Roles of Finance in Health Care
Cost containment refers to the act of regulating the financial expenses that are required during the daily running of an organization (Abel-Smith & Mossialos, 1994). Additionally, this concept is also relevant in ensuring specific projects within any public or private sector is achieved within the pre-outlined constraints of the budget. Health care forms one of the significantly impacted sectors with the concept of cost containment. Cost containment as a managerial tool has consistently contributed towards the low maintenance of financial costs attached to healthcare activities. Despite cost containment possessing positive contribution towards sustainability in health care expenditures, it has also been argued to be an encouraging factor towards racial abuse and discrimination within the health sector.
What Cost Containment Practices Do We See from Private Health Insurance Versus Public Health Insurance?
Public health insurance such as Medicare and Medicaid significantly contributes to taking care of the costs of health services on behalf of vulnerable members of society. Medicare specifically benefits the elderly and persons with disabilities through settling their health service costs whereas Medicaid covers the health expenses of low-income individuals and persons with disabilities. Through this health insurance provision, health service providers are capable to obtain financial compensation attached to the rendered service thus enabling their continued operation and functionality. On the other hand, private health insurance dominates the healthcare landscape as it is considered by a majority of individuals due to its robustness. Additionally, employer-based health care coverage forms a common source of this insurance cover. Private health insurance has made a major contribution to the growth and development of the health care sector through its robustness and affordability. In the long run, it has successfully met the health financial obligations of its beneficiaries thereby maintaining financial flow within the health care system.
How Do National Expenditures Affect an Organization?
An increase in national expenditures improves the general operation of an organization or sector of the economy. This implies that with increased national government, public and private expenditure on a certain sector of the economy, the sector in the discussion is prone to service delivery improvement as a result of improved allocation and circulation of resources. Finally, this helps in the growth and development of the organization or sector leading to the general growth and stability of the economy at large.
What Trends Are We Seeing with National Expenditures? What Does the Future Look Like?
According to the evident trends within the national expenditures, many business stakeholders and the national government are highly attracted to making financial engagements and obligations within the healthcare sector. This is witnessed through the consistent increase in health insurance companies that offer adequate health covers to their extensive policyholders. This posses the economic benefit of balancing the financial flow within the health sector. Nevertheless, the government’s health expenditure approach which has allocated more funds to the health sector has potentially improved the health service delivery.
The future holds the healthcare sector to dominate a better fraction of the national expenditures. This is a result of the sector possessing an increased level of financial attraction to private investors in the form of insurance providers.
What Role Does Cost Shifting Play?
According to Morrisey (1994) Cost shifting entails the act of charging more service fees to an insured patient than the uninsured patient for a common service to both patients. This concept is a common practice among health care providers to compensate associated financial losses encountered during the provision of health services to uninsured patients. This compensation is realized through the implementation of the surplus service fee to insured patients. In the long run, cost-shifting successfully helps hospitals to generate and balance financial resources that are very necessary for its daily operations and functions towards health service delivery as a goal.
Cost shifting play concept stipulates that whenever a service discount is demanded by a patient through the underpayment of health services, the health facility is forced to review their reimbursement structure to provide a cover-up for the resulting financial gap. Finally, other patients are forced to pay for the resulting financial difference hence leading to an increase in their health service fee to keep the health facility financially sound.
What Are the Various Methods of Reimbursement and What Trends Do We See with These?
Healthcare reimbursement refers to the payment of health services after their successful provision. This process requires a series of steps which are normally concluded within a month after the provision of the health service. In some cases, health providers do avoid these steps through direct billing of the patient who shall further partake all the necessary procedures as outlined by his or her health policy. Below is a discussion of the commonly experienced methods of hospital reimbursement.
Discount from billed charges
This method of reimbursement exposes the health providers to the least amount of risks as the model demands that the payer agrees to reimburse at a specific discount which is arrived at upon negotiations (Casto & Forrestal, 2013). Additionally, for negotiation purposes, the model adopts the charge description master which is mandated to track billing and various activities. It is always the easiest to calculate despite the payers possessing characters that are associated with deep scrutiny of the charged bills. As a result, increased rates of denials can be encouraged which may lead to further complications such as audits and works of recovery.
Fee-for-service
According to this method, specifically agreed rates are involved for any of the outlined services or procedures as intended by the beneficiary. Additionally, the model includes various components of care and extensive cost-controls.
Value-based reimbursement
According to the latest model of the value-based model of reimbursement, health providers are compensated for their services in strict adherence to the quality and efficiency of the service delivery. As a result of this linkage, there exist additional incentives that are associated with this model to serve the purpose of encouraging a more positive outcome in relation quality of the service rather than its quantity.
Bundled payments
Concerning the bundled payments method of reimbursement, providers of healthcare services are reimbursed according to the existing care episodes. It is highly dependent on care coordination than other pre-existing case-rate reimbursements.
Shared savings
This method of reimbursement involves the provision of incentives to the providers. This is achieved through provisions of certain agreed percentage as savings with the health care providers. This method finally contributes towards lowering the risks associated with health care providers hence possessing a positive impact on the outcome and care coordination for an outlined population of potential patients. It normally involves the incorporation of various concepts and factors in determining the amounts of shared savings.
With the current trends associated with the above methods of reimbursement, it is still evident that all the above reimbursement methods are disadvantageous to small scale health providers unlike the large-scale providers who can adequately negotiate for the biggest fraction of the financial cake. Finally, the remaining less lucrative financial negotiation shall be left for the small-scale health providers. Additionally, the above models offer a lucrative return to value-based contracts. This implies that health providers that are possession of data to prove their association with improving outcomes tend to be more attractive to insurers.
Reference
Abel-Smith, B., & Mossialos, E. (1994). Cost containment and health care reform: a study of the European Union. Health policy, 28(2), 89-132.
Casto, A. B., & Forrestal, E. (2013). Principles of healthcare reimbursement. American Health Information Management Association.
Morrisey, M. A. (1994). Cost shifting in health care: Separating evidence from rhetoric. American Enterprise Institute.