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Research Proposal - An Investigation on Financial Management in Hospitals: Case Study of Nurse Managers

An Investigation on Financial Management in Hospitals: Case Study of Nurse Managers


1.0  Title

            The working title of the study is initially drafted as - An Investigation on Financial Management in Hospitals: Case Study of Nurse Managers. Nurse manager is a key role in the healthcare as s/he serves as the backbone of the organization. Nurse managers therefore should develop concrete and pragmatic skills such as operational, financial and management. Amongst the responsibilities of the nurse manager, to balance the tensions between quality and cost seemed to be the most challenging.    

2.0  Abstract

            In this paper, the researcher provided a detailed proposal for a qualitative research about financial management in hospitals. Case study of nurse managers is involved in the investigation. The proposal basically tackles the context of the study, preliminary literatures read and the methodologies to be used. Questions to be answered and objectives to be addressed are also presented. Basically, the study will purport to investigate financial management by exploring the key financial roles of nurse managers.

3.0  Introduction

Context of the study

            The healthcare industry is facing significant financial challenges and dilemmas. According to the World Bank, all health financing systems attempt at observing three basic principles of public finance. First focuses on raising enough revenue for the purpose of providing individuals with basic packages of essential services and financial protection which can be used against medical expenses caused by illness and injury. Such endeavor should be taken in an equitable, efficient and financially sustainable manner. Second deals with the management of these revenues to pool health risks equitably and efficiently. Third ensures the purchase of health services in ways that are allocatively and technically efficient.

            In developing countries, the ability to improve health outcomes, provide financial protection to the people and ensure customer satisfaction are the main factors to consider in providing basic health services. There are some dilemmas that the healthcare industry will face. These are the fundamental demographic, epidemiological, economic and political constraints for both the needs base and the present and future economic circumstances in meeting these needs and the current health spending patterns in domestic levels as well as domestic resource mobilization; risk pooling mechanisms in place including national health service systems, social health insurance, voluntary health insurance, and community-based health insurance; external financial flows; and government policies relating to health issues.

            Today, hospitals and health care providers are facing problematic issues and practical difficulties in keeping the organization financially feasible. The pressure is on providing health care services while combating extreme cost demands. Despite of all the problems in the developing countries towards achieving a highly sustainable health financing, there are specific predicaments in the institution level. How the institutions could properly manipulate health care resources such as labor, supplies and capital in order to guarantee financial feasibility so that it can meet its immediate and long range objectives is the main problem.

            Providing quality treatments for the patient is an outgrowth of organizationally and financially sustainable health institutions. There are external forces that influence the healthcare financial management such as rate regulating agencies, peer review organization, prevailing charge profile, customary charge profile, preferred provider organizations, certificate of needs regulations, budgeting requirements for medical and technological advances and labor relation problems. These restraints and control of health care costs calls for shared responsibility or management by involvement.

            However, the persons responsible could only do their best to control the costs but will not increase the productivity of the institution. This is a major challenge for nurse managers. Nurse managers, in the onset, are responsible for the costs and revenues of the healthcare institution. Specifically, nurse managers are required to understand organisational budget reports. This includes developing basic unit budget, monitoring and analyzing budget variances and being able to develop strategies to address these variances. Aside from these, nurse managers need to develop a strong working relationship with the finance or financial department of the hospital (Danna, 2010).

            Finkler et al (2007, p. 5) noted that this is in addition of the basic clinical functions of the nurses so that the essence of nursing will be maintained. Therefore, the financial aspects of the role of the nurse managers are growing and becoming more sophisticated. The key reason for nurse managers to develop a strong understanding of the relationship between cost and quality is the fact that healthcare services are costly to provide. As such, only health care organizations that are financially sound can provide high quality services. Organizations that do not pay adequate attention to their financial may find themselves in a difficult position (Finkler and Graf, 2001, p. 1).  

