Do You Need A Financial Consultant In Healthcare?
by Sumona Job & Career 25 November 2022
Hospital bankruptcies are no longer an unusual occurrence. According to some reports, the number of hospitals that filed for Chapter 11 in 2022 is tracking 28% higher than the previous year. The common reasons cited for this trend are inflation, a nursing shortage, a significant increase in labor costs, and a steep increase in insurance rates.
With proper financial management, many of these healthcare institutions could have been saved. It is quite telling that three out of four closures occurred in rural America, where financial management isn’t given as high a priority as in large cities.
Hiring a financial consulting firm, especially for facilities that cannot afford to keep an in-house team, can help them get ahead of financial problems and keep hospitals and other healthcare institutions financially healthy.
Understanding the role of a financial consultant before you hire one is the first step toward avoiding financial trouble. Knowing what they do and how they can help your healthcare facility helps you understand whether they will add value.
What is a financial consultant?
A financial consultant is a financial advisor. Their main role is to audit all financial functions so that they can devise an operational strategy to achieve your goals. A primary role of a financial consultant, for example, is to assess costs and find ways to reduce expenditures while maintaining a high standard of healthcare delivery.
What does a financial consultant do in healthcare?
You can think of a financial consultant in healthcare as the circulatory system that keeps every aspect of the hospital supplied so it can function normally. They make sure that the hospital can afford everything it needs, from equipment to medication and employees. What exactly do they do?
1. Evaluation of existing structures
One of the first things that a financial consultant will do is evaluate existing structures within your hospital so that they can maximize resource efficiency. They will, for example, look at the number of patients that have been treated in the ER in the last year and whether you are losing any to neighboring hospitals.
If you are, it means you are losing revenue. The financial consultant will investigate the reasons why patients choose other treatment centers. They will also work to find out what can be done to increase retention rates so that your hospital can increase revenue.
2. Planning
When you hire a financial consultant, they will look for ways that your hospital can increase revenue and decrease costs. They can, for example, plan to reduce costs by a certain percentage in the coming year and then define strategies to help them achieve this goal.
3. Investment Planning
One of the reasons why your hospital may be struggling may be a lack of long-term investments. A financial consultant who specializes in healthcare is aware of opportunities where you can invest profits so that you can create a more secure future.
4. Cost containment
The Centers for Medicare and Medicaid Services predict that healthcare costs will rise by 5.5% annually in the next few years. By 2027, costs are expected to reach $6tn. That is significant, and there isn’t an expected matching increase in revenue.
Cost containment is a delicate balancing act for most hospitals and healthcare institutions. While they must provide the best care possible, they need to carefully watch spending and remain within budget at all times.
The role of a financial consultant is to look for ways to reduce spending while maintaining a high quality of service. They implement strategies to reduce waste and increase efficiency.
5. Coding and billing
One of the most complex elements of managing finances in a hospital is working with various healthcare providers to make sure that they are billed and that they pay on time. Also known as billing and coding, it is a complicated process that takes a lot of time and requires expertise to handle.
A financial consultant examines all coding and billing practices to ensure that the hospital is compliant, that all providers are billed accordingly, and that they pay on time.
6. Financing
Large institutions like hospitals actively seek financing to keep operations going. Fundraising is one of the jobs of a financial consultant. They seek affordable loans and grants and administer the funds, making sure that they are meeting payment obligations as agreed.
7. Risk management
When we think of risk in healthcare, what comes to mind is disease and illness. However, there are certain risks associated with healthcare finance management, and they need to be managed carefully. Patient records, for example, are a major risk area, and these records need to be secure at all times.
Misuse of funds and equipment isn’t uncommon, as is stealing of drugs from hospital pharmacies. A financial consultant assesses risk areas and devises mitigation strategies.
8. Finding new sources of revenue
When you hire a financial consultant, one of the things they will do is find new ways that your hospital can make money. These new sources must align with the hospital’s core objectives and long-term goals while endeavoring to deliver high-quality service to patients.
9. Day-to-day financial duties
A financial consultant will work with the in-house finance team to ensure that everyday duties are carried out. This includes tasks such as purchasing and supplies, logistics, petty cash, and even payroll.
They may also examine these activities to find out whether they adhere to industry standards. This means looking for excessive expenditure and ways to curb it, finding cheap suppliers of high-quality equipment, and improving logistics to decrease costs.
Is financial consulting a good career?
Looking at the above roles of a financial consultant, it becomes clear that this is a job for someone who is detail-oriented, analytical, and decisive, and who is a strategic thinker. They also need to be an excellent communicator who knows how to ally teams.
If you have these qualities, you can become a qualified financial consultant by enrolling in an MBA program. An MBA program imparts the necessary business administration skills that you need to analyze and manage healthcare finances.
If you are already a working professional, an online MBA is highly recommended. This allows you to keep working while you study. Spring Arbor University has an excellent post on what career prospects you can expect after completing an MBA and taking on the role of financial consultant.
In-house versus external consulting in healthcare financial management
Should a hospital bring in a financial consultant, or can they rely on their in-house team to streamline finances?
Financial consultants can be expensive, but they are often a better way to go especially if a healthcare institution is losing money.
In-house teams have certain advantages. They are vested in the company and will often go out of their way to solve problems. They are also excellent for building long-term relationships, and because they are familiar with the working structures of the hospital, they can move around more efficiently.
However, experts recommend that when you are experiencing financial troubles, it is best to hire an external consultant. They often have broader expertise and can deal with a wider range of issues.
One of the most common arguments against financial consultants is that they cost more. While this may be true, it is important to look at the bigger picture. They may cost you more today, but they implement policies that save you money in the future.
Many institutions hire financial consultants because they don’t have a bias. They do not have a vested interest because they are there for a short time. Consultants are keen to give you solutions and move on to other clients who need their services.
Perform an in-depth analysis to determine whether you need to hire an external financial consultant or whether your in-house team can get the job done.
Do I need an MBA to become a financial consultant?
Yes, you do. If you want to stand out in your field and be attractive to employers, an MBA is a must. It is the gold standard for those who want to rise to top management, and it includes excellent compensation.
Money and benefits are not the only reasons to enroll in an MBA:
- You have a wider range of jobs that you can apply to. According to a report by the Graduate Management Admission Council, 90% of employers in America plan to hire MBA graduates while 75% anticipate that they will offer them internships.
- An MBA equips you with the knowledge and skills to work at all levels of management. You become a versatile individual who can be hired for any managerial role.
- Job retention rates for MBAs tend to be higher.
- MBAs tend to form great professional networks that are useful in career building.
Conclusion
Healthcare institutions are facing difficult times. Many are not bringing in more revenue, but costs keep rising. As a result, many are declaring bankruptcy and withdrawing much-needed services from communities.
Proper financial management goes a long way in ensuring that healthcare facilities continue to provide services. The role of a financial consultant is to assess all revenue and expenses and improve efficiency. They work with hospital employees and stakeholders to provide high-quality, affordable healthcare while remaining profitable.
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