After Studying Chapter 1 Case Respond To The Following 1a

After Studying The Chapter 1 Case Respond To The Following1at Which

After studying the Chapter 1 case, respond to the following: 1. At which level do some of the basic functions (cost accounting, reporting tax, patient accounts and billing, accounts payable) belong? Financial Management. After studying the Chapter 2 case, respond to the following: 2. Identify the agency problems that PCI and Physicians' Clinic need to resolve. 3. What agency problems will be involved if PCI goes through with the joint venture that Dr. Jackson has proposed?

Paper For Above instruction

The cases presented in Chapters 1 and 2 of the textbook offer valuable insights into the functioning and issues faced by healthcare organizations and clinics. They provide an opportunity to analyze various management problems, especially focusing on the levels at which key functions are performed and the agency problems involved in organizational decision-making.

In the first case, the question asks at which level some of the basic functions such as cost accounting, reporting tax, patient accounts and billing, and accounts payable belong. These functions are primarily part of a hospital or clinic’s financial management system. Financial management in healthcare involves the strategic planning, organizing, directing, and controlling of financial activities including budgeting, accounting, financial reporting, and compliance with relevant regulations (Harrison et al., 2018). Specifically, functions such as cost accounting and financial reporting are vital for ensuring financial transparency and accountability. Patient accounts and billing systems facilitate revenue cycle management, while accounts payable pertains to managing the clinic’s or hospital’s short-term liabilities (Carroll & Darby, 2021). These functions operate at an organizational level but are integral to the broader discipline of financial management, which encompasses all these activities to ensure the financial sustainability of healthcare providers.

In the second case, we are asked to identify the agency problems that PCI (Physicians’ Clinic Inc.) and Physicians’ Clinic need to resolve. Agency problems arise when there is a conflict of interest between principals (owners or shareholders) and agents (managers or employees) who are supposed to act on their behalf (Jensen & Meckling, 1976). In healthcare clinics like PCI, the owners and physicians may have divergent interests. For instance, physicians may prioritize patient care and clinical autonomy, whereas the owners may focus on revenue generation and cost control. This divergence can lead to conflicts over resource allocation, service provision, and financial decision-making.

Furthermore, the agency problem becomes pronounced when physicians have managerial authority but may not have aligned incentives with owners. Physicians may engage in practices that maximize their income or clinical autonomy at the expense of the clinic's financial health. The principals need mechanisms, such as incentive-based compensation and oversight, to manage these conflicts effectively (Bloom & Propper, 2014).

The third part prompts us to examine the potential agency problems if PCI proceeds with the joint venture proposed by Dr. Jackson. A joint venture between PCI and another entity, possibly involving external partners or physicians, introduces new agency concerns. Firstly, there could be conflicts regarding profit-sharing, decision-making authority, and strategic direction, especially if the partners have different objectives or management styles (Eisenhardt, 1989). For example, if Dr. Jackson’s proposed venture emphasizes clinical independence and patient satisfaction over profitability, tensions may arise with financial stakeholders focused on returns.

Moreover, moral hazard issues may appear if the partners do not have adequate oversight or aligned incentives. The external party might pursue self-interests at the expense of overall performance, leading to misaligned goals and potential trust issues. Therefore, establishing clear governance structures, transparent contractual arrangements, and shared performance metrics are crucial to mitigate these agency problems (Chung & Pruitt, 2018).

In conclusion, understanding the levels at which core functions operate within healthcare institutions clarifies organizational roles and responsibilities, while recognizing agency problems is vital in structuring effective management and strategic initiatives like joint ventures. Addressing these issues proactively enhances the operational efficiency, financial health, and organizational cohesion of healthcare providers.

References

• Bloom, N., & Propper, C. (2014). The Economics of Healthcare Quality and Performance. IMF Working Paper No. 14/111.
• Carroll, A., & Darby, M. (2021). Healthcare Financial Management: Strategies for Revenue Cycle Success. Journal of Healthcare Finance, 47(1), 25–34.
• Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. Academy of Management Review, 14(1), 57–74.
• Harrison, M., Dimick, J., & Pizer, S. (2018). Hospital Financial Management: Principles and Strategies. Health Economics Review, 8, 12.
• Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
• Chung, H., & Pruitt, S. W. (2018). Governance and Agency Problems in Healthcare Joint Ventures. Journal of Health Administration Education, 35(2), 214–229.