Summary

HPI4007 - Summary for the exam

0 purchase

Course
HPI4007 Financial Management of Healthcare

Institution
Maastricht University (UM)

This summary contains all relevant topics that you need for the exam. It is a summary of the cases, finanical ratios, and the IT productivity paradox. For each topic, I gave some example exam questions. At the end, I also included a key term list.

[Show more]

Preview 4 out of 50 pages

View example

Uploaded on July 13, 2023
Number of pages 50
Written in 2022/2023
Type Summary

capital investment
budgeting
variance analysis
npv
irr
discounting
budget impact analysis
master budget elements
hospital based hta
minihta
budget impact analysis
tradition
funding capital investments

Institution
Maastricht University (UM)
Education
Healthcare Innovation Management and Policy
Course
HPI4007 Financial Management of Healthcare

lottesteenvoorden

Member since 5 year 36 documents sold

$7.89

Add to cart

Save

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

HPI4007 – Summary
Financial Management of Healthcare
Healthcare Policy Innovation and Management

Case 1 - Planning and Budgeting...........................................................................................2
Budget................................................................................................................................ 2
Master Budget Elements.....................................................................................................2
Budgeting............................................................................................................................ 4
Variance Analysis............................................................................................................... 8
Case 2 - Renovating or Contracting Out...............................................................................10
Capital Investment............................................................................................................ 10
Capital Investment Analysis..............................................................................................10
Funding Capital Investments.............................................................................................15
Case 3 - Shall I do an Economic Evaluation?.......................................................................17
Traditional HTA................................................................................................................. 17
Hospital-based HTA.......................................................................................................... 18
Budget impact analyses....................................................................................................21
Case 4 - Understanding Financial Statements......................................................................23
Financial Statement.......................................................................................................... 23
Balance Sheet................................................................................................................... 24
Income Statement............................................................................................................. 25
Cash Flow Statement........................................................................................................26
Determining the financial health of an organization...........................................................27
Accounting Principles........................................................................................................28
Stakeholders with an interest in the financial statement....................................................31
Financial Ratios.................................................................................................................... 32
Financial Statement Analysis............................................................................................32
Ratio Analysis................................................................................................................... 32
Type of financial ratios......................................................................................................33
IT Productivity Paradox........................................................................................................ 35
Key terms list........................................................................................................................ 37

, Case 1 - Planning and Budgeting

Budget

Budget = a management instrument used to relate planned resource consumption to a specific
period of time
● Planning document that identifies expected costs for certain activities & revenues (income) to
cover these costs, needed for an organization to achieve its goals and objectives (before an
event has occurred).
● Control document that allows an organization to monitor the actual revenues
generated and its use of resources against what was planned → Variance is
expected
● It can include a broad range of resources - not just money

Master budget / internal budget = Management tool; Plan of how organization resources should be
used in a given period of time, mostly 1 year. Which costs that are expected to be incurred by a set of
activities, and which income that is expected to cover these costs.

Importance of the budget:
● Gives information on expected income/expenses
● Forewarns of potential shortfalls in the resources
● Enable managers to identify the resources that will be needed to achieve target levels of
activity or desired outcomes
● Forces managers to set priorities and make commitments
● To aid planning of annual operations
● To coordinate and control the activities of the various parts of the organization and to ensure
that the parts are in harmony with each other
● To communicate plans to the various responsibility center managers
● To motivate managers to strive to achieve the organizational goals
● Allows managers to analyze efficiency
 To evaluate the performance of managers

Functions of the budget:
 Distribution function: to allocate the organization resources in an efficient manner
 Communicative function: It provides information for further analysis and management
decision-making
 Authorization functions: It helps top managers to set rules and to impose their vision and
objectives on the entire organization
 Management function: It helps managers to evaluate the need of resources and to control
their utilization within the organization

Master Budget Elements

Although the term “The budget” is often used as if there were only one
budget, most health care organizations develop four interrelated
budgets: statistics budget, operating budget, cash budget, capital
budget.

2

,✦ Statistics budget: identifies the amount of
services that will be provided, usually listed by payor
type.
● Contains projections of expected production
quantities
● Basis other components of internal budget

✦ Operating budget: the expected revenues and
the related resource flows.
● Guide day-to-day operations and overall
financial performance. To set goals, allocate
resources, monitor performance.
● Sales projection, production costs,
marketing, salaries, R&D costs, overhead
costs, other operating expenses.
● Whether an item is classified as
operating or nonoperating is subject
to interpretation by each organization. Although this matter has received considerable
attention over the years by both the accounting and health care financial
management professions, there remains a lack of standardization among health care
organizations in classifying specific line items.
● Bottom line in the operating budget: net income for the period:
○ Expense operating budget: a forecast of the operating expenses that will be incurred
during the current budget period.
○ Revenue operating budget: a forecast of the operating revenues that will be earned
during the current budget period.

✦ Cash budget: represents the organization’s cash inflows and outflows.
● Cash sales, customer payments, loan proceeds, operating expenses, debt payments, other
cash transactions
● Forecast and plan cash flows to ensure availability of sufficient cash to cover expenses (helps
to manage liquidity).
● In addition to showing cash inflows and outflows, the cash budget also details when it is
necessary to borrow/take a loan to cover cash shortages and when excess funds are
available to invest.
● The bottom line in the cash budget is the amount of cash available at the end of the period:
“excess cash” or “need to borrow”

✦ Capital budget: the plan for acquiring long-term assets (equipment).
● It summarizes the anticipated major purchases for the year; replacements or new assets.
● Capital budgets in outpatient facilities may be fairly small, but those for large systems with
inpatient facilities may contain millions of dollars’ worth of items.

Example exam questions:
● Indicate and explain 2 possible changes in the organisations master budget in 2023 in case
the innovation is purchased in 2022 and put into use as of 1st Jan 2023.
● Indicate and explain changes in the cash budget and operational budget in 2023 in case the
innovation is purchased in 2022 and put into use as of 1st Jan 2023.

3

, Budgeting

Budgeting = developing the budget; the plan to spend the resources
● Traditional budgeting
● Alternative ways of budgeting

Phases in internal budgeting process:
● Phase 1: Preparation
● Phase 2: Review & adaptation
● Phase 3: Application
● Phase 4: Evaluation & control
→ budgeting process doesn’t stop once the budget is developed, but when it’s developed
it’s going to be applied in practice and then it’s evaluated. That input will have
management information for next year.

Level of decentralization in the development process:
● Top-down budgeting process: solely at a top management level; impose on the lower
organization levels.
○ + integrate their visions and long-term strategic objectives
○ - less acceptance at lower organization levels, dissatisfaction & poor performance.
● Bottom-up budgeting process: each department develops own budget, then are combined
○ + high level of acceptance by the employees
○ - little space for the top vision and objectives
● Mixed form of budgeting process: The top management develops guidelines based on
which the departments develop their own budgets

The process of control:

Traditional budgeting = is a method that depends on the same year’s spending to do the budgeting
for the current year. The only benefit of going for this sort of budgeting is simplicity.

There are different types of budgeting approaches. Budgeting can be based on:
● Type of forecast: Historical data; No historical data (e.g. delphi); Mixed forms
● Budgeting period: Annual; Longer period; Combination (rolling); Special purpose
● Level of detail: Line-item; Program; Performance
● Model of budgeting: Incremental-decremental; Negotiative; Evaluative; Zero-based
● Level of flexibility: static; flexible/activity

4

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller lottesteenvoorden. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $7.89. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

73514 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 15 years now

Start selling

Summary

HPI4007 - Summary for the exam

Document information

Subjects

Written for

Seller

Reviews received

Content preview