Current Financial Environment in Healthcare
It is essential that healthcare managers understand the external factors that have a profound influence on the practice of healthcare finance. A key factor to understanding healthcare finance is the knowledge of all the different and unique setting that provide health services. Healthcare services are provided in numerous settings, including hospitals, ambulatory care offices and clinics, long-term care facilities, and integrated delivery systems.Current Financial Environment in Healthcare
Hospitals afford diagnostic and therapeutic services to those who need more than several hours of care. Hospitals must be licensed by the state and undergo inspections for compliance with state regulations (Gapenski 2013). Most hospitals are accredited by The Joint Commission, which is intended to promote high standards of care. Accreditation provides eligibility for participation in the Medicare and Medicaid programs.
Hospitals are classified as either general acute care facilities or specialty facilities. General acute care facilities provide general medical and surgical services and selected acute specialty services (Gapenski 2013). These facilities account for most hospitals and have comparatively short spans of stay. Specialty hospitals limit the admission of patients to specific ages, sexes, illnesses, or conditions (Gapenski 2013). Specialty hospitals frequently sustain lower expenses than general hospitals because they do not need the overhead connected with providing various diverse forms of care and services.
Hospitals are classified by proprietorship as governmental, private not-for-profit, or investor owned. Government hospitals constitute 25% of all hospitals and are divided into federal and public entities. Federal hospitals serve special purposes such as DOD and VA hospitals. Public hospitals are funded wholly or in part by a city, county, tax district, or state. Federal and Public hospitals provide substantial services to indigent patients (Gapenski 2013). Private not-for-profit hospitals are non government entities organized for the sole purpose of providing inpatient healthcare services (Gapenski 2013). Roughly 80% of all private hospitals are not-for-profit entities and 60% of all hospitals are private hospitals. For serving a charitable purpose, these hospitals obtain several benefits, including exemption from federal and state income taxes, exemption from property and sales taxes, eligibility to receive tax-deductible charitable contributions, favorable postal rates, favorable tax-exempt financing, and tax-favored annuities for employees. The residual 15% of all hospitals are investment-owned hospitals, whose titleholders profit directly from the revenues created by the business. Dissimilar from not-for-profit, these hospitals pay taxes and sacrifice the other benefits of not-for-profit status.Current Financial Environment in Healthcare
Physicians hold a chief responsibility for defining which hospital services are delivered to patients and how long patients are hospitalized. Therefore, physicians play a crucial role in shaping a hospital’s costs and profits and henceforth its financial condition.
Ambulatory care encompasses services provided to patients who are not admitted to a hospital or nursing home. Associated to hospital-based services, these innovative settings offer patients more amenities and convenience and, in many situations, lower prices. Patients who required hospitalization due to the intricacy, strength, evasiveness, or peril connected with certain procedures are now able to be treated in ambulatory locations. Health insurers have instituted payment mechanisms that provide incentives for providers to perform services on an outpatient basis. Ambulatory facilities are not as expensive to run and are less often subject to censurer and certificate-of-need protocols than are hospitals.
Home health care is a substitute to nursing home care but is not readily accessible in numerous rural areas. Third-party financiers, particularly Medicare, have shown mixed signals sufficiently compensating for home health care. Several home health care businesses have been forced to close due to a new, less lavish Medicare payment system.
Long-term care entails healthcare services provided to people who lack all or some functional capability. Long-term care is a hybrid of healthcare and social services. Nursing homes are a main provider of this care.
Nursing home care is accessible at two levels: Skilled Nursing Facilities (SNF) and Nursing Facilities (NF). SNFs offer the level of care contiguous to hospital care. Services must be delivered under the direction of a physician. NFs are envisioned for those that don’t need hospital or SNF care but whose mental or physical circumstances necessitate daily contentiousness on one or more medical services.Current Financial Environment in Healthcare
Long-term care facilities are more plentiful than hospitals, but are smaller than hospitals, and are licensed and inspected by states. The elderly are excessively high users of healthcare services and are chief users of long-term care. Upsurges in demand for long-term care facilities are estimated, as the proportion of the US residents aged 65 or older is anticipated to raise from less than 15% in 2010 to 20% in 2030.
