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SMU MBAHCS ASSIGNMENT

SEMESTER III

MH0054

FINANCE, ECONOMICS AND PLANNING IN HEALTHCARE SERVICES


ASSIGNMENT SET: I

SUBMITTED BY:

J.JERALD JEYAPRAKASH
MBAHCS

ROLL NO :- 531010671

SMU- MBA Semester III

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Finance, Economics and Planning in Healthcare Services-MH0054

INDEX

Q.No Q.1

QUESTION WRITE SHORT NOTES ON THE FOLLOWING (A) BALANCE SHEET (B) FIXED ASSETS AND INTANGIBLE ASSETS

Page No

3 6 7 10 17 19

Q.2 Q.3 Q.4 Q.5

DISCUSS HEALTH INSURANCE CATEGORISE COSTS AND EXPLAIN EACH WHAT IS THE SCOPE OF FINANCIAL MANAGEMENT IN HOSPITALS? CHINMAYA MISSION TRUST HOSPITAL IS CHARITY HEALTH ORGANIZATION, WHAT DO YOU T HINK ARE THE SERVICE TAXES ON THIS HOSPITAL? WILL THIS HOSPITAL GETS ANY TAX BENEFITS? DISCUSS. DESCRIBE THE FOLLOWING 1. CONTROLLERSHIP 2. TREASURERSHIP

Q.6

24

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Q.1. WRITE SHORT NOTES ON THE FOLLOWING (A) BALANCE SHEET Answer Balance sheet: It also referred to as statement of financial position or condition, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a companys financial condition". Balance Sheet Heading
Heading Name of Investor-Owned Organization Balance Sheet Dates Assets Current Assets Non Current Assets Total Assets Liabilities Current Liabilities Non-Current Liabilities Total Liabilities Shareholders Equity Common Stock Retained Earnings Total Shareholders Equity Total Liabilities and Shareholders Equity Key pertinent information including: - Accounting policies - Payment arrangements with third parties - Asset restrictions - Property and equipment - Long-term debt Name of Not-For-Profit Organization Balance Sheet Dates Assets Current Assets Non Current Assets Total Assets Liabilities Current Liabilities Non-Current Liabilities Total Liabilities Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets Total Liabilities and Net Assets Key pertinent information including: o Accounting policies o Payment arrangements with third parties o Asset restrictions o Property and equipment o Long-term debt

Body Notes

SMU- MBA Semester III

Reg. No: 531010671

Finance, Economics and Planning in Healthcare Services-MH0054

Sample Balance Sheet Balance Sheets (Assets) Years Ended December 31, 1999 and 2000

SMU- MBA Semester III

Reg. No: 531010671

Finance, Economics and Planning in Healthcare Services-MH0054

Sample Balance Sheet Balance Sheets (Liabilities) Years Ended December 31, 1999 and 2000

SMU- MBA Semester III

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Finance, Economics and Planning in Healthcare Services-MH0054

(B) FIXED ASSETS AND INTANGIBLE ASSETS Fixed assets All Fixed Assets are stated at their original cost of acquisition less accumulated depreciation and impairment losses are recognised where necessary (Also refer Clause N in the Notes forming part of Accounts). Additional cost relating to the acquisition and installation of fixed assets are capitalised. Wherever VAT is eligible for input availment, fixed assets are stated at cost of acquisition after deduction of input VAT. Capital work-in-progress comprises of outstanding advances paid to acquire fixed assets and amounts expended on development/acquisition of Fixed Assets that are not yet ready for their intended use at the Balance Sheet Date. Expenditure during construction period incurred on projects under implementation is treated as preoperative expenses, pending allocation to the assets and is included under capital work-in-progress. Assets acquired under hire purchase agreements are capitalised to the extent of principal value, while finance charges are charged to revenue on accrual basis. Interest on borrowings for acquisition of fixed assets and related revenue expenditure incurred for the period prior to the commencement of operations for the expansion activities of the company are capitalised.

