HEALTH CARE FINANCING(1).ppt

education

1. HEALTH CARE FINANCING
NNM 7115

2. PURPOSE OF HEALTH SYSTEMS
•To protect and improve people’s health
and well-being
•Other systems in society such education,
agriculture, and other social services and
economic activities may also contribute
greatly to the population’s health

3. FUNCTIONS OF THE HEALTH
SYSTEM
•Stewardship (oversight)
•Creating resources (investment &
training)
•Financing (collecting, pooling and
purchasing)
•Health Services delivery

4. HEALTH CARE FINANCING
•The process of raising financial and material
resources to pay for goods and services related
to health.
•Health care financing aims to reduce or
eliminate the possibility that an individual will
be unable to pay for such care, or will be
impoverished as a result of trying to do so, by:
–making funding available,
–setting the right financial incentives for providers,
–ensuring that all individuals have access to effective
public health and personal health care.

5. CHALLENGES IN HEALTH CARE
FINANCING
•Main challenges:
–Scarcity
–Efficiency
–Sustainability of resources
•Others challenges:
–Poverty
–High cost of health care
–Poor planning and organization of health care
–Lack of commitment to improvement and
maintenance of health by both individuals and
governments

6. HEALTH CARE FINANCING
MECHANISMS
•Health financing mechanisms are
organizational options for a health financing
system of how to offer financial risk
protection to people against the costs of
healthcare.
•These include tax-based financing, social
health insurance, private health insurance and
medical savings accounts

7. FUNCTIONS OF HEALTH CARE
FINANCING
•Revenue collection
•Resource Risk pooling
•Purchasing (health care delivery)

8. 1. REVENUE COLLECTION
•This is the process by which the health system
receives money from households and organizations
or companies, as well as from donors.
–General taxation
–Mandated social health insurance contributions (usually
salary-related and almost never risk-related)
–Voluntary private health insurance contributions (usually
risk related)
–Out-of-pocket payment (user-charges)
–Donations

9. 2. RESOURCE RISK POOLING
•This is the accumulation and management of
revenues in such a way as to ensure that the risk of
having to pay for health care is borne by all the
members of the pool and not by each contributor
individually.
•Pooling is traditionally known as the “insurance
function” within the health system, whether the
insurance is explicit (people knowingly subscribe to
a scheme) or implicit (as with tax revenues).
•The main purpose of pooling is to share the financial
risk associated with health interventions for which
the need is uncertain.

10. 3. PURCHASING (HEALTH CARE
DELIVERY)
•This is the process by which pooled funds are paid to
providers in order to deliver a specified or
unspecified set of health interventions. It may be
performed passively or strategically.
–Passive purchasing implies following a predetermined
budget or simply paying bills when presented.
–Strategic purchasing involves a continuous search for the
best ways to maximize health system performance by
deciding which interventions should be purchased, how,
and from whom. This means actively choosing
interventions in order to achieve the best performance, both
for individuals and the population as a whole, by means of
selective contracting and incentive schemes.

11. Financial management
•Making financial decision based on
information on financial activities.
•Financial management is the process of
planning, mobilization, utilization and
reporting of finances in an organization or
enterprise.
•Health care financial management involves
the functions of revenue collection, risk
pooling and financial expenditure for
purchasing health care services

12. ROLE OF FINANCE MANAGEMENT IN
HEALTH SYSTEMS
•Planning and budgeting
•Financial reporting – financial statements
•Capital investment – capital budgeting
•Financing decisions – support for operations
•Working capital management
•Contract management
•Financial risk management

13. RESPONSIBILITIES OF MANAGERS
OF HEALTH CARE BUSINESS
•Planning and budgeting
•Establishing policies that control the
operations of the organization
•Overseeing the day-to-day activities of
subordinates