Statement of the problem

            The share of total economy consumed by health care services is large and growing as well as the pressures to effectively control health care spending. The pressure is on nurse managers to provide high quality care in a cost-effective manner. As the role of the nurse managers evolve, the level of responsibility for issues of financial management has increased dramatically for nurses at all levels of health care organizations. To be able to control costs, nurse managers need to understand those costs, their origin and the way they can be managed. Having said this, there are questions that needed to be reflected on the role of the nurse managers in effective financial management.

1)    How nurse managers perceive their financial roles? Are these roles interfering in effective performance of their clinical roles?

2)    How strategic is having nurse managers to play key financial roles? Or is having nurse managers playing financial roles problematic?

3)    How nurse managers aid in maintaining the balance between cost and quality? In what ways nurse managers are contributing to the cost effectiveness of the operation?

4)    How nurse managers’ financial roles are influenced by the organization's desire to cut cost while maintaining the quality of health care services? Is there a possibility of a cost versus quality conflict?

Research aim and objectives

            The main purpose of the study is to investigate financial management on hospitals from the perspectives of the nurse managers. In lieu with this, the following research objectives will be addressed:

·         To understand the nature and dynamics of the financial management in the health care setting

·         To establish the financial roles of nurse managers as a contributory factor in the success of the organization

·         To analyze the tradeoffs in maintain health care quality that is based on cost effectiveness

4.0  Preliminary Literature Review

Financial management in the health care

            Management budgeting is perceived to be a key element in the general management process. It sought to involve clinicians, nurse managers and other budget holders in understanding their own management roles, with a view to improving services through more effective management at local level, and it was stressed that management budgeting should not be seen as an accounting exercise or as a device for containing costs (Woof, 1993). Covaleski and Dirsmith (2002), on the other hand, view budgeting as one means for achieving control over activities performed at middle and lower levels in the organization through an essentially downward flow of information.

                Budgeting, particularly in the nursing services area, where centralized control by a hospital administration may not be attainable, is more complex than this traditional definition would suggest. In such a setting, budgets may well be used as a negotiating tool with which middle level managers advocate the needs of the subunit to upper-level organizational members. Such a use of budgets would emphasize an upward flow of information which is, in turn, consistent with the image the organization wishes to portray to its environment (Covaleski and Dirsmith, 2002).

            Sonberg and Vestal (1993) stipulate that nursing financial management is the natural outgrowth of the increased responsibility being assumed by nursing administrators. While nursing administrators are honing their knowledge on the fiscal aspect of the operation, they are also required to understand the broad scope of financial management. These nursing administrators are taught and delegated financial control compared to the other members of the nursing management team. For the authors, financial management is a triad of complex, ongoing processes essential to institutional management. It is for the nurse population to address the new challenge and accept the responsibility for the business aspects of nursing.

            Barrett (1990) claims that nursing administrators should play a key role in a healthcare organization's financial planning and management. Nurses can help financial managers address such issues as managed care, cost accounting, staffing, and quality assurance.

Financial role of nurse managers

            Herrin and Prince (1994) refer to nurse managers as the leader in health care delivery system. As nurse managers collaborate with other managers in the organization, they are calling upon skills and advanced education to carry out functions in the areas of clinical systems management, human resource management, environmental management, and financial management. This is necessary considering the fact that the nursing budget constitutes one of the largest department budgets in most hospitals and in many cases involves managing millions of dollars (Hodges and Poteet, 1991).

            There is a continuing problem with authority in matters germane to resource allocation (Hodges and Poteet, 1991). Hence, nurse executives are allocated financial control. However, the degree to which the nurse executive has freedom to control financial resources has a major impact on the hospital's ability to compete in a rapidly changing marketplace characterized by a severe nursing shortage. This is more so since control could be diffused especially when there is a nursing division budget that coordinates all the department’s financial matters (Zachry et al, 1995).

