May 18, 2005
For many hospitals and health systems, accessing the necessary funds to make improvements in medical equipment, technology, and facilities remains a top challenge. According to the new Financing the Future II report, the keys to survival and capital access lie in the rigorous, consistent application of corporate finance principles, a discipline that is not always second nature to resource-constrained hospitals navigating the ever-changing healthcare market.
The report, Seven Principles of Best Practice Financial Management, is the first in the new Financing the Future II series developed by HFMA in partnership with GE Commercial Finance Healthcare Financial Services and Kaufman, Hall & Associates, Inc. The report details key examples in financial planning and execution by leading healthcare organizations and corporations, based on the following seven guiding principles for best practice financial management:
- Through finance education, organizations achieve real unification around an integrated planning process.
- Rigorous calendar management guides the integrated planning process.
- Successful organizations start and end the planning process with a solid balance sheet.
- The "right" capital structure supports strategic financial goals, while optimizing flexibility and minimizing cost.
- Best practice capital management aligns an organization's long-range strategic, financial, and related operating plans.
- Consistent methodologies and templates facilitate evaluation of capital investment opportunities based on solid analysis, a level playing field, and consideration of project risk.
- Measurement and accountability ensure continued competitive financial performance.
These seven principles can and should serve as an effective road map with which to navigate the ever-challenging healthcare marketplace.
Transitioning to a best practice corporate finance-based model requires the education of the board of trustees and staff throughout the organization. Finance education provides the foundation that supports integrated strategic, financial, and capital planning; solid balance sheet and capital structure management; consistent and analysis-based capital allocation tied to the annual budgeting process; rigorous calendar management to guide the integrated planning and allocation processes; and measurement and accountability to ensure continued competitive financial performance.
About Financing the Future II
To be published over the next 18 months, Financing the Future II will include six reports for healthcare financial leaders, their staffs, and board members. Topics to be covered include key principles of better practice financial management (Report 1); capital structure management (Report 2); strategic financial planning, as well as capital planning and allocation (Report 3); joint ventures with physicians and other partners (Report 4); strategies for financially struggling hospitals (Report 5); and the outlook for capital access (Report 6).
SOURCE:
Financing the Future II: Seven Principles of Best Practice Financial Management
Additional Resources
- Financing the Future reports
- Financing the Future tools and resources
- HFMA's Internet Guide to Capacity Planning (Available to HFMA members only. Not a member? Join now!)
- "A Capital Idea: Bonds and Nontraditional Financing Options," May 2004 hfm (Available to HFMA members only. Not a member? Join now!)
- "The Capital Challenge: Needs vs. Resources," May 2003 hfm, (Available to HFMA members only. Not a member? Join now!)
- "Establishing Best Practice Financial Management," a Financing the Future II Audio Webcast, June 16, 2005
- Capital Access Essentials , October 2004 HFMA Audio Webcast
- Healthcare Bond Rating: Recent Trends and What They Mean to You , November 2004 HFMA Audio Webcast
- More Capital Resources
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble.
HFMA Wants You to Know ISSN: 1540-0697. Volume IV, Issue 10. Copyright 2005, Healthcare Financial Management Association. All rights reserved.