Integrated delivery systems can be organized in several ways, however, the significant features of such systems are that the organization has the capacity to undertake full clinical obligation for the healthcare requirements of a distinct population. In agreements with some insurers, the integrated delivery system obtains fixed expenditures for each plan-covered life and henceforth shoulders both the financial and clinical risks connected with providing healthcare services.
To be an active competitor, integrated delivery systems must curtail the delivery of needless services, for the reason that extra services generate further costs but don’t automatically result in added profits. The objective of integrated delivery systems is to provide all required services to its member population in the lowest-cost setting. Clinical integration between the various providers and mechanisms of care is critical to attaining quality, cost efficiency, and patient satisfaction.
There are numerous potential benefits attributed to an integrated delivery system. Patients are kept in the corporate network of services. Providers have access to managerial and functional specialists. Information systems that track all features of patient care can be established more easily than under a fragmented care model, and the costs to develop them can be shared. Larger, versatile establishments have improved access to capital. The ability to recruit and retain management and professional staff is enhanced. Healthcare insurers can be presented a complete on-stop-shop of services. A full array of healthcare services can be better planned and delivered to meet the needs of a distinct population. Many of these population-based labors characteristically are not offered by stand-alone providers.
Despite the advantages of integration, health system administrators have found that handling large, diverse enterprises is problematic. Frequently, the financial and patient care gains projected were not obtained, and several systems have dissolved. Healthcare reform lawmaking has formed extra incentives that are anticipated to foster the formation of a new category of integrated delivery systems, the accountable care organization.Current Financial Environment in Healthcare
The healthcare sector of our economy is growing rapidly in size and complexity. The role of financial information in the decision-making process cannot be overstated. It is incumbent on all healthcare decision makers to become accounting-literate in our financially changing healthcare environment.
References
Gapenski, C. (2013). Fundamentals of Healthcare Finance, 2nd Edition. Retrieved on December
9, 2016 from: https://kaplan.vitalsource.com/#/books/9781567935714/cfi/27!/4/4@0:0.00
Cleverley, W., Cameron, A. (2003). Essentials of Health Care Finance, 5th Edition. Jones & Bartlett Publishers. Retrieved on December 10, 2016 from: https://books.google.com/books?isbn=0763724955
Every day, it becomes more challenging for hospitals to survive in the current healthcare climate, particularly regarding financial matters. It’s tough to find the money to fund care quality initiatives and other improvements while staying afloat.
With that in mind, Siemens Financial Services surveyed healthcare finance managers around the globe to find out about their top challenges in the current financial landscape. It chronicled the results in a new report.
The biggest economic challenges healthcare providers face right now are fairly universal despite each facility’s location and size.
According to the report, the top four are:
- Managing investment in a capital-constrained environment. Between frequently changing laws, expansion of healthcare access and growing patient demands, hospitals need access to more financial resources to keep up. Plus, the pressure to cut costs while boosting outcomes puts restrictions on how much money hospitals can spend to improve patients’ health.
- Accessing digital innovation and technological transformation. New medical technology is being developed at a rapid pace, but hospitals can’t always take advantage of its benefits, whether it’s due to cost constraints or an outdated IT structure. But because there’s increased pressure to use technology for improved patient outcomes, more facilities are exploring how they can come up with the money to implement new medical devices, interoperable electronic health records systems and other innovations.Current Financial Environment in Healthcare
- Adapting to market forces. Mergers are a significant part of the healthcare landscape. Large payers are consolidating into even larger companies, and hospitals are joining forces under the same corporate umbrella. There’s increasing pressure from government officials to make sure these arrangements are aboveboard. Patients are also letting their voices be heard as consumers. Those pressures, combined with the difficulty in recruiting and retaining top clinical talent, have created increased financial pressure for facilities.
