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ABSTRACT: The physician leaders of today and tomorrow need certain foundational tools to meet the industry's challenges, including basic financial knowledge. Unfortunately, having knowledge in these domains does not necessary correlate with the excellent clinical skills that may have led to a physician's promotion into a leadership role in the first place. Furthermore, learning these skills is often left to "on-the-job" training for physicians new to leadership, which can be a slow process. Because significant emphasis is placed on controlling management and costs in the healthcare environment, today's physician leaders need to understand the uniqueness of healthcare economics and how to interpret financial statements. Therefore, they may be better served if they are armed with knowledge in these areas early in their leadership journey. This information provides an introduction to these topics and is not intended to be comprehensive; rather, it should serve as the basis for a longer journey of acquiring literacy, comfort, and experience with the finance of healthcare.
PHYSICIANS ARE EXPERTS IN CLINICAL TREATments and outcomes but often lack knowledge of healthcarerelated finance and the skills to manage finance-related tasks.1,2 Studies have shown that although critical, financial management is the weakest leadership competency among healthcare organization leaders.3,4
Improving healthcare finance literacy and the awareness of healthcare's unique economic environment can enhance physicians' ability to plan and implement fiscal decisions in new leadership positions.1,5 Additionally, understanding the financial aspect of healthcare adds a significant competitive advantage for physician executive positions.6
This review provides an overview of the unique aspects of healthcare economics and a basic introduction to financial statements. Closing the gap with this practical basic knowhow primer will serve new physician leaders well by providing information that will allow them to prepare for the increasing responsibilities associated with their new roles.
SUPPLY AND DEMAND IN NORMAL ECONOMIC MARKETS
The economic principles of supply and demand in healthcare differ significantly from those in conventional economic markets. In conventional economic markets where there are no external market forces, the price of a product or service is determined by the supply and demand for said product or services. In short, price is the "great equalizer," as it is price that establishes the equilibrium between supply and demand (see Figure 1).7
The microeconomics supply curve...