Many nurses managers would like to have a nostalgic view of being in nursing leadership, their sole purpose is the patients under their care (Schultz, 2015). Well no one is disputing that the safety and quality of care is important, if the business does not make a profit then it will no longer be present to care for the sick ( Schultz,2015). Many fail to see that business have a higher purpose then just the product they provide (Schultz, 2015). Health care organizations are the cornerstone of communities. Long-term care organizations not only care for the elderly, but provide jobs, health insurance, education and social support, to the public they serve (Schultz, 2015). Nursing administrators have an obligation to be good stewards of the resources that they have been given and make a profit to continue to fulfill the purpose they have been created for (Schultz, 2015). “As each has received a gift, use it to serve one another, as a good stewards of Gods varied grace (1 Peter, 4:10).

     The first scenario given in financial exercise one, wants to determine if it would be more financially profitable for a long-term care center to take an initial payment of $100,000 dollars when a patient arrives to their facility, or to take a payment of $300,000 upon, Mr. Richman death (Nursing 523, 2015). The scenario states that they business will receive 14% interest yearly and expects, Mr. Richman to live another 12 years (Nursing 523, 2015). Compound interest is the beginning principle, plus the annual interest added to the principle that cause the initial principle to increase, making the profit from the interest compound annually (Varela & Abodou, 2012). If the organization took the initial payment of $100,000 dollars and Mr. Richman lived at least ten more years the facility, would make a greater profit, then taking the $300,000 upon his death.

This is a very simplistic view of how to make money in a business. When determining what would be most profitable a manager must take many financial aspect into consideration to include, the economy, inflation, time, long-term organizational goals, government policy, and the cost of resources to make a profit ( Schultz,2015). Furthermore, research has concluded the last few years of someone’s life are the most costly in the terms of resources and money (Schultz, 2015). Due to this problem, the United States government often provides subsidy to long-term care facilities that abide by certain government regulations (Schultz, 2015). Therefore, organizational leaders must abide by these rules to insure the greatest profit. In addition financial managers that have the capital to tolerate some financial risk have options such as annuities, stocks and index funds to create a greater profit (Varela& Abodou, 2012). Albert Einstein stated “the man who understands compound interest will rule the world”.

Capitation is an arrangement made with a health maintenance organization to care for a specific group of people, for a set amount of time, providing agreed upon services prior to the contract (Schultz, 2015). The amount of the capitation is determined by the local cost of medical services in the area as well as the average cost to treat the population included in the HMO’s plan (Schultz, 2015). This is often determined by the client’s previous medical history and use of services (Schultz, 2015). The health care provider is paid a specific amount at the beginning of an agreement (Schultz.2015). Oftentimes the HMO will keep a certain amount of money in a risk pool so if a deficit is created it can be used to cover this discrepancy (Schultz, 2015). If there is a profit it is given to the provider as a bonus (Schultz, 2015). Capitation is a payment method that pays for each customer served rather than the service provided (Schultz, 2015). The objective of this type of payment method is to control the cost of health care services, eliminate the waste of resource and promote physicians to keep patients healthy  (Schultz, 2015). The HMO insures that needed medical procedures are not withheld from clients to improve the physicians profit, by monitoring physicians for underutilization of resources and by tracking and reporting quality outcomes to the public ( Schultz, 2015). One way that it has been possible to control the cost of health care is to hire ARNP’S because they can provide 80% of the services of doctors at half the cost (Schultz, 2015). Due to this fact the United States government is giving incentives to increase these midlevel providers (Schultz.2015). This same principle is demonstrated in financial exercise question number two.

In recent history the government passed the affordable care act (Schultz, 2015). One reason for this action was the difference in the cost of health care services, between providers, organizations and states (Schultz, 2015).It is not uncommon at this time in history for people to pay different prices for the same healthcare services based on their insurance, income, location, or if they are private pay ( Schultz,2015). Private payers are almost extinct because of the drastic rise in the cost of healthcare (Schultz, 2015). Due to the difference in pay rates it is necessary for the nurse manager to be able to calculate the revenue that will be obtained by each person and insurance carrier to determine budgets, resources needed and staffing.