            Abernethy and Stoelwinder (2006) claim that the extent to which nurse managers uses management control systems will depend on whether their goal orientation is to system rather than output or derived goals. Budgeting is considered a management control strategy. When it comes to the goal orientation of nurse managers, the tendency is for nurse managers appear to develop their goals of professionalisation without a diminution of their organizational focus or their orientation towards providing a high standard of patient care.

            Cost effective health care has become the motto of the industry since the 1990s. Although a great majority of costs can be controlled on individual nursing units, the problem is that many clinically expert nurse managers lack skills in financial management. There is the need to teach such skills in a framework in which cost was balanced with quality. Colsolvo and Peters (1991) discovered that while additional roles may impede the traditional roles of the nurses, nurse managers are keen in learning new skills to keep with the current needs. 

Recommendations for the financial role of nurse managers

            Having said this, Lemire (2000) asserts that the changes and expansion in the nurse administrator role indicate a need for a specialized body of financial knowledge and skills for making system focused decisions that integrate the clinical and business aspects of healthcare. There is a high agreement on the important financial management concepts to the nurse administrator role between the nurse administrators and chief executive officers. As proposed, a graduate level financial management course that includes concepts for course content and practice applications is required.             Poteet et al (1991) offer another perspective noting that chief nurse executives face staggering financial responsibility. Nonetheless, a variety of processes are used to administer budgets in excess of $14 million. What these nurse executives need therefore is on-the-job experience, instead of formal education, which can be considered as the major means of acquiring expertise in financial management.

            For Storfjell and Jessup (1996), there is a need for an activity-based cost management (ABCM) which they described as an exciting management tool that links financial information with operations. By determining the costs of specific activities and processes, nurse managers accurately determine true costs of services more accurately than traditional cost accounting methods, and then can target processes for improvement and monitor them for change and improvement. ABCM process is equipped with features that can be applied to nursing management situations.

5.0  Methodology

Research philosophy

            Basically, the study is interpretative in nature. This study will adapt an interpretivist approach in research. Interpretivism is the necessary research philosophy for this study because it allows the search, of the ‘details of the situation, to understand the reality or perhaps a reality working behind them. From the interpretivist perception, it is necessary to explore the subjective meanings motivating people’s actions in order to understand their actions (Saunders et al, 2007). Susceptibility which may come from the side of the researcher(s) is the inherent limitation of the study. Remaining vigilant in engaging in surveying and interviewing as well as interpreting data would address this issue.

            There are two reasons for situating myself in this type of philosophy. Firstly, there is the need to gain first-hand knowledge about the issue while the resulting data analysis is expected to shed new light (be it positive or negative) on how people view criticality of financial management in hospitals and the role that nurse managers play. Second, I am interested in conducting my research in a qualitative manner because I want to place myself in the position of viewing the value of an effective financial management in an institution which basically caters to the living and sustaining the quality of life health-wise.

Research strategy

            Qualitatively, the study will try to find and build theories that will explain the relationship of financial management with nurse managers and then the subsistence of the healthcare system. According to Nykiel (2007), there are two main advantages to using qualitative study. The first is it enables the researcher for interaction with respondents. Thus, this freedom enables the in-depth probing of issues, at the same time, yields great details in responses and the second is it allows interaction between respondents. Likewise, the qualitative elements which do not necessarily having standard measure such as behavior, attitudes, opinions and beliefs within the organisational domain are able to be analyzed.

            Case study method will be also applied. Robson (2002) defines case study as a “strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence.” Case study approach would be most appropriate to exclude the experiences nurse managers working on the financial aspect of the hospital.

Data collection

            Survey of nurse managers will be conducted using a structured questionnaire.  A structured questionnaire will be thus developed for the purpose of this study. Because it is structured, the researcher will try not to influence the environment which is being observed (Bell, 2005, p. 188). Through this, comparative analysis of the experiences of nurse managers will be plausible. This will represent the primary data of the study. This will be followed by a focus group interview of the nurse managers which will also represent the primary data.

