Legal environment
The current healthcare system has developed globally. The healthcare system has altered as a result of multitude of factors such as technological advancements. The healthcare sector has been impacted by worldwide technological change. Due to technological advancements, healthcare workers have been capable to treat people with less error in the course. Additionally, budgeting and financial systems of healthcare sector has been changes Improved technology design has a positive influence on the healthcare businesses. Management of healthcare businesses faces many challenging issues, as per the “ICD 10 diagnostic” method that involves government laws, operational expense, and novel healthcare techniques which all organizations should obey to. The purpose of this study is to observe how modern healthcare businesses and the social care sector are influenced by continuous alterations happening in the sector globally.
Legal environment: Legislation is among the important factor that has been used to alter the health and social sector in UK. In the 2012, one of the primary regulation that was passed was the “Health and Social Care Act 2012” (Allen et al. 2017) The act made entrance by establishing the first ever lawful obligation regarding the healthcare discrimination. In addition, the laws included health bodies like Public Health England, Department of Health, Clinical Commissioning Groups, and NHS England, The law necessities the bodies to minimize healthcare discrimination between the public of England. Moreover, the act included modifications to those native establishments that have public health responsibility. The other law passed was Equity Act of 2010 (Kaehne et al. 2017). It encourages impartiality responsibility for public sector bodies. The primary objective of this act is to incorporate impartiality into the everyday operating of commerce in the public division. However, there are helpful laws which is the “Social Value Act of 2012” which necessitates representative in the public division to consider the social, environmental, as well as economic wellbeing when buying contracts or services. The establishment of social values is instantaneously linked with the endeavour to decrease impartiality in healthcare through taking actions on healthcare related social dominants
Financial Environment: As per Lafond, Charlesworth and Roberts, (2016) the National Health Service (NHS) operation in the UK are financed by tax payments and small donations from insurance companies. The scrutiny of financial information discloses that the health service is encountering huge force of financing. It is quite challenging to understand what the financial statistics implies for the patients because it is difficult to interpret the connection among financial performance and healthcare quality. Negative financial performance has conventionally been associated with poor-quality care and poor management. Nevertheless, it can also imply that the shortfall is the result of additional spending to ensure quality care. Positive financial performance would imply problems for patients if healthcare professionals changed their service model, compromising quality and limiting access to quality care.
Regulatory Environment: The healthcare regulatory standard in UK was initially incorporated in 2000NHS plan. The regulatory structure has experience several reorganizing, since then. The Health and Social Care Act of 2008’s regulatory structure assures that service offered in agreement with the regulation fulfils the proper quality benchmarks. The basic benchmark was incorporated in 2015 that offered benchmarks that quality must never go below (Sanderson, Allen and Osipovic 2017). Moreover, the benchmark assures that the emphasis of the care is on the patient. The health and social care system implements four regulatory plan that involves voluntarism and safe regulation, met regulation, control and command, and market mechanism. Self regulation alludes to the structure in which the business controls its member’s behaviours. Next, the Meta regulation plan outsources to scrutinize the behaviour of self-regulation. The command and control entails straight regulation by the government. Lastly the marketing mechanisms are implemented to encourage loyalty to benchmarks
Financial Environment
Private Finance Initiatives (PFI): It is term used for financing from private sources for public initiative. Health and social care belongs to public unit because governments are accountable for assuring that the people has better health. Private public partnership is an endeavour by the government to safe financial support for diverse health and social care initiative by functioning with the commerce division (Mansor and Rashid 2016). Private segment businesses might direct the plan after their contribution in financial support.
Agency partners: It entails to collaboration of agencies to raise funds for a specific project. Several health and social care plans might profit from financing collected by different business (Adler, Glymour and Fielding 2016). Private or public agencies may be included in the program if they are concerned. Health and social care programs which has a particular objective, including establishing a community health centre, may profit from agency partners.
Competitive tendering: It is refers to bids where huge institutional investors purchase newly issued government debt. The organization should participate in auction activities to purchase shares. With the help of competitive tendering, the government obtains financial support it requires to do various public projects (Sussex et al., 2019). Health and social care competitive tendering might significantly aid the government receives the necessities funding to carry out numerous programs in the pitch although the organization embrace government securities from their funding.
Outsourcing: It is use of a third-party service provider to complete work that was traditionally performed by an entity. In the health and social care industry, outsourcing is when a government agency deals with third party to perform activities which was previously done in house; this is known as outsourcing (Huo 2017). Healthcare and social services are extensively outsourced, mainly in the part of health insurance that is provided by a range of government allied bodies. Government agencies and health care institutions work collaboratively in order to assure the well-being and health of the public they serve.
