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How The Concept of Production in Finance Adds Value to The Medical Business Field?

How The Concept of Production in Finance Adds Value to The Medical Business Field?

Maintaining and improving human well-being is only possible if health services are funded appropriately. There would be no doctors, no medicines, and no efforts to promote or prevent disease if the government did not have the money to do so. There is a lot more to funding than merely bringing in money, though. To get a clear picture of how production in finance may be monitored and evaluated. It is necessary to know the indicators designed to measure. One way or another, production in financing systems should aim to raise enough money to cover health care costs. Still, they should also do it in a way that allows individuals to access the services they need without fear of financial catastrophe or impoverishment. This entails two connected goals: raising enough money and protecting the public from financial risk. It is essential to use the available resources wisely to achieve these goals. Thus, the financial system is frequently separated into three interconnected roles – revenue gathering, resource pooling, and services buying.

Elements in Production in Finance

There are four elements in finance production: planning, decision making, organizing, directing, and controlling. Some sectors in the medical field stress three elements, planning, controlling, and decision making. Hence regarding directing and controlling as part of the controlling element. In planning, the financial manager identifies the appropriate strategies that should be incorporated to accomplish the required objectives. Therefore, the primary function is to identify the goals and the necessary procedures to achieve those goals. Controlling in finance ensures that all the areas of the medical field follow the appropriate and stipulated strategies to achieve the desired objectives (World Health Organization, 2009).

 One of the best strategies to achieve control is to compare the past and present results. Something cannot progress in the right direction in organizing and directing if it is not planned and appropriately guided. As a result, medical institutions cannot function without this component (World Health Organization, 2009). Work will be done to the fullest extent in an ordered and well-directed medical practice. Working in the financial department daily ensures there are no errors or mishaps. It is essential to take reasonable steps if something goes awry. Fixing problems will be more challenging if the system is disorganized. The final feature is decision-making, which necessitates the support of the other three. Making decisions will be a piece of cake if excellent planning, controlling, organization, and direction are practiced. Sound financial decisions will lead to more productive and successful employment at the medical facility.

How Production in Finance Adds Value to The Medical Field

Whether or not and how money is pooled to disperse risk across demographics determines the level of financial risk protection. Regressive charges, such as those levied directly on users, are commonplace. There are some folks who they put off (World Health Organization, 2009). The only financial safeguard they offer is that customers spend when they are sick and not in good health. It can lead to financial difficulty and perhaps poverty for those who do not support their community. Equitably raising finances usually necessitates some degree of economic growth in monetary policy. Access to essential services while safeguarding individuals from the more extreme financial implications of paying for fear tactics is an issue that must be addressed. To attain these objectives, prepayment and pooling of gathered income are necessary. Individuals pay into the plan when fit and use these monies when ill. As a general rule, aggregated funds in most nations are derived from a combination of tax and health insurance premiums. This sector necessitates collecting data on how well people are guarded against the financial ramifications of illness. The amount of progressivity in how planned health funds such as taxes and insurance contributions are raised could also be measured (World Health Organization, 2009).

It also guarantees resource efficiency. A wide range of issues is involved, including mitigating waste and corruption and the available initiatives given the limited resources. Additionally, services should be provided by the state or bought from nongovernmental organizations, how providers (such as healthcare staff and hospitals) should be compensated to ensure high quality and efficiency, and specific services or rewards should be targeted at the poor (World Health Organization, 2009). An efficient health care system is challenging to measure since there are so many variables involved, and we will return to this subject later.

Evaluation and Planning

Production in finance includes evaluating the company’s financial capabilities and entire operations. Healthcare institutions may now plan for the future due to innovation (Gapenski & Pink, 2007). For example, let’s imagine that an emergency room at a nearby hospital is losing patients to a nearby hospital with more excellent space. They may opt to expand their emergency room as a result of this. Additionally, it also helps in long-term investment. When it comes to significant investments in the company, the finance team has a structure, but all managers at all levels are involved. Long-term investment selections necessitate careful consideration of the investment’s execution strategy and its effect on the investor’s financial future. At a healthcare facility, financial experts will assess whether or not an emergency department development is worth the investment in time and money.

Achieving Different Financial Objectives

Financial production and corporate strategy go hand in hand. Hospitals have purchased Doctor’s practices close to hospitals for various reasons. It becomes a national hospital system when physicians who sell their operations join the staff (Gapenski & Pink, 2007). In this way, the institution establishes a broader and more stable payment stream: It receives money from all aspects of medical care, from diagnostic testing to surgery to rehabilitation. As a national medical system, which is considerably larger than a single hospital, has more negotiating leverage with health insurance organizations, practice acquisition helps pay for the acquisition.

Helps in Accessing the Features of Third-Party Payers

Population Pyramid Analysis

Health care expenses are reimbursed and managed by a third-party payer, a third-party business. Types of third-party payers include governmental insurance, private insurers, self-insured individuals who pay for their medical bills, and commercial insurance companies (Gapenski & Pink, 2007). Healthcare professionals benefit greatly from this sort of insurance since it provides a reliable source of income. The state set up health insurance firms to relieve the general population of the financial burden of medical expenses. Third-party payers foot the bill for the patients’ medical bills. The patients pay third-party funders a premium or co-payment, and in most cases, they minimize the financial burden on the patients. Third-party insurers typically don’t cover all of a patient’s medical bills because they have deductibles that must be met by the patient first.

