Healthcare Case Study

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In today’s highly competitive, value driven, reimbursement challenged healthcare environment, achieving financial targets and conforming to generally accepted accounting principles (GAAP) can prove to be extremely challenging for a hospital. Not-For-Profit (NFP) hospitals face the additional challenge of supporting and defending their tax exempt status. In order to qualify for tax-exempt status, NFP hospitals must comply with the Internal Revenue Service’s (IRS) criteria for tax-exemption which includes (Nowicki, 2015): 1. The hospital must operate for charitable, scientific or educational purposes only. A charitable organization is defined as, “An organization that provides community benefits or serves the public interest. In the case…show more content…
As I have read about the requirements placed on NFP organizations, I cannot help but wonder if it would not just be easier to pay taxes. Kaplan & Haas (2014) address these challenges and list five key mistakes that healthcare organizations make when trying to achieve financial targets. The first mistake is cutting back on support staff. Cutting payroll to save expenses seems to make good financial sense, what is important to evaluate is if by cutting support staff you are now requiring your highly skilled professional staff to perform duties below their skill set and thereby decrease their productivity. The second mistake is underinvesting in space and equipment. Having adequate space and equipment allows your providers to maintain productivity and hence, increase revenue generating activities. Mistake number three is focusing narrowly on procurement prices. Often it seems easier to reduce materials and services from outside vendors to cut costs, than to face the difficulty of staff reductions. However, focusing too narrowly on supply cost and overlooking how individual clinicians actually use supplies will cause organizations to overlook opportunities to lower spending. Mistake four is maximizing patient throughput. Increasing the number of patients seen in a day will only improve revenue if quality and patient satisfaction are maintained, which is often not the case when volume is the driving factor.

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