- Meeting regulation and compliance requirements. Hospitals and healthcare providers have to make sure they’re compliant with a number of rules and regulations governing everything from patient privacy to outcomes from procedures. Cutting corners here could land facilities in hot water, so it’s key to have the funds available to invest in meeting compliance guidelines.
Healthcare performance is strongly dependent on the economy, but also on the health systems themselves. This link should not be underestimated.
Investment in health is not only a desirable, but also an essential priority for most societies. However, our health systems face tough and complex challenges, in part derived from new pressures, such as ageing populations, growing prevalence of chronic illnesses, and intensive use of expensive yet vital health technologies.Current Financial Environment in Healthcare
Moreover, we must deal with higher expectations of citizens and resolve persistent inequities in access and in health conditions among different groups. Little wonder that the issue of how to ensure the financial sustainability of health systems, while making a positive contribution to macroeconomic performance, has moved to the top of the policy agenda across the OECD area. Much of the work undertaken in the OECD Health Project has aimed at providing policymakers with the evidence they need to promote more value for money in the health sector, while ensuring universal access, equity and raising quality of care. We have learned a lot, though there is more to discover.A basic message has emerged: investments in health and the design of health financing policies should be addressed in terms of the interaction between health and the economy. Just as growth, income, investment and employment are a function of the performance and quality of the economic system, its regulatory frameworks, trade policies, social capital and labour markets, etc, so health conditions (mortality, morbidity, disability) depend not just on standards of living, but on the actual performance of health systems themselves. Let us go over some of these interactions.
Health performance and economic performance are interlinked. Wealthier countries have healthier populations for a start. And it is a basic truth that poverty, mainly through infant malnourishment and mortality, adversely affects life expectancy. National income has a direct effect on the development of health systems, through insurance coverage and public spending, for instance. As demonstrated in 1997 by the WHO Commission on Macroeconomics and Health for a panel of 167 countries, while health expenditures are determined mainly by national income, they increase faster than income.
Another well-known relationship is an institutional one. Take the case of tobacco use. Efficient fiscal systems in the OECD have meant that increases in taxes on tobacco could reinforce other public health policies like rule-based restrictions on smoking in public places. Some countries have gone very far in this respect, with Ireland actually banning smoking in its famous pubs! Such courageous initiatives cannot succeed without institutional backing, whether legalistic or otherwise.Another example of how institutional arrangements can help is through universal provision of insurance coverage, which a larger fiscal base and a small informal sector help to attain. Globalization in general, and trade liberalization in particular, also affect healthcare, via constrained pricing and trade policies of pharmaceuticals, and the need for enhanced health surveillance across borders and populations.Current Financial Environment in Healthcare
The effects of health on development are clear. Countries with weak health and education conditions find it harder to achieve sustained growth. Indeed, economic evidence confirms that a 10% improvement in life expectancy at birth is associated with a rise in economic growth of some 0.3-0.4 percentage points a year.
Disease hinders institutional performance too. Lower life expectancy discourages adult training and damages productivity. Similarly, the emergence of deadly communicable diseases has become an obstacle for the development of sectors like the tourism industry, on which so many countries rely.
Policy choices cannot be taken lightly. Health financing, through out-of-pocket expenditures, is inequitable and can expose whole populations to huge cost burdens that block development and simply perpetuate the disease/poverty trap. On the other hand, health systems need financing and investment to improve their performance, yet this need cannot in turn impose an unfair burden on national spending or competitiveness.This is a very delicate balance for policymakers to have to strike. There are other challenges too. For instance, in high-income countries, the lack of benefit portability associated with employer-provided health insurance often constrains worker mobility, so impeding the efficiency of labor markets we all want to see. And there are indirect effects on other spending decisions, both by households and governments. In other words, if you want to raise investment in health spending, you may need to find cuts elsewhere in the economic system.
As policymakers with public responsibilities, we must never forget that decisions taken in one sphere affect conditions, stakeholders and policies in another. We all want better health systems, but the impact of health on the economy should not be underestimated. Our challenge is to harmonize health and economic policies to improve health outcomes, of course, but also to minimize any negative impacts while promoting synergies wherever possible.Current Financial Environment in Healthcare