In the context of NHS, the healthcare providers are the agents that compose judgments on the place of the standard who is the service user. As a result, agency conflict occurs when the healthcare providers persuade excess consumption to produce extra revenue for NHS or ask for below consumption to reduce expense without minimising revenue. Alternatively, the word stakeholder is broadly used to allude to a crowd that supports the survival of a business and have through impact on the survival of a business (NHS confederation 2022). In the NHS, the stakeholders comprise the tax payers, suppliers, partners, regulators, service providers, and service users.
The importance of communication in managing stakeholder relationships cannot be overstated. Stakeholder communication aids in the creation of value in the management process. Stakeholder communication, on the other hand, aids in the management of stakeholder expectations. Stakeholder expectations are difficult to predict, but they are critical to the success of the company (Heyne, et al. 2020). When good communication is implemented, stakeholder engagement management becomes more efficient. The flow of information through numerous channels to reach stakeholders is referred to as engagement. Stakeholder impressions of how their needs are managed are shaped by effective communication, and as a result, they become more engaged in the activities. Stakeholders can also prepare for predicted future changes with effective communication. Effective communication can enable stakeholders in understanding the need for change and how they may contribute positively to the NHS’s improvement, for example, if changes are required in the NHS (Heyne, et al. 2020). Lastly, the significance of stakeholder communication in the formation of long term relationships is highlighted. The means by which information is given and decisions are made is referred to as communication. Communication fosters harmony and contributes in the development of a long-term relationship.
Regulatory Environment
Due of its limited bargaining strength, the NHS should focus its efforts on suppliers, taxpayers, and the third sector. Stakeholders such as service providers, the media, and the government should all be considered (Miller 2018). Because it is the primary regulator, the government should be kept informed and contacted on a regular basis. Patients are the most important reason for healthcare institutions to exist, and they must be taught. Contractual service providers, such as pharmaceuticals, must maintain high levels of satisfaction with the NHS. Finally, HNS must communicate with service users, suppliers, and potential partners in order to inform, consult, and engage them.
Targeted contact via letters and face-to-face communication is one method of communicating with stakeholders. This form of communication can be supplemented by telephone and email communication (Lybecker, McBeth and Stoutenborough 2016). Electronic channels, which are only used within the company, are the other way of communication. Newsletters, intranets, and electronic bulletins are examples of internal channels. Another method of electronic contact with stakeholders is the release of yearly reports, which are sent to them by email or website. External routes, such as the usage of trust websites, can also be utilised. Lastly, organised events and seminars may be used to engage stakeholders (Almazan, Chen and Titman 2017).
A financial constraint alludes to impediment that restricts the financing availability for health and social services. The health and social care service managers might be impacted by financial constraints because of health and social care system. This is because of the budget and expenses which are challenging to please through customers and stakeholders. The health and social sector is dependent on funding because it makes the service doable. The managers could more productively make decisions about acquire and procurement the goods and patients require while funding is freely accessible (Green et al. 2017). Customers are free to pay costs for the cure they require because they could cover the related medicinal payment by its own. There are number of methods from which the healthcare organization’s stakeholders might connect effectively in the investment verdict. The income stakeholders make from their asset are utilised to fulfil the desires and needs of the customer.
Hiam et al. (2017) recommends that expenses are disbursement of the gathered information that is utilized by managers in accessing the overall expenditure and cost that is needed for maintaining and delivering the services. Managers could emphasis their estimated resources by budgeting. There are numerous kinds of expense which are fixed cost, direct cost, indirect cost, semi variable and variable.
The costs are the yield of any services or product that are provide to organization or people. Like any other companies, financial restrictions in health and service care are accounted in agreement with the responsibility departments and the input resources. It explains that health and social care sector verdict necessities cost to make the business development and deliver services. Numerous accounting systems believe that activity base system is incapable of offering inadequate details (Hiam et al. 2017). For example, project base systems financial records do not offer revenues and costs that are sustained in each initiative. Health and social care sector could implement management accounting system that is competent of offering the data about management process. However, the only issue is that this system hardly ever settles with the management and financial reports. Therefore it is compulsory that all financial information of the health care is obtainable so that it could fulfil the needs of stakeholders. Furthermore, it would significantly aid the company stakeholder and management in decision making process.
Private Finance Initiatives (PFI)
As per Watkins et al. (2017), there are varieties of methods from where financial constraints may negatively influence the healthcare service delivery and the lack of ability of customers to meet the expenses for instance, in healthcare organizations, management might encounter problems of functioning with inadequate resources or materials to offer efficient services in management. It is typical for healthcare employees to go on a strike. The reason behind this is that the healthcare companies are facing financial problems. Another cause why managers are not able to execute correctly the acquire responsibilities is for the reason that of constrained financial resources. Budgeting becomes a complex activity due to shortage of funding. For instance, it is probable that health care organization do not have enough resources to fulfil the requirements of all their customers.
