Richard L. Clarke, DHA, FHFMA

The importance of a hospital's mission cannot be overstated: Providing safe, high-quality care that benefits the community.

Yet truly providing benefit to the community goes beyond that definition. True community benefit requires reaching out to a community to understand its unique healthcare needs and fulfilling those needs even when a traditional business analysis would find that the return is not worth the expenditure.

Providing community benefit requires passion and dedication. It also requires skilled and knowledgeable people, effective processes, and technology applied to enable those processes. And that requires money.

If the mission of health care is community benefit, the mission of healthcare financial managers is making sure the resources are available to provide that benefit. Hospitals need to achieve a level of financial performance that earns them access to capital sufficient to fund their mission. Yet how do hospitals know what financial resources truly are necessary for mission?

One way is to establish a budget for community benefit. Such a budget would cover the funds necessary for activities such as:

Provision of charity care. These services should be based on a clear charity care policy derived from community needs and input, with easy-to-understand, written eligibility criteria.

Reduction of government burden. Many tax-exempt hospitals provide services that the government would otherwise have to provide, particularly high-tech, high-intensity services, emergency care, chronic care, long-term care, and unprofitable services.

Provision of essential healthcare services. A not-for-profit hospital often is the sole provider of healthcare services that are essential to a community, such as emergency departments and outpatient clinics serving low-income patients.

Provision of unprofitable services. These are services that respond to a community need, but lose money due to high costs combined with low volume or inadequate payment. A possible example is a burn center.

Public education. Such programs include public health education, wellness programs, and the sponsorship of educational activities.

Service of other unmet human needs. These needs may not involve health care per se, but might be services that no other entity in the area provides, such as Meals on Wheels.

This issue of hfm magazine highlights the challenge of cost management, particularly supply and labor costs. Hospitals will always need to manage rising costs, as will any business. What makes hospitals unique, however, is why cost management is so important. For hospitals, managing costs helps foster the financial performance necessary to provide resources for community benefit. And some community-benefit activities may help control costs by helping patients get preventive care and navigate the healthcare system more efficiently and effectively.

Establishing a budget for community benefit provides a context for a hospital's efforts toward operational efficiency. A budget for community benefit also provides a focus for organizational leaders, helping them systematically ensure that resources are available to fulfill their mission. That is the business of caring, and the business of HFMA.

Note: Adapted from Richard L. Clarke, "A Board's Eye View of Mission and Margin," The Governance Institute's E-Briefing, January 2007.

Publication Date: Sunday, April 01, 2007

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