Quality And Financial Factors

Having affordable and optimum quality of care is the goal of all healthcare institutions and patients as well. Achieving this goal is the challenge that we have been taught in healthcare finance and value course. Quality and safety of care is the priority for all activities in the healthcare institutions. It starts from the top of the management pyramid at the strategic level and cross all other pyramid sections (the management control and the operation control). Financial control is part of the management section and it has an important impact on quality of service.

When the managers blend their financial and quality skills to obtain the best care for patient the organization goal will be reached. We can obtain this when the care is financially efficient and qualitatively effective.

When we studied how differential accounting impact the decisions to expand or drop service, increase or decrease the price and how full costing may lead to misleading decisions. We learned how to make the right decision based on scientific framework that take in consideration quality of care.

Even if the decision is financially profitable, it will not be implemented if it has a negative quality aspect. This decision framework based on alternative approach where all the alternatives are studied from the quantitative and qualitative dimension. The framework starts by define the problem, identify the alternatives, evaluate the quantitative factors, evaluate the qualitative factors and then make the decision.

This framework is similar to the framework of quality improvement, which starts with recognizing the risk, clarifying the problem, identifying the opportunities, designing the solution, implementing change, measure the impact and learn and share.

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This similarity came from the similar goals of financial control and quality improvement achieving patient expected value.

A good example is, a hospital has a surgery service and according to differential accounting this department is losing money. This was discovered by the financial controller to be not from low number of admissions, it is from high post-operative infection. Here, differential accounting helps us not only from finance, but also from quality of care. The hospital administration at this point before deciding what to do, needs to apply the framework for quality improvement or the framework of the alternative choice decision framework and in either scenario the result will be better off for patient and institution.

Other example to show the importance of blending quality and finance is the average length of stay (ALOS). From Quality prospective ALOS means increase patient risk of infection and decrease the admission rate. ALOS has a negative impact from the financial prospective as well, the more days patient stays in the hospital the more investigations and labor work the more financial burden on the hospital. Manager with combined financial and quality skills will be able to recognize how serious this problem is.

Quality is not a cheap, good quality needs good staff, good instrument, and more patient satisfaction. However, the impact of high quality worth the high cost. High quality means patient is safer and more satisfied this in turn leads to spread of excellent reputation and more patients attracted to that facilities and more profit. High quality institutions have less suit and less infection rate, less ALOS, low medical errors, less patient complaints, and more satisfied workers. This is representing a high return on investment. One case of medical error for instance, a baby born after mismanaged delivery who developed brain insult will cost the institution millions of dollars’ worth recruiting dozens of well-educated and trained OBG physicians and nurses.

Many quality activities work proactively to prevent financial loss. An example of this is the surgical time out. The OR team must do the time out for every patient this is going to prevent a lot of surgical errors including wrong patient or wrong site surgery which will cost a lot of money and affect patient life if it happened. Quality improvement and financial control are similar in their goal and in approaching that goal. while financial management is in the middle of the organization pyramid, quality is part of everyone in the organization including strategic manager, middle manager, and operation manager. To be able to provide high quality, institutions need good financial management.

Financial managers need to use the differential accounting and alternative decision method to make the right decision. Quality and financial factors are affecting each other when quality goes up financial impact will be positive. This may not be appearing immediately but for sure it will occur with time. Institution with financial instability may not be able to implement the required quality standard exposing patients to risk of poor quality.