Intangible assets Intangible assets are initially recognised at cost and amortised over the best estimate of their useful life. Cost of software, if any, acquired for internal use, is also amortised.

SMU- MBA Semester III

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Finance, Economics and Planning in Healthcare Services-MH0054

Q.2 DISCUSS HEALTH INSURANCE Answer Health insurance can be defined as an individual or group purchasing health care coverage in advance by paying a fee called premium. On a broader level, it can also be discussed to be an arrangement that helps to defer, delay, reduce or altogether avoid payment for health care incurred by individuals. Health insurance is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program, or from private insurance companies. It may be purchased on a group basis, for example, by a firm to cover its employees or purchased by an individual. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from unexpected healthcare expenses. The health care system in India is characterised by multiple systems of medicine, mixed ownership patterns and different kinds of delivery structures. Public sector ownership is divided between central and state governments, municipal and Panchayat local governments. Public health facilities include teaching hospitals, secondary level hospitals, first-level referral hospitals (CHCs or rural hospitals), dispensaries; Primary Health Centres (PHCs), sub-centres, and health posts. Also included are public facilities for selected occupational groups like organized work force (ESI), defence, government employees (CGHS), railways, post and telegraph and mines among others. The private sector (for profit and not for profit) is the dominant sector with 50 per cent of people seeking indoor care and around 60 to 70 per cent of those seeking ambulatory care (or outpatient care) from private health facilities. The main schemes can be categorized under the following headings: 1. Voluntary health insurance schemes or private-for-profit schemes; 2. Employer-based schemes; 3. Insurance offered by NGOs/community based health insurance, and

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Finance, Economics and Planning in Healthcare Services-MH0054

4. Mandatory health insurance schemes or government run schemes (namely ESIS, CGHS).

Let us understand each of them one by one. 1. Voluntary health insurance schemes or private-for-profit schemes: Voluntary health insurance may be either private or public. Private insurance, buyers are willing to pay premium to an insurance company that pools people with similar risks and insures them for health expenses. In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies provide voluntary insurance schemes. 2. Employer-based schemes: Employers in both the public and private sector offer employer-based insurance schemes through their own employer-managed facilities by way of lump sum payments, reimbursement of employees health expenditure for outpatient care and hospitalization, fixed medical allowance, monthly or annual irrespective of actual expenses, or covering them under the group health insurance policy. 3. Insurance offered by NGOs/community-based health insurance: Community-based funds refer to schemes where members prepay a set amount each year for specified services. 4. Social Insurance or mandatory health insurance schemes or government run schemes (namely the ESIS, CGHS): Social insurance is an earmarked fund set up by government with explicit benefits in return for payment. It is usually compulsory for certain groups in the population and the premiums are determined by income. The benefit packages are standardized and contributions are earmarked for spending on health services. The government-run schemes include the Central Government Health Scheme (CGHS) and the Employees State Insurance Scheme (ESIS). Other government initiatives Apart from the government-run schemes, social security benefits for the disadvantaged groups can be availed of, under the provisions of

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Maternity Benefit (Amendment) Act, 1995; Workmens Compensation (Amendment) Act, 1984; Plantation Labour Act, 1951; Mine Mines Labour Welfare Fund Act, 1946; Beedi Workers Welfare Fund Act, 1976; and Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

The Government of India has also undertaken initiatives to address issues relating to access to public health systems especially for the vulnerable sections of the society. The National Health Policy 2002 acknowledges this and aims to evolve a policy structure, which reduces such inequities and allows the disadvantaged sections of the population a fairer access to public health services. In keeping with the recommendations of the Tenth Five Year Plan and the National Health Policy (NHP) 2002, the Department of Family Welfare is also proposing to commission studies in eight states covering eight districts, to generate district-specific data, which is essential for conceptualization of a reasonable and financially viable insurance scheme. The government also offers assistance by way of Illness Assistance Funds, which have been set up by the Ministry of Health and Family Welfare at the national level and in a few states. Health insurance initiatives by state governments In the recent past, various state governments have begun health insurance initiatives. For instance, the Andhra Pradesh government is implementing the Aarogya Raksha Scheme since 2000, with a view to increase the utilization of permanent methods of family planning by covering the health risks of the acceptors. The coverage is for common illnesses and accident insurance benefits are also offered. The hospital bill is directly reimbursed by the Insurance Company, namely the New India Assurance Company. Concerns, challenges and the way ahead