According to Watkins et al., (2017), several customers who doesn’t receive their required service, lose faith in organization. Therefore, it is extremely possible that the customer would relocate to organization which could satisfy their requirements. As a consequence, a loss of trust in the ability of the organization to offer services might lead in people looking out services somewhere else. Stakeholders might not be competent to capably return on their investments because of a lack of clients in the businesses. On the other hand, the stakeholders might choose to pull out their inadequate resources from the company, leading to deterioration of the emergency or probably the end of the company.
Mostly, in the perspective of the clients, financial constraints are resolute by the expense of services as well as financial proportion of those clients. When health and social services are too expensive, the bulk of possible clientele would not be able to provide them. As a result, patients with low-income are often unable to meet the financial needs of health and social care system, so they doesn’t receive proper treatment. These patients inevitably have negative health results as a consequence of their inability to obtain the most suitable type of treatment or service.
Customers who are incapable to pay for healthcare treatment weren’t the only people who face financial difficulties. On the other hand, financing and budgeting of a task has a direct influence on the management of the companies. It is unfavourable of investors, because they would not be receiving desired profits. Financial constraints, including expensive healthcare services might be conquer through patients using affordable healthcare financing alternatives such as insurance coverage (Brouwer et al. 2019) Companies may seek for other financing alternatives because of their financial constraints. As a consequence, companies would be able to obtain financing they require to continuing operating. The grants and loans might be attaining through the company to fulfil the management and budgetary needs.
The challenges of budgeting in the public sector are as follows:
Allocation Dispute: In the public sector, budgeting may encounter difficulties to certain departments in which department managers could raise problems with regard to allocation. Generally it occurs when several departments are not included in the procedure as well as when departments are not permitted to outsource low cost services from outside the companies (Mauro, Cinquini and Grossi 2017).
Agency partners
Budgetary Difference: An experienced manager may incorporate budgetary subside, that means raising cost and minimizing income in a specific department to accomplish positive budgetary difference. Although it may be favourable method of controlling difference in budget, it may be resulting to management difficulties which may need misunderstanding function to recognize (Mauro, Cinquini and Grossi 2017).
Biasness: It is numeric in the character of budget, as a result management take notice on the qualitative feature of the company. It implies that the concentration of the company is on maximizing on the profit. However the clientele are determined on approval they obtain from the services instead of profits (Saliterer, Sicilia and Steccolini 2018). For example, in a healthcare organization the patients would concentrate service quality they get from the organization. As a result, it becomes challenging to include these aspects and ideas in the budget because of their qualitative behaviour, therefore the idea of budgeting don’t provide proper support to the requirements of the customer
Time factor: Budgeting in the public sector is time consuming and complex. The circumstance generally occurs in companies where they constantly modify their system such that several repetition of the budget is necessary (Mutuma, Ireri and Lyria 2016). The time utilised in the budget could only be minimised where adequately delineate budgeting practices. They have included IT in its budgeting procedures.
Firm decision: In the public sector, the development team in the budget making procedure always concentrates on strategies of companies towards the end of the year. On the other hand, fewer attempts are made to significantly aid in reconsidering the strategies (Anessi-Pessina et al. 2016) As a result, and basic changes in the operation’s market negatively impact the budget and minimize its competitive edge against the rivals.
There are two types of budgeting: Incremental and Zero based budgeting, that are usually utilized in a company. Both has its own share of advantages and disadvantages.
Incremental budgeting: It is the traditional way of budgeting. It is a process where a new budget is formed by adding and subtracting from the exiting budget. The advantages of this budgeting are:
- Since the budget provides equivalent alteration from one year to next, companies are not in a place to contend with their rivals as it requires high volume of budget resources. As a result the chances of competition in the organization are less (Ouassini 2018).
- Incremental budgeting significantly aids in ensuring that the finance stays stable over period, as costs are comparatively easy. It can be supportive for organizations which necessities financing for several years.
- The reliance on the numbers and statistics from the previous budgets assures that the budget stays quite dependable and consistent over period of time.
- This budgeting is the simplest form of budgeting approach. It does not necessities complicated calculations because it utilizes the budget for the exiting period to estimate the future budget. Moreover, only a less number of suppositions are needed in this approach. Lastly the simplicity of the approach enables the management of organization to save time on budgeting (Bouillon, Ehoff Jr and Smith 2016).
- The steadinesses of this approach do not offer any incentives to the management of the organization for reconsidering its budgets. Due to the lack of evaluating method, budgets are vulnerable to mistakes, improper supposition, and waste.