14. PLANNING AND
BUDGETING
•Planning:
–Process of preparing for the future – making decisions
for the future. Planning is a function of management
•Budgeting:
–A statement in monetary terms of resources required to
support organizational operations or expected to be
raised and / or to be used for specific activity items
during a given period of time. Budgeting is a
management tool
–The process of identifying, gathering, summarizing and
communicating financial and non-financial information
about he organizations future activities

15. Principles: What is a good
budget for the health sector?

16. The budget process
•Budgets align to the aspirations of the nation (such as long and
medium-term planning goals and aspirations such as the economic
development goals at the national level, or the sustainable
development goals at the global level). 
•In many countries, budgeting is guided by an overarching
frameworks, such as the Medium-Term Expenditure Framework
(MTEF).
•Many modern budgets adopt a ‘program-based budget’ approach.
This is where activities or inputs are grouped together into
‘programs’. Several programs make up a sector budget (such as the
health sector).
•Budgets are typically anchored in a legal framework, such as a
Public Financial Management Act.

17. TYPES OF BUDGET
•Statistic budget-well informed by statistics/
knowledge
•Revenue budget-indicate funds collected from
different sources/expected funds to be collected
from different sources
•Expense budget- indicate activities in which the
funds will be spent
•Operating budget-for operations/ short term
•Cash budget-based on available cash

18. Budget Decisions
•Timing- Different decisions are made at different
stages of the budget process.
•Intervene before the decisions you want to change
are made, not after.
•Knowing which stage of the budget process you
are in will help you to be strategic in your
advocacy efforts
•Conventional (cash available for budgeting) versus
zero-based budgets( no funds available but are
accrued during the year)
•Top-down versus Bottom-up budgets

19. Class discussion
•How is the budget made at your hospital/
institution?

20. BUDGET CYCLE STEPS

21. HOW CAN YOU ENGAGE IN THE
BUDGET CYCLE?

22. MAIN DECISION-MAKERS IN THE
BUDGET MAKING PROCESS

23. BENEFITS OF BUDGETING
•Align operational plans with financial planning
targets
•Prioritize capital investments to align with strategic
initiatives
•Effectively manage capital spend and cash flow
•Better understand the allotment of funding to
individual projects, initiatives, and clinical
departments
•Minimize purchasing errors

24. AUDITING
•Auditing is an examination of accounting
records undertaken with a view to establish
whether they correctly and completely reflect
the transactions to which they relate
•An audit is a systematic process of objectively
obtaining and evaluating evidence regarding
assertions about economic actions and events to
ascertain the degree of correspondence between
these assertions and established criteria and
communicating the results to interested users.

25. FEATURES OF AUDITING
•Audit is a systematic and scientific examination
•Undertaken by an independent person or body of persons who
are duly qualified for the job
•Audit is a verification of the results shown by the profit and
loss account and the state of affairs as shown by the balance
sheet.
•Audit is a critical review of the system of accounting and
internal control.
•Use of vouchers, documents, information and explanations
received from the authorities
•Authenticity of the financial statements and report is
established
•Scrutiny of documents

26. TYPES OF AUDIT
•Audit of financial statements: Examine financial
statements, determine if they give a true and fair
view or fairly present the financial statements.
•Operational Audit: A study of a specific unit of an
organization for the purpose of measuring its
performance.
•Compliance Audit: A review of an organization’s
procedures and financial records performed to
determine whether the organization is following
specific procedures, rules, or regulations set out by
some higher authority.

28. TYPES OF AUDIT EVIDENCE
•Physical Examination (invoices, inventory, receipts,
assets etc.)
•Third-Party Statements or Confirmation
•Client Statements or Representations
•Authoritative Documentations (vouchers, contracts,
paid cheques etc.)
•Observation
•Clerical Accuracy (computations and transfers of
information)
•Comparison & Data Relationships

29. THE IMPORTANCE OF THE AUDIT
PROCESS
•Validates the financial reports
•Regular audits are essential to identify any
malpractices, financial mismanagement, or
Fraud, Waste and Abuse (FWA) early
•Regular audits can give an institution
objective feedback and identify areas for
improvement

30. Thank you