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Given the situation, there are few issues of concern or barriers towards implementing a social health insurance scheme in India. These are enumerated below along with the possible way ahead. India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks. Insurance is limited to only a small proportion of people in the organized sector covering less than 10% of the total population. Much of the focus of the existing schemes is on hospital expenses. Health insurance per se, suffers from problems like adverse selection, moral hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the absence of any costing mechanisms, there is difficulty in calculating the premium. Q.3.CATEGORISE COSTS AND EXPLAIN EACH Answer The costs are classified into various categories according to the purpose and requirements of the firm. Some of the most important classifications are as follows: 1. According to functions 2. Direct and indirect cost 3. According to variability 4. According to controllability 5. According to normality 6. According to time 7. According to planning and control 8. According to managerial decisions 9. Differential, incremental or decrement cost 10. Opportunity cost 11. Relevant and irrelevant cost. 1. According to Functions: Under this methodology, the costs are classified into various divisions or functions of the enterprise viz. production cost, administration cost, selling

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Finance, Economics and Planning in Healthcare Services-MH0054

and distribution cost and so on. The detailed classification is that total of production cost sub-classified into cost of manufacture, fabrication or construction and another classification of cost is commercial cost of operations; which is other than the cost of manufacturing and production. The major components of commercial costs are known as administrative cost of operations and selling and distribution cost of operations. Production related: o Indirect material such as oil, grease etc. o Indirect labour such as wages of storehouse watchman. o Indirect expenses such as hospital rent and insurance. Office and administration related: o Indirect material such as general office stationery. o Indirect labour such as salary of office staff. o Indirect expenses such as office rent and lighting. 2. Direct and Indirect Cost: Direct costs of a cost object are related to the particular cost object and can be traced to that cost object conveniently and in an economically feasible (cost-effective) way. But this is possible only when the cost can be identified with a cost object or cost unit and even the exact amount incurred on the same is known. For example, the cost of the electricity. The cost of the electricity can be easily traced to the hospital activities. The term cost tracing is used to describe the assignment of direct costs to a particular cost object. Indirect costs of a cost object are related to the particular cost object but cannot be directly traced to that cost object in a convenient and economically feasible(cost-effective) way. For example, the salary of supervisor who oversees the procurement of medicines at a hospital and the pharmacy center it runs, is an indirect cost for a hospital. Supervision costs are related to the cost object (hospital) because supervision is a must for managing the incoming of medicines at the hospital. But the supervision costs shall be termed as indirect costs because supervisor also oversees the procurement of medicines for other related centers/ activities. It is quite difficult to trace supervision costs to the hospital. The term Cost allocation is used to describe the assignment of indirect costs to a particular cost

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Finance, Economics and Planning in Healthcare Services-MH0054

object or cost unit. So there has to be a common/joint cost and some reasonable base, and then cost allocation will take place. Several factors affect the classification of a cost as direct or indirect such as the following: Significance of the cost in question Design of operation Cost collection technology