- The expectation that the company’s activities would remain stable is a key driver of incremental budgeting. As a result, budgets are frequently reactive to possible developments which may emerge as a consequence of unexpected events or other factors (Bouillon, Ehoff Jr and Smith 2016).
- This budgeting strategy has the potential to stifle development and innovation. As new budgets are predicated on existing budget estimates, there is limited scope for entirely fresh concepts or initiatives to be funded. As a result, the budgeting system hinders creative thinking and promotes a conservative corporate culture.
- In a corporation, incremental budgeting could lead to excessive spending. This is due to the fact that departments in the organization frequently spend all of the funds assigned to them in a plan one year in to get more in the following budgeting year. Under incremental budgeting, each component of the budget is increased by a specific amount each year. Certain departments, on the other hand, may not require more funding each year yet would be given one as part of the budgeting process. As a result, the budgeting process could become inefficient and wasteful (Asogwa and Etim 2017)
Zero base budgeting: In this approach, the budgets are created from zero, which indicates that for this year’s budget, no data from the prior year’s budget is required. The advantages are:
- It also promotes departmental communication and cooperation, as well as employee motivation, by incorporating them in decision-making (Oraka, Sopekan and Udeh 2016)
- A zero-based budget eliminates the difficulties of incremental budgeting by requiring explanation for every line item.
- By eliminating any unnecessary or repetitive tasks, it results to the recognition of possibilities and better cost-effective methods of working.
- Since it employs current data rather than historical data, it enhances resource allocation efficiency (Dali 2021)
- Unlike standard budgeting approaches, which require each department to rethink and calculate each item that impacts cash flow, this method requires each department to reconsider and calculate each item that affects cash flow. This helps with cost reduction to some level because it provides a precise image of costs versus desired performance (Ibrahim 2019)
- It’s a challenging process to explain each line item and expense, and it necessitates manager training (Rassadina, 2018).
- Creating a budget from the ground up may necessitate the participation of a big number of staff. Several departments might be unable to do so due to a lack of time and human resources.
- It takes a long time for a corporate or government-funded institution to complete annual budgeting, especially when compared to incremental budgeting, which is a much faster procedure (lddin and Dali, 2021)
The goal of zero-based budgeting is to accurately reflect a department’s genuine costs. Despite the fact that it takes longer, this is a more suitable method of budgeting. At the finish of each day, the organisation must decide if it intends to spend time and resources in the budgeting process in order to deliver more precise data or opt for the simpler incremental budgeting method.
The dissimilarity in total revenue among the two years is due to a 25 per cent rise in sales in 2019. Despite the fact that the same number of items are sold, income fluctuates in 2019 as prices rise. In 2019, a 25% price increase culminated in increased sales. Since the break-even point in 2018 is greater than the break-even point in 2019, earnings in 2019 would be higher. Despite the same level of production expenditures as in 2018, the company’s earnings would improve in 2019 as its products sell for more money. Before Sams Ltd hits break even, a few more items must be sold, indicating that the business will make more profit in 2019. The company is expected to create more revenue in 2019 than what it did in 2018 owing to the increase retail price of the items. The safety margin was increased much further as a result of this.
Competitive tendering
A set of assumptions underpins the break-even analysis. As per Kresta and Lisztwanová (2017), breakeven analysis supposes that it is uncomplicated to distinguish among fixed and variable cost. Although, in real life, it is not the scene, certain cost has both variable and fixed factors, which in return makes it complicated to analyse breakeven analysis. Further, break even analysis supposes that the fixed cost stays steady despite the consequences of the production level. In real life, it might not be correct. When output reaches a particular level, fixed expenses increase in lockstep, rendering the breakeven analysis obsolete. In breakeven analysis, the variable cost per unit is also considered to remain constant throughout all production levels. Contrary to popular belief, variable costs decrease as production levels raise since the firm becomes more efficient in production as output increases (Tannen 2020).
Breakeven analysis presupposes that the selling price will remain constant, despite the reality that selling prices change in the real world. This assumption in breakeven analysis might lead to erroneous conclusions since a change in the selling price shifts the company’s breakeven point. Furthermore, the method assumes that all units produced have been sold, which is incorrect because firms and organisations have closing and opening stock. It is also assumed that management policies remain constant, which is incorrect because they change in reaction to external factors. In addition, the product mix is expected to remain consistent throughout time that might not have been the case (Lohmann 2020). Lastly, breakeven analysis presupposes that manufacturing method, labour efficiency, and technology remain unchanged. Nevertheless, elements including such market demand, fire, and natural calamities alter and are affected by unforeseeable circumstances.
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Outsourcing
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