Major Factors that Escalate the Costs of Healthcare with Emphasis on Frequent Admission
There are many things that can lead to the escalation of costs of healthcare. One of the most easily observable reasons would be the increase in number of patient admissions. Every time a patient pays a visit to a hospital or any medical institution, this patient incurs costs that would be billed to either him (i.e. out of pocket) or his health insurance provider. Among the total volume of patients paying a visit to medical institutions, only a small but still significant percentage has to be admitted. Usually, these are the cases where the patient has to be observed by the attending physicians because of the seriousness of the clinical complaint or the already diagnosed condition. These things are completely normal, tolerable, and inevitable. After all, hospitals have beds for this very reason. However, what is not normal is the frequent and often unnecessary admission of patients in hospitals and medical institutions. Technically, patients who only have minor conditions that do not require admission stir up the demand for accommodations inside the hospital. The basic law of economics would suggest that the higher the demand is, the higher the price of a commodity or service would be and this is basically the principle that explains why there is a shoot up in healthcare costs as a result of frequent admission. There is no other way to resolve this aside from applying interventions that are aimed at improving care and reducing costs for high risk patients who have been observed with frequent hospital admissions .
Comparison and Contrast of Various Reimbursement Methods and their Incentives to Control Costs
There are numerous healthcare reimbursement methods being utilized in hospitals and medical institutions today. Most of them are self-explanatory in nature. Four of the most common ones would be the fee for service, discounted fee for service, capitation, and salary reimbursement methods. The fee for service reimbursement method is the most traditional; it is also apparently the most commonly used because of its simplicity. It clearly outlines the financial responsibility of the patient and his insurance provider to the health professional and the medical institution. It does not offer any incentives at all aside from its high level of ease of use. The discounted fee for service reimbursement method is more beneficial as far as the goal of cutting and controlling healthcare costs is concerned because it enables patients and health insurance companies to take advantage of predetermined discount rates on the usual and customary prices charged by medical institutions for a specific medical or healthcare service. The capitation reimbursement method is one that is based on the number of patients being service; thus, payment is on a per-head basis instead of per-service. This is cost-beneficial during scenarios where there are a lot of services needed by individual patients that paying for a per-service-based method would not make sense financially . The salary reimbursement method is where the medical professionals get a fixed amount of payment regardless of the service they provide and the number of patients they handle. Among the four, the preferred one would be the discounted fee for service because of the predetermined discount rate that it offers and its significant impact on existing healthcare cost reduction efforts.
Difference between Costs, Charges, Revenue in relation to various Units of Service
In a medical and or healthcare setting, there are units of service. The units of service would be the counterpart of an organization’s various lines of business in a typical for profit business setting. It would only be natural for each unit of service to have different cost, charge, and revenue valuation and calculation methods because after all, each unit is going to be dealing with a specific set of circumstances. It would be disastrous to impose a unified financial valuation and calculation approach in this case, as is the case in a typical non-medical-business related setting. The financial goal, however, would remain the same. The servicing medical institution has to be able to provide services to patients for a reasonable cost in exchange of a reasonable charge; this would enable them to profit from every unit of service provided . Cost, in this scenario, would pertain to the cost of producing a unit of service (e.g. nursing care, rehabilitative care, may be on a per session basis). Charges would pertain to the financial responsibility that the patients have to cover. Revenue would be what the institution would be getting for successfully providing a service. More complicated medical and healthcare services would of course incur larger costs and therefore their charges and revenues would have to get adjusted upward as well.
Why all Healthcare Organizations should make a profit
The complex answer to this question can be summed up in one word: sustainability. Healthcare organizations, just like any other organization out there, rely on a steady flow of financial resources to keep operating . Healthcare organizations have to make both ends meet too; they have to cover fixed and variable costs, operating expenses, and capital expenditures in order to continue serving their patients. Hypothetically, if they are to offer their services at a loss (i.e. with a negative profit per service transaction), they will eventually go bankrupt and if there is going to be one population group who would be most affected in the long run, that would be the patients.
Cost Considerations for Nurses working in Managed Care Environments
Inadequate funding especially for high-cost healthcare and medical cases would be one of the major cost considerations for nurses and other medical professionals working in managed care environments. Even though the idea behind the implementation of managed care environments is to reduce the cost of healthcare without compromising quality, realistically, quality would really be affected significantly once the funding gets restricted. This could be easily felt in high cost medical and healthcare case settings .
Purpose of and Relationship among Operating, Cash, and Capital Budgets
The common purpose of all these financial variables (operating, cash, and capital budgets) is to keep the healthcare institution running and expanding. Operating budget is used to pay all recurring and non-recurring bills—that may be attributed to core and non-core operations. Cash is the key asset that is used in every transaction with the hospital’s stakeholders (e.g. patients, business partners, employees including the medical professionals). Capital budget or expenditure is often used for expansion purposes .
Explanation of the Budgeting Process
The budgeting process for healthcare and medical institutions may vary between countries. In the United States, the healthcare system or at least the patients are highly dependent on insurance companies when it comes to paying their healthcare and medical expenses. This is why one of the goals of the federal government is to significantly improve insurance membership across all states to make sure that everyone gets medically treated as necessary without worrying too much about the costs. It is the medical insurance companies who pay the hospitals on behalf of the patients. In exchange, the hospitals get paid, often heftily, for the services that they provide. They then use the revenues they generated from those services to cover their operating expenses and finance future expansion projects (in order to service even more patients and offer currently unavailable medical and healthcare services) in the form of capital expenditures. The proposed budget for a fiscal year is often scrutinized and approved by a board of trustees or directors. This is often the case in both public and private healthcare institutions settings, although other unique arrangements may be implemented in some organizations .
References
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