HCR 203 Effective Financial Policies and Procedures Discussion

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Review Figures 14.1 and 14.2 in Ch. 14 of Medical Insurance: A Revenue Cycle Process Approach;

Write a 350 word paper in which you:

Explain the 3 major elements of critical thinking: Logical inquiry, Problem Solving, Evaluative decision making.

Describe the basic elements of an effective medical office financial policy;

Outline how medical office procedures support financial policies;

Describe the consequences of having office procedures that do not support the financial policy;

Recommend strategies or tools that medical offices can use to ensure effective alignment of polices and procedures

Effective financial policies and procedures can help provide efficient financial management, risk mitigation, and the alignment of financial operations with the overall mission of the organization. Before you begin creating financial policies and procedures or reviewing them for your organization, it is important to understand what these are, the intended purpose and benefits, how to implement them, and when they should be reviewed.

What Are Financial Policies and Procedures?
Financial policies are the rules that govern the financial activities within an organization. Well-designed financial policies should align with the overall goals of the organization. And they should be written with enough clarity to be understood by individuals throughout the organization and provide for flexibility to operate within such policy. For example, a policy may state that “the Organization will reimburse employees for the actual cost of meals and gratuities while conducting business travel up to $100 a day.”

Financial procedures outline how certain tasks are done and/or policies are adhered to. They can take the form of flow-charts, checklists, or written narratives. No matter the form, they should succinctly provide the necessary “how to” information to the individual(s) tasked with carrying out those procedures. Thus, some relevant considerations when developing procedures is identifying who, by role, is involved in the procedure, when the procedure needs to be applied, and how the procedure should be applied. For example, a procedure related to a financial reporting and closing policy may state that, “By the 15th day of the following month, the accounting manager reviews the bank reconciliation and signs off and dates the reconciliation.”

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Purpose and Benefits of Financial Policies and Procedures
Assignment of Responsibilities and Establishment of Expectations
Effective policies and procedures will clarify roles and responsibilities within the financial realm of the organization. By clearly establishing these roles, authorities, and responsibilities, all parties involved will better understand the structure and guardrails that are in place for them to operate under. Proper implementation will lead to less confusion and increased accountability. Further, it results in more clearly established expectations for how employees will carry out their job duties.

Safeguarding of Assets
Policies and procedures establish and document the system of internal controls that are in place to safeguard the assets of the organization. This includes ensuring there is adequate segregation of duties, established authorization requirements and limits, and restricted access to the assets of the organization.

Consistent Recordkeeping
Having clearly documented procedures creates a foundation that allows transactions to be processed consistently across the organization and over time. Further, having documented policies and procedures reduces the risk that systems operate off of “institutional knowledge,” which can be lost due to staff turnover.

Accurate, Reliable, and Relevant Financial Reporting
Adherence to the financial policies and procedures supports the accurate recording of transactions in accordance with the applicable accounting standards and the financial reporting structure of the organization. Maintaining the financial reporting framework ensures the decision makers in the organization have timely access to the financial information needed to make informed business decisions.

Maintain Compliance with Regulatory Requirements
Many not-for-profit organizations receive federal awards which require that they comply with the provisions of the Uniform Guidance (2 CFR 200). In many instances, the Uniform Guidance specifically requires the organization has written policies and/or procedures to ensure that certain requirements of the guidance are incorporated into the fiscal operations of the organization. For example, entities are required to have written procurement policies and procedures for determining the allowability of a cost to a federal award. Thus, the policies and procedures manual becomes a key document for maintaining compliance.

Implementation
It is important that individuals receive access and regular training on the financial policies and procedures of the organization, so the benefits of the structure that the document creates can be realized. Also, there should be regular and consistent enforcement of the policies across all levels of the organization. Otherwise, the organization risks falling out of compliance with its policies and loses the strategic value they were put in place to create.

Ultimately, the board has a fiduciary duty to the organization to ensure that its resources are used appropriately. This includes making sure there are good, documented policies and procedures to protect those resources. Management is responsible for ensuring these are communicated, followed, monitored, and corrected as needed.

Regular Review and Updates
The financial policies and procedures are a document that should be regularly subjected to review and updates. As organizations change in size and complexity, implement new systems, or are subjected to changes in regulations or accounting standards, it is likely the processes or policies that existed will need to be modified. Further, it’s important that any best practices or ‘lessons learned’ are regularly incorporated into the financial policies and procedures for continual process improvements.