3. According to Variability: Costing systems record the costs of resources acquired and track how they are then used. Recording the costs of resources acquired and used allows managers to see how costs behave. Let us first consider two basic types of cost-behavior patterns found in many accounting systems. A variable cost changes in total in proportion to changes in the related level of total activity or volume. A fixed cost remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume. Costs are defined as variable or fixed with respect to a specific cost object and for a given time period. Identifying a cost as variable or fixed helps managers in forecasting total costs and in taking many important management decisions. Variable costs are those costs that vary in total directly and proportionately with changes in the activity level. Fixed costs are the costs that remain the same in total regardless of changes in the activity level or quantity of the cost driver, within the relevant range. Examples include insurance, rent, property taxes, supervisory salaries etc. Because total fixed costs remain constant as activity changes, it follows that fixed costs per unit vary inversely with activity: As volume increases, unit cost declines, and vice versa. Variable costs are generally termed as product costs, while fixed costs are known as period costs. Each of the manufacturing components (such as direct materials, direct labour, and manufacturing overhead) are product costs. Product costs are costs that are a necessary and integral part of making the finished product. However, period costs are costs that are matched with the revenue of a specific time period rather than included as part of

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the cost of a product. These are mainly non-manufacturing costs such as selling and administrative expenses. Mixed costs are the costs that contain both a variable element and a fixed element. Sometimes called semi-variable costs, mixed costs change in total but not proportionately with changes in the activity level. These costs do not change within the units of a small range of activity but may change when the output reaches a new level. It is also known as semi-fixed cost or semi-variable cost. Example 1: Make a classification of the different costs given below related to a particular product: Cost Direct Material Salary Expenses Electricity Power Rent Hospital Building Direct Wages Warehouse Charges Amount ( in Rs ) 20000 10000 1000 4500 2000 2500

Solution: We know the following: Direct cost include: Direct material + Direct labour + Direct expenses Indirect expenses include: Factory overhead + Administration overhead + selling overhead

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Finance, Economics and Planning in Healthcare Services-MH0054

Classification of Expenses Classification of Expenses Type of Cost Direct material Direct Wages Direct Expenses Total Direct cost or prime cost Hospital Overhead : Amount 20000 2000 4000 26000

Electricity power Rent Hospital Building Administration Overhead : Selling Overhead Warehouse Charges Total Indirect Expenses

1000 4500

2500 8000

SMU- MBA Semester III

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Finance, Economics and Planning in Healthcare Services-MH0054

4. According to Controllability: The costs are classified into two categories in accordance with controllability, as follows: - Controllable costs: Cost, which can be controlled through some measures known as controllable costs. All variable costs are considered to be controllable in segment to some extent. - Uncontrollable costs: Costs, which cannot be controlled, are known as uncontrollable costs. All fixed costs are very difficult to control or bring down; they rigid or fixed irrespective to the level of production. 5. According to Normality: Under this methodology, the costs which are normally incurred at a given level of output in the conditions in which that level of activity normally attained. - Normal cost: It is the cost, which is normally incurred at a given level of output in the conditions in which that level of output is normally achieved. - Abnormal cost: It is the cost, which is not normally incurred at a given level of output in the conditions in which that level of output is normally attained. 6. According to Time: According to this classification, the costs are classified into historical costs and predetermined costs: - Historical costs: The costs are accumulated or ascertained only after the incurrence known as past cost or historical costs. - Predetermined costs: These costs are determined or estimated in advance to any activity by considering the past events, which are normally affecting the costs. 7. According to Planning and Control: The following are the two major classifications viz. standard cost and budgetary control: - Standard Cost: Standard cost is a cost scientifically determined by way of assuming a particular level of efficiency in utilization of material, labour and indirect expenses.

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Finance, Economics and Planning in Healthcare Services-MH0054

