Author: Louis C. Gapenski
Publisher: Health Administration Press – 415 pages
Book Review by: Paiso Jamakar
Healthcare is the largest industry in the United States. In 2009 its revenues were about $2.47 trillion, representing about 17.3% or nearly one-sixth of the total gross domestic product in the United States that year. It impacts the lives and livelihoods of nearly everyone in this country. Whether you are in health care or want to learn more about it, there are hundreds of books available for you, depending on what aspect of this industry you want to explore.
This is a book for people involved in healthcare professions, particularly in operations. As its title indicates, it was written to introduce fundamental (basic rather than advanced) principles and applications in healthcare finance within healthcare organizations such as hospitals, outpatient surgical centers, various types of clinics, group and individual medical practices, eldercare and long-term care facilities, nursing homes, and other such entities.
It is intended mainly for entry-level operational managers: those whose primary responsibility is in the clinical area or something else other than principally, financial. Advanced-level books are available for you if your role is that of a financial manager in a large healthcare organization.
The author Louis Gapenski PhD, a professor of health services administration as well as finance at the University of Florida in Gainesvillw, has authored or co-authored 28 textbooks on corporate and healthcare finance.
This is a very useful book of Dr. Gapenski that provides great value to those who want to learn basic concepts in the financial aspects of healthcare, and to find solutions to financial problems in real-word healthcare scenarios. It contains industry practice sidebars, a list and definition of key concepts in each chapter and self-test questions as some additional aids to learning.
What is refreshingly different about this book compared to others in this field is that it does not contain unfamiliar terms or complex formulas. I enjoyed going through the book and I would say even someone who knows just a little about accounting and business will understand much of its content. A lot of it is self-explanatory. If you know basic business terms such as revenues, expenses and profits, you will find this book an easy study.
If you know simply that a company (or individual) makes money by selling goods and services and receiving payments for them, paying for the costs of running the company, and keeping the money left over as profit or net income, you will understand the details in this book. After retaining its profits year after year, the company’s balance sheet grows. The core meaning of the word “balance” refers to what is left over.
I suppose anyone who knows a bit more about business is also conversant with these terms: assets and liabilities; appreciation and depreciation; cost and benefit; credit and debit; equity and debt; profit and loss; receivables and payables; and revenue and expense. All these terms pertain to the plus or minus sides of the ledger – the basic core of the accounts of a firm (or a non-profit outfit) – which must always be balanced at the end of the year or any reporting period.
I mention this knowledge of basic accounting terms to calm the fears of people who have never opened a book on healthcare finance and have trepidation that its contents may be too dense for them to fathom. Relax. There is nothing to be fearful about in this book – it actually illuminates the subject of healthcare finance for you!
Each chapter of this book is very well organized. First, there is a tab called “Theme Set-Up” at the start of each chapter. After a brief overview of the content in that chapter, a number of “Learning Objectives” are itemized – what you will be able to define, discuss, describe, or list as key issues on the specific concepts covered in that chapter.
What follows are: a short Introduction, a heading and write-up on each topic relating to the title of that particular chapter, a sidebar on each “Critical Concept” discussed, and a finally a “Self-Test Questions” tab at the end of each topic in the chapter. To help you further understand key terms discussed in the chapter, there is a running glossary of terms in narrow strips on the edges of the pages.
Each chapter is organized in this very useful way, making it easy for you to read, understand, absorb and even recall what you learned. It is a delight to see such a marvelous layout of each chapter, facilitating learning.
I urge readers to read the Critical Concepts sidebars and the terms in the glossary in the narrow columns on the sides of the pages, in order best grasp the material. When you do these two tasks, it gets progressively easier for you to understand the content in subsequent chapters. This is a good starting approach to learning – getting the meanings of key concepts and terms.
In addition to the 13 chapters of the book, there are four others – chapters 14 through 17 – that are found online at www.ACHE.org/books/FinancialFundamentals.
These online chapters cover subjects not found in the printed book, such as on financial markets and securities; business valuation and financing of leases; distributions of bonuses and dividends to owners, as well as repurchases of stock; and capitation (per- patient periodic payments), rate-setting and risk-sharing.
As another added benefit to readers, two appendices are available: one on ratios pertaining to operations and the other on financial analysis.
Learning is better when practice is involved, I believe, and I am sure you will agree. For example, you learn a language much quicker when you speak it often. So in this book, five real-life cases are provided that help readers better learn the concepts presented in the book. The cases pertain to the finances in a dialysis center, a university hospital, a medical practice, a clinic, and a community hospital.
The scope of this book is wide. You learn what healthcare finance is, in what types of organizations it is used and how; business basics and goals; the wide range of ways healthcare is paid for; how providers (hospitals, doctors, etc.) can estimate the cost of healthcare services and how to price them so they do not lose money when they sell them. This is for non-profits as well, so they do not end up with losses.
Other areas this book covers are: planning and budgeting costs, revenues and income; managing cash and cash flows; creating a healthcare organization with different financing options; raising capital with equity-sharing or profit-sharing; handling debt and payables; reporting financial condition (balance sheet) and results (income statement) to shareholders and the government; and analysis of cash flows and financial results.
All in all, my opinion is that this is a valuable book, with its comprehensive coverage of the subject, excellent organization and clear writing, and important study aids provided in it that make learning easier than usual, and fun. Dr. Louis Gapenski is to be commended for his hard work reflected in this superior book.