            For the secondary data, research reports and books and journal contents will be consulted as well as theses and related studies. Sometimes, secondary research is required in the preliminary stages of the study to determine what is known already and what new data are required, or to inform research design. Preliminary research is already incorporated in this study. Internet databases will be also consulted including Questia, Highbeam and Emerald.

Data analysis

            Descriptive statistics will be used to analyze the results of the survey. Qualitative data analysis will be used to collect relevant themes from the analyzed data and will categorise them accordingly. From those themes, the study will develop insights regarding the subject. This type of analysis is highly inductive as the themes emerge from data and are not imposed by the researcher or evaluator. Background reading can form part of the analysis process.

            Considering a flexible approach, the choice and design of methods are constantly modified during data gathering based on continuing analysis. This will give way for creation of an investigation of important new issues, concerns, probabilities and questions as they arose (Anderson, 1998). Nonetheless, in cases where the chosen research methodology proved to be inadequate, insufficient and not suitable, it will be immediately dropped off so as not to jeopardise the quality of the investigation. 


Abernethy, M. A. & Stoelwinder, J. U. (2006). Nurse managers and budgeting: Professional/bureaucratic conflict? International Journal of Health Planning and Management, 3(1): 3-18.

Anderson, G. (1998). Fundamentals of educational research. London: Falmer.

Barrett, M. (1990). How nurses can help hospitals achieve financial goals. Healthcare Financial Management Association Journal, 43(6): 68-70.

Bell, J. (2005). Doing your research project: a guide for first-time researchers in education, health and social science. McGraw-Hill International.

Consolvo, C. A. & Peters, M. (1991). Financial management for nurse managers--the bottom line for renewal. Journal of Continuing Education in Nursing, 22(6): 245-247.

Covaleski, M. A. & Dirsmith, M. W. (2002). Budgeting as a means for control and loose coupling. Accounting Organizations and Society Journal, 8(4): 323-340.

Danna, D. (2010). Essential business skills for nurse managers. Strategies for Nurse Managers Journal.

Finkler, S. A. & Graf, C. M. (2001). Budgeting concepts for nurse managers. Elsevier Health Sciences.

Finkler, S. A., Kovner, C. T. & Jones, C. B. (2007). Financial management for nurse managers and executives. Elsevier Health Sciences.

Herrin, M. D. & Prince, S. M. (1994). The new nurse manager: partner in managing costs and quality. Hospital Materiel Management Quarterly, 16(2): 41-47.

Hodges, L. C. & Poteet, G. W. (1991). Financial responsibility and budget decision making. Journal of Nursing Administration, 21(10): 30-33.

Lemire, J. A. (2000). Redesigning financial management education for the nursing administration graduate student. Journal of Nursing Administration, 30(4): 199-205.

Nykiel, R. (2007). Handbook of Marketing Research Methodologies. Routledge.

Poteet, G. W., Hodges, L. C. & Goddard, N. (1991). Financial responsibilities and preparation of chief nurse executives. Nursing Economics Journal, 9(5): 305-309.

Robson, C. (2002) Real World Research, 2nd edn, Oxford: Blackwell.

Saunders, M., Lewis, P. and Thornhill, A. (2007). Research methods for business students. 4th edition. Harlow: Pearson Education Limited.

Sonberg, V. & Vestal, K. W. (1993). Nursing as a business. Financial management. Nursing Clinics of North America Journal, 18(3): 491-498.

Storfjell, J. L. & Jessup, S. (1996). Bridging the gap between finance and clinical operations with activity-based cost management. Journal of Nursing Administration, 26(12): 12-17.

Woof, D. (1993). Management Budgeting. Journal of Management in Medicine, 1(2): 151-157.

Zachry, B. R., Gilbert, R. L. & Gragg, M. (1995). Director of nursing finance: controlling health care costs. Nursing Management Journal, 26(11): 49-53.

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