The prepared standards are compared with the actual performance of the firm in studying the variances in between them. The variances are studied and analysed through an exclusive analysis. - Budget: A budget is detailed plan of operation for some specific future period. It is an estimate prepared in advance of the period to which it applies. It act as a business barometer as it is complete programme of activities of the business for the period covered. The control is exercised through continuous comparison of actual results with the budgets. The ultimate aim of comparing with each other is to either to secure individuals action towards the objective or to provide a basis for revision. 8. According to Managerial Decisions: The major classifications are sunk cost and marginal cost: - Marginal cost is the amount at any given volume of output by which aggregate costs are changed if the volume of output is decreased or increased by one unit. - Sunk costs are costs incurred in the past. They are the results of past decisions, and cannot be changed by future decisions. Since they do not influence future decision-making, they are irrelevant costs. 9. Differentials, Incremental or Decrement Cost: The difference in total cost between two alternatives is termed as differential cost. In case the choice of an alternative results in an increase in total cost, such increased costs are known as incremental costs. While assessing the profitability of a proposed change, the incremental costs are matched with incremental revenue. 10. Opportunity Cost: Opportunity cost refers to an advantage in measurable terms that have foregone on account of not using the facilities in the manner originally planned. For example, if a building is proposed to be utilized for developing a new project plant, that of a super-specialty hospital, should be compared with the opportunity cost of the same land if it was used for developing a hospital with general facilities.

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Finance, Economics and Planning in Healthcare Services-MH0054

11. Relevant and Irrelevant Costs: Relevant costs are those which change by managerial decision. Irrelevant costs are those which do not get affected by the decision. For example, if a proprietor is planning to close down an unprofitable healthcare center, this will affect the wages payable to the staff of the center. This is relevant in this connection since they will disappear on closing down of a center. But prepaid rents of a center or unrecovered costs of any equipment which will have to be scrapped are irrelevant costs which should be ignored.

Q.4.WHAT IS THE SCOPE OF FINANCIAL MANAGEMENT IN HOSPITALS? Answer Scope of Financial Management in Hospitals You know that financial management is broadly concerned with the acquisition and use of funds by the organisation. In other words, FM is planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization. FM scope may be defined in terms of the following questions: How large should the organisation be and how fast should it grow? What should be the composition of the oragnisations assets? What should be the mix of the organisations financing? How should the firm analyze, plan, and control its financial affairs?

The answers of all of these questions are a must for financial management and can be used in hospitals for: Inventory Management: Inventory cost accounting methods are seldom used by medical practitioners. After all, doctors and healthcare organizations provide a service, and generally do not sell things. However, inventory is playing an increasingly important role in the financial viability of procedurally based medical practitioners, clinics, and hospitals. Knowledge of financial management helps its staff to manage various cost-volumes of inventory being and to be procured in/for the short term as well as the long term operations.

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Finance, Economics and Planning in Healthcare Services-MH0054

Credit Management: Credit management involves collections and accounts receivables management agency that is dedicated to accelerating cash flow. The knowledge of financial management provides the managers of hospitals with optimum service through expertise, knowledge, technology and open communication. Cash Management: Efficient cash management processes are pre-requisites to execute payments, collect receivables and manage liquidity. Managing the channels of collections, payments and accounting information efficiently becomes imperative with growth in business transaction volumes. This includes enabling greater connectivity to internal corporate systems, expanding the scope of cash management services to include fullcycle processes via ecommerce, or cash management services targeted at the needs of specific customer segments. Investments: Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument. Without the knowledge of finance you cannot work on investment management for the organization might be working for. Capital Budgeting Decisions: Capital budgeting is vital in marketing decisions. Decisions on investment, which take time to mature, have to be based on the returns which that investment will make. Unless the project is for social reasons only, if the investment is unprofitable in the long run, it is unwise to invest in it now. Often, it would be good to know what the present value of the future investment is, or how long it will take to mature (give returns). It could be much more profitable putting the planned investment money in the bank and earning interest, or investing in an alternative project.

