Hospital Financial Management Components and Ethics

Financial management

Profit-making, non-profit making, and governments need to account for their financial transitions for a period. Hospital financial management involves strategies put in place to ensure that financial operations in the hospital are conducted appropriately. Resources are scarce, thus they need to be managed effectively. When managing and reporting financial information, managers, accountants, and leaders should be guided by some code ethics; other than normal business ethics, there are some specific accounting ethics recognized by GAAP and IFRS (Baker & Baker, 2011). This paper discusses financial reporting practices and ethical standards in health care finance.

Elements of financial management

Financial management works under four general elements, they are:

  • Planning
    The first step taken by financial managers is developing a plan detailing the expectation of each department in the hospital. This is more skewed to financial expectations (expenses, capital, investments, and revenue). With a clear picture of the expectations, goals, and objectives are set. Strategies to see the fulfillment of the goals is also developed.
  • Controlling
    This is a continuous process where the manager through feedback from various departments monitors the progress toward the attainment of goals and objectives set in the planning stage. Current performances are calculated and any variance in the reports is interpolated. This stage offers a chance to change strategies if the current ones are not leading the department/organization to the attainment of set goals. Objectives and goals may also be adjusted.
  • Organizing and directing
    Resources in an organization are scarce; thus they need to be well allocated to various programs. For efficiency, financial managers prioritize the project to be undertaken at a particular time and how. This may involve a day-to-day allocation of available resources in different programs.
  • Decision-making
    Financial management information is used for decision-making. They assist management in making current and future decisions regarding the operations in a business. Information is crucial for decision-making since it offers several alternatives to choose from. The best alternative is considered (Baker & Baker, 2011).

Generally accepted accounting practices and general financial ethical standards

The accounting code of ethics can be classified into five elements, these elements are:

  • Competence
    Management accountants are expected to be competent in the discipline. They should be adequately trained to ensure that they understand the art of accounting. Different countries have accounting bodies that license management accountants. In case of a change in accounting principles, then it’s ethical for a management accountant to update him/herself with the changes.
  • Integrity and professionalism
    Management accountants should uphold integrity and professionalism in their duties. They should understand that the information they give is used by internal and external users for making decisions and thus it should not be misleading. The ability to stand on one’s ground when called to fraud or abuse their professionalism is also crucial.
  • Confidentiality
    Information is power. Financial managers should maintain a high level of confidentiality. They should know what information to disclose to the public and which one not to. When determining what to disclose and what not to, management accountants are expected to be guided by international accounting standards and reporting standards.
  • Credibility
    Financial managers should be accountable for all their actions. They should responsibly perform their duties. Personal ethics like honesty are also important. To be credible with what one does, a certain degree of independence is called for.
  • Resolution of Ethical Conflict and due Care
    Financial managers should be on the frontline to guide an organization to ethical principles and conduct. They should also understand that they have access to information that managers use for decision making thus they have a duty of care to them. Financial information is also used by external users like investors for making decisions; thus they should reflect the true position of the business (Cleverly & Cameron, 2007).

Examples of ethical behaviors in Baker & Baker’s book

Example 1

On page 7, the writer illustrates that financial accounts are important to outsiders. They go ahead and give the outsiders who use the hospital accounts as Medicare, Medicare, and government for various policy making.


The significance of the example is to show how important financial information is to the management of an economy. This calls for ethics in financial management. Integrity and truthfulness of the accounts will be required.

Example 2

On page 13, the writer gives an example of some of the information required in a hospital; patients’ data. They say that when data is well captured, it assists the hospital to have a smooth follow.


This example shows the need for good financial management in the hospital. It portrays how important financial management is important in a hospital. The example supports the ethic of competence in financial management as well as compliance with the set organizational code of conduct (Baker & Baker, 2011).


Financial management is important to hospitals. It provides relevant information for internal and external users for decision-making. Financial management has o duty of care and thus should perform their duties with integrity. They should follow the code of ethics required for the profession.


Baker, J. J., & Baker, R. W. (2011). Health Care Finance Basic tools for Nonfinancial Managers (3rd ed.). Sudbury, Ma: Jones and Bartlett Publishers.

Cleverly, W. O., & Cameron, A. E. (2007). Essentials of health care finance (6th ed.). Sudbury, MA: Jones and Bartlett.

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