Helps in Payment Procedures Utilized and Impacts of Coding On Remuneration

Shared savings, schedule and cost, fee-for-service, value-based payment, and discounts from billed rates are some of the most prevalent ways hospitals get reimbursed. This model is based on predetermined rates and fees for all services and procedures, including extra and other management components and cost controls (Marcinko et al., 2013). Second, the payer allows compensation at a negotiated discount using the Charge Description Master, which operates by tracking activity and charging services, giving suppliers the lowest amount of risk. Third, the Value-Based Remuneration model pays health care professionals using a fee-for-service strategy that incorporates quality and resourceful aspects. Fourth, the shared savings approach encourages people to relocate further while also lowering their risks, resulting in better results and care for a larger number of patients. Finally, bundled payments allow healthcare professionals to get remuneration for specific care episodes.

Corporate payers such as United Health Care, Aetna, or federal mediators that represent health systems pay for medical care services and procedures. Remuneration is determined by the claims submitted by health personnel using procedure codes and medical diagnoses (Ritsema et al., 2021). Health informatics has a major effect on revenue cycle efficiency. Medical coding must be of the highest quality since healthcare businesses cannot make errors that jeopardize their operations. Medical providers benefit greatly from high-quality coding because it protects them from dismissing their claims. Denial of claims can negatively affect the company’s bottom line since reimbursements to providers might be withheld, delayed, or halted due to a lack of reimbursement. The only way to avoid the accompanying expenses and controls is to resist any instances of denial actively. Working things out might be seen as a long-term investment that will pay off in the long run when there is denial.

Generating Income

Investing in assets to provide financial stability is another goal of production in finance. Financial managers need to keep an eye on the health care market rates to maintain profitability while also being competitive. Hospital departments are also evaluated for their performance (Zietlow et al., 2018). Consider the possibility of launching new services as a means of generating cash. A cannabis dispensary, for example, might be a new source of revenue for some healthcare organizations that also provides a means of ensuring that the substance is safe and legal to be given. The health care finance manager prepares proposals for new projects once senior management approves the idea. These proposals include the project’s expenses, how it will be funded, and annual profit estimates.

Monitoring Internal Spending

Expenditure is monitored for fraud and misuse of cash by financial managers in healthcare. Clinicians have a large say in how much money is spent. A patient’s demands might not be considered while purchasing medication or medical equipment, leading to legal liability for the organization (Bharantiharan & Vijayasekar, 2013). All expenditures for pharmaceuticals and equipment are audited once a month by a special committee established up by the finance managers. An inquiry or disciplinary measures based on federal fraud and abuse statutes may be taken against a physician found to have committed fraud by the healthcare organization.


Additionally, the generation of finance helps raise funds to cover medical costs. Fundraising, securing financing, and utilizing other in-house resources are just some methods to achieve this goal. To make an informed decision, they have to consider both short- and long-term costs and benefits (Bharantiharan & Vijayasekar, 2013). When it comes to hiring a consultant to help evaluate what the company needs, how much it will cost, and how to pay for it, the senior management typically has the last say. It also helps in working capital management. A medical facility’s working capital is the difference between its current assets and liabilities. This could be cash, liquid assets, or liabilities, or it could be the company’s stock. Organizations can cut expenses while improving efficiency by properly managing their capital.


In conclusion, funding the healthcare sector is appropriate to ensure excellent healthcare services. Finance’s production elements are essential in different medical sectors to ensure that finance adds value to the medical field. Production in finance adds value through evaluation and planning, which involves assessing the organization’s financial performance and overall operations. It also adds value through achieving different financial objectives, accessing the features of third-party payers, generating income, and monitoring internal spending. Furthermore, it is responsible for ensuring financial stability in the medical field and mitigating financial risks.


Bharantiharan, J., & Vijayasekar, M. (2013). Introduction to Healthcare Financial Management. International Journal of Marketing, Financial Services & Management Research2(4), 176-183.

Gapenski, L. C., & Pink, G. H. (2007). Understanding healthcare financial management. Chicago: Health Administration Press.

Marcinko, D. E., Baum, N., Hertico, H. R., Hetico, H. R., & Nash, D. B. (2013). Financial Management Strategies for Hospitals and Healthcare Organizations. CRC Press.

Ritsema, T. S., Pa-C, P. M., Brown, D. L., Dfaapa, M. P. C., Vetrosky, D. T., & Dfaapa, P. P. C. (2021). Ballweg’s Physician Assistant: A Guide to Clinical Practice-E-Book. Elsevier Health Sciences.

World Health Organization. (2009). Toolkit on monitoring health systems strengthening. WHO. 2008b. WHO, 17-3.

Zietlow, J., Hankin, J. A., Seidner, A., & O’Brien, T. (2018). Financial management for nonprofit organizations: policies and practices. John Wiley & Sons.,%20Jo%20Ann%20Hankin,%20Alan%20G.%20Seidner-Financial%20Management%20for%20Nonprofit%20Organizations_%20Policies%20and%20Practices-Wil~1.pdf


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