SMU- MBA Semester III

Reg. No: 531010671

Finance, Economics and Planning in Healthcare Services-MH0054

Q.5.CHINMAYA MISSION TRUST HOSPITAL IS CHARITY HEALTH ORGANIZATION, WHAT DO YOU THINK ARE THE SERVICE TAXES ON THIS HOSPITAL? WILL THIS HOSPITAL GETS ANY TAX BENEFITS? DISCUSS Service tax in India is an important form of indirect tax. The Central Board of Excise and Customs (CBEC) has the responsibility of collecting the levy in different states in India. It is not imposed in the state of Jammu and Kashmir. Currently, the rate is 10%. What is service tax? It is a type of indirect duty levied on particular services that are categorized as taxable services. The responsibility of paying this kind of levy lies on the service provider. This duty can't be levied on services that are not included in the specified list. Over last one or two years, the domain of service tax been broadened to include new services. The goal behind imposing service tax in India is to lower the extent of concentration of taxation on business and industry without compelling the government to find the middle ground on the revenue requirements. Intersting piece for charities in India Donations for charitable purposes attract tax benefits. If you give to a charitable organisation, not only is your donation exempt from Income Tax in the hands of the organisation, but you can earn a tax deduction too. For this, the organisation must be certified under 80-G or have projects approved under various sections of the regulations which offer tax benefits to donors. Income from hospitals run by charitable trusts: Tax laws of almost all countries provide tax breaks to religious or charitable N.G.Os in the form of exempting their incomes from tax and also by way of granting tax incentives to the donors, who donate moneys to such exempted institutions. Such tax breaks and incentives are also embedded in various provisions of the Income tax Act, 1961.

SMU- MBA Semester III

Reg. No: 531010671

Finance, Economics and Planning in Healthcare Services-MH0054

The concept of income, for assessment of religious or charitable trusts, etc., is somewhat different from assessment of other entities. This is because voluntary contributions are also taken as income. According to section 2(24)(ii), a trust or institution may be wholly or partly charitable in nature. Various provisions will, therefore, be applicable to the activities or purposes which are of this nature. Section 12 makes some changes in the aforesaid income. Firstly, it excludes corpus donations from the ambit of income. Thus, voluntary contributions received with a specific direction that they shall form part of the corpus are to be excluded from the definition of the term income. It may be noted here that these contributions have to be used in accordance with the directions of the donor. And secondly, the value of any medical or educational service, by a trust etc. running an educational institution or a hospital, to a person referred to in section 13(3) of the Act will be deemed to be the income of the trust or institution. If the beneficiary has made any payment for such service, then such payment shall be deducted from the value of the service in arriving at the income. Your donations to organisations that have the following tax exemption certifications are eligible for tax benefits : 80 G: 50% of your donation can be set off against from your taxable income. 35AC : 100% deduction can be claimed for donation for certain projects approved under this section. 35(1)(iii) : NGOs engaged in research in social sciences can be approved for tax exemption under this section. People who have business or professional income can claim 125% deduction of their donation and others can claim 100%. This deduction will be withdrawn after 31 March 2005. 35CCB : NGOs engaged in conservation of natural resources and aforestation are given approval under this. 100% deduction may be claimed by donors

Tax Benefits to Charitable Hospitals: To be or not to be, the debate goes on

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Finance, Economics and Planning in Healthcare Services-MH0054

In Sep 2003, Express Healthcare Management published an article that presented two contradictory views on the existing tax benefits to the charitable hospitals. All tax benefits should be withdrawn According to Mr Ravi Duggal, co-ordinator of the NGO-Centre for Enquiry into Health and Allied Themes, under the Public Trust Act, hospitals registered as trust hospitals are supposed to provide free care to upto 20 per cent of their admissions, OPD and other services and for this, they are exempted from the income tax. All these years, most of the charitable trust hospitals taken the State for a royal ride by not complying with this provision of the Act. The charity commissioner, to whom they are accountable, has also not audited the functioning of these hospitals to find out whether the social benefit of free care for the poor is being provided, in lieu of the tax benefits the hospitals get. For octroi exemption, similar benefit clauses are there. If hospitals do not honour the social commitment as per the Public Trust Act then, there is no reason for them to get any tax benefits. In fact, the income tax authorities too need to review the tax exemptions by conducting audit for the provision of free care. When the Maharashtra government, sometime back, raised this question of 20 per cent free care under pressure from NGOs and activists, and demanded that the 20 per cent free care could be referrals from government hospitals, the hospital lobby went to court and got a stay order. With such an attitude on part of these so called charitable hospitals, all tax benefits should be withdrawn. Hence, the BMC was right in withdrawing the octroi tax exemption given to the trust hospitals in the city. The concessional patients are usually bureaucrats, politicians, acquaintances of doctors and hospital staff or at the most, some rebate in charges is given to the members of the community by whom the hospital was set up. Let us first have transparency about

