Financial management

Financial management incorporates a number of components. Wherever a clinical service is provided—in a university teaching hospital, a general hospital, or a private hospital—the cost of patient treatment will vary depending on the patient' condition, the expertise of the health professionals involved in the treatment, and additional expenses such as teaching, research overheads, etc. Costs are fixed (unchanging irrespective of the level of activity), semi-fixed (fixed for a range of activities), or variable (changing directly as activity increases or decreases). The process of consultation between the managers and the clinical service providers is crucial in financial management. Budgets have to be fixed in advance, but there is the additional responsibility of ensuring that planning variances and operational variances are taken into account. Whether the service is delivered in the private or the public sector, it must be effective, efficient, and economical.

Financial management must include a clear idea of not only all the expenses but also the costs, both fixed and flexible. Most clinicians will not be interested in the minutiae of budget management, but close collaboration with their finance directors will allow them to understand the costs and expeditures as well as incoming monies which can be used in the planning and delivery of services.

According to Bainton,(8) resource management has three components:

1. close involvement of medical and nursing staff in management;

2. development of information systems, particularly case mix (a method of categorizing workload by appropriate groupings);

3. organizational development to help health-care professionals and managers to work in close collaboration.

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