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36909453 AHM 520 Course Health Plan

36909453 AHM 520 Course Health Plan

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02/10/2013

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AHM 520 Course: Health Plan Finance and Risk ManagementChapter Heading:
Page: 1-21
Health Plan Financial Information
Welcome to the study of health plan finance. This course focuses specifically on thefinancing of healthcare through health plans such as those offered by health plans.Recall from
Healthcare Management: An Introduction
that a
health plan
is an entitythat utilizes certain concepts or techniques to manage the accessibility, cost, andquality of healthcare delivery and financing. Many health plans assume or managethe financial risks associated with the unexpected costs of healthcare benefits.Because finance is closely tied to delivery systems and costs, all health plans relyheavily on financial information.
Health Plan Financial Information
Health Plan Finance and Financial Information
 In the context of this course,
finance
is the effective and efficient management of money to achieve a health plan’s strategic goals and objectives. A primary strategicgoal of a health plan is to offer one or more health plans that meet the healthcareneeds of employers and other purchasers or payors.Many health plans offer one or more products. Although in some contexts the term
health plan
refers to healthcare benefits provided through an employer or othergroup, in the context of this course, a
health plan
is the delivery and financingsystem of healthcare benefits, rather than the benefits themselves. Health plansexpect to receive regular premium payments in exchange for assuming the risksassociated with the uncertain costs of healthcare.
Health Plan Financial Information
Health Plan Finance and Financial Information
 To meet its goals and objectives, a health plan must be able to:
Pay providers
Bear or share the risk of not having enough money to support its ongoingoperations
Determine the rates to charge purchasers of its products and services
Plan strategically for growth and expansion of products and services
Analyze financial markets and information
Manage the flow of funds into and out of the health plan
Raise and manage capital
 
All these functions comprise
health plan finance
. To understand health plan finance,you must be able to interpret financial information.
Financial information
includesany numerical data compiled for and from a company’s records. Health plans analyzefinancial information as part of the decision-making process involved in generatingenough funds to conduct ongoing business and to expand operations. Examples of ahealth plan’s financial information are listed inFigure 1A-2. We discuss many of these reports in later lessons.
Health Plan Financial Information
Characteristics of Financial Information
 Simply obtaining financial information is of little use to a health plan. The healthplan’s employees must be able to interpret financial information to attain the healthplan’s goals. Key characteristics of useful financial information include timeliness,quality, accuracy, and clarity of that information. Also, financial information must beappropriate. In other words, financial information is appropriate when it serves theneeds of those who use the information. We discuss the impact of thesecharacteristics on a health plan’s strategic planning process in
The Strategic PlanningProcess in Health Plans
.
 
A health plan’s accountants, actuaries, underwriters, financial analysts, investmentanalysts, sales forecasters, and other staff members have a decision support role indeveloping and providing the plan’s managers and executives with appropriatefinancial information. Compilers of a health plan’s financial information also serve ina decision support role for regulators, investors, and others outside the plan whomake decisions about the plan from their interpretation of the plan’s financialinformation. In addition, financial information developed for health plan managersand executives must be "actionable". That is, it must provide what is necessary for ahealth plan’s managers to make decisions about the plan’s direction, growth, andongoing survival.
Health Plan Financial Information
Users of Financial Information
1
 Many organizations and people rely on the financial information contained in acompany’s accounting records and reports. These interested parties generally consistof two groups: internal users and external users of financial information.
Health Plan Financial Information
Users of Financial Information
 
Internal Users
 
Internal users
of a health plan’s financial information are those individuals within thehealth plan who make decisions that affect plan operations. These individuals includethe health plan’s directors, officers, managers, and others involved in planning,controlling, monitoring, and evaluating the financial implications of their decisions.Figure 1A-2lists several key positions typically found in a health plan and thegeneral responsibilities of these positions within the plan’s financial functions. Notethat actual health plans may have different internal corporate structures than thosepresented. For example, one health plan may outsource its actuarial andunderwriting functions; another health plan may have one or more actuaries on staff and an underwriting department.

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