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concessions as per the law, which should be made public information, and then tax concessions should be given. Exemptions are deserved as they are passed on to patients Contrary to Mr Duggals point of view, Mr Anupam Verma, head, operations, Hinduja Hospital, Mumbai, maintains that the trust hospitals are basically philanthropic organisations. They work as not for profit organisations and their main objective is, to help the government in providing medical care to the public. They assist the government, with the sole purpose of providing health care at minimal costs. The hospitals are not provided with any funds or subsidies from the government, to enable them to provide the care that is required for those in need. Although the exemption on octroi provided only around 5 per cent relief on the actual cost of the imported facilities, such exemptions, including the income tax exemption, is well deserved by the trust hospitals. The surplus margins enjoyed by the hospitals are too less, considering the high costs incurred on the high quality treatments offered. The cost vs price ratio is very high in the treatments offered, and any rise in the cost would mean an increase in the price which will be paid by the patients, for the treatment. The trust hospitals have come to the governments rescue in ensuring the provision of good health care to the people. It is unfair on the part of the government to want to earn a revenue out of the services offered by these hospitals. The exemptions given by the government in income tax and the other taxes are passed on to the patients in terms of reduced treatment costs. The Jeevandayi scheme, proposed by the government, includes providing free treatment to patients referred to the trust hospitals from the government hospitals, with the government paying about Rs 50,000 to the hospital for the treatment. It was strongly opposed because, the patients who were referred came in cars with mobiles in their hands and to add to it, the government blatantly refused to give the assured amount to the hospitals. The percentage of people getting free treatment in the trust hospitals is much more than the percentage required in the proposal and thus, the exemptions are well deserved by the hospitals. Their withdrawal will affect the patients in terms of the price paid by them for the

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services only. The free treatments will continue to be offered to those in need, but the concession given may have to be reduced, if the exemptions are withdrawn. Chinmaya Mission trust hospital is charity health organization getting the all the service and tax exempting from the Indian government

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Q6. DESCRIBE THE FOLLOWING 1. CONTROLLERSHIP 2. TREASURERSHIP

Answer Financial functions in healthcare organisation can be categorised under the following categories: 1. Controllership 2. Treasurership

You will notice that there are hardly any healthcare organisation having separately identified positions as the ones written above, yet every substantial organisation has the separation of duties. Following is the manner in which the above two functions can be further classified: 1. Controllership Planning for control: This covers the function of establishing budgetary systems. Reporting and interpreting: includes the preparation of financial statements. Evaluating and Consulting: involves conducting cost analyses. Administrating Taxes: comprises of calculating payroll taxes owed. Reporting to Government: consists of submitting medicare bills and cost reports. Protecting Assets: developing internal control procedures. Appraising Economic Health: this is done by analysing financial statements.

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2. Treasurership Providing capital: includes making arrangements for bond issuance. Maintaining investor relations: assists in analysis of appropriate dividend payment policy. Providing short term financing: done by making arrangements lines of credit. Providing banking and custody: comprises of managing overnight and short term fund transfers. Overseeing credit and collections: establishes billing, credit and collection policies. Choosing investments: achieved by analysing capital investment projects. Providing insurance: includes management of funds related to selfinsurance program. In the organisations, the effectiveness of financial management is the result of various factors for example environmental conditions, personnel capabilities, and information quality. We already know that a big part of the overall financial management task depends on accurate, timely and relevant information. Since a lot of finance related activities are carried out by the help of the accounting process. Thus for a professional who holds a responsible position in a healthcare organisation, it becomes quite imperative to have an adequate understanding of the accounting process and the data generated by it.

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