted an EHR
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7
Health Information Technology for
Economic and Clinical Health Act
(cont’d.)
• 95% of hospitals indicate that they will try
to qualify as Meaningful Users of an EHR
– However, as of January 2011, only 2% of
hospitals surveyed could meet the standards
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8
Health Information Technology for
Economic and Clinical Health Act
(cont’d.)
• EHR adoption is a critical component for
improving quality of health care
– Main barrier to EHR adoption is not cost
– Many EHR systems are poorly designed and
are less user-friendly than paper records
– Well-designed, user-friendly systems save
time for clinicians and increased productivity
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9
Coding and ICD-10-CM
• Third parties that pay for medical services
need to know what was done and why
– What was done: procedure codes
– Why it was done: diagnosis codes
• Medicare requires use of Healthcare
Common Procedure Coding System
(HCPCS) by providers submitting claims
– CPT codes used for medical procedures
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10
Coding and ICD-10-CM (cont’d.)
• Coding diagnoses is complicated
• Most countries use the International
Classification of Diseases (ICD) system
– Maintained by the World Health Organization
– Now in its 10th edition with over five times the
CM (clinical modifications) codes as the 9th
– ICD-10-CM: no inpatient procedure codes
• ICD-10-Procedure Coding System being created
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11
Coding and ICD-10-CM (cont’d.)
• Implementation of ICD-10 will improve
health record keeping but will take time,
money, and much employee labor
• Organizations need to prepare for this:
– Add or upgrade health information technology
– Train employees
– Amend policies and procedures
– Acquire funds
© 2013 Delmar/Cengage Learning. All Rights Reserved.
12
Summary
• Federal laws created new requirements for
the entire healthcare industry
• Healthcare providers must ensure the
privacy and security of health records
• Incentives are available for adoption of
electronic health records and prescriptions
– Adoption has been slow
© 2013 Delmar/Cengage Learning. All Rights Reserved.
13
Summary (cont’d.)
• ICD-10-CM and ICD-10-PCS will improve
the ability to analyze healthcare trends
• Adopting health information technology is
difficult due to diverse interests of
providers, payers, and the government
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14

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