Foundations of Health Care Financial Management

Foundations of Health Care Financial Management

Foundations of Health Care Financial Management 150 150 Peter

Foundations of Health Care Financial Management

What were the driving forces behind the current focus on quality, costs, and health care financing? How have various reimbursement methodologies influenced health care delivery and financing?

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Foundations of Health Care Financial Management

One of the major driving forces behind the current focus on quality, costs, and healthcare financing is the desire to reduce health care costs. One of the biggest factors behind U.S healthcare costs is the price of medical care, which accounts for 90% of spending. These costs include the expense of caring for those with long-term medical conditions, the increased costs of new procedures, medicines, technologies, and the aging population (Jones, Finkler, Kovner, & Mose, 2019). While examining the opportunities to cut costs, the cost reduction strategies should also prioritize the cost reduction strategies. The focus to address costs should aim at ensuring that the hospital has several contracts with original equipment manufacturers and maintenance vendors on any equipment used to treat, diagnose and monitor patients. This helps eliminate unnecessary costs and expenses that are incurred in repairing and replacing the equipment. Breakdown of equipment also increases hospital expenses as it leads to the delayed provision of care, which makes a patient develop health problems that initially did not exist or the condition of the patient tends to worsen. The focus on quality will also help reduce medical costs. Provision of low-quality services leads to increased readmission rates and increased rates of hospital-acquired infections. It also contributes to the increased rate of misdiagnosis, which affects the patient’s health outcome, negatively increasing the number of hospital visits. Provision of low-quality care can also lead to legal suits, which increases the hospital expenses and costs and hence the desire to address the quality of services provided (Artiga, Orgera, & Pham, 2020). More training on the use of evidence-based practice is being offered to the health care providers to enable them to be in a better position of providing quality care, which helps reduce hospital costs.

The drive towards providing quality care has led to the implementation of the pay-for-performance model. This model ensures that the health providers, medical groups, and hospitals receive a certain incentive for meeting certain performance measures. There are two types of value-based reimbursement models. The first is the one-sided model, which usually rewards providers for performing well. The second one is the two-sided model, which usually punishes and also rewards health providers based on their outcomes. This reimbursement model has helped ensure that providers are not paid for low-quality services and also helps in redirecting finances to encourage quality clinical practices and enhance positive health outcomes. This helps prevent the occurrence of adverse events hence reducing hospital costs (Timpka, Nyce, & Amer-Wåhlin, 2018). Another reimbursement method that has influenced health care delivery and financing is the shared savings method. This is a payment model that normally offers an incentive for providers to minimize health care spending to a specific patient population by giving them a percentage of net savings which is as a result of their efforts. This helps reduce medical costs, especially for the aging population, considering that most of them suffer from multiple chronic conditions that are expensive to treat (McWilliams, Hatfield, Landon, & Chernew, 2019). Bundled payments is another reimbursement methodology that has influenced healthcare delivery and financing. In the case of bundled payment, health providers are accountable for the cost and quality of care they provide during a predetermined episode. Health providers that exceed the target price tend to incur financial penalties, while those that keep costs below a risk-adjusted target price share a given percentage of the resulting savings (Preston, Caccavale, Smith, Stull, Harwood, & Kayiaros, 2018).



Artiga, S., Orgera, K., & Pham, O. (2020). Disparities in health and health care: Five key questions and answers. Kaiser Family Foundation.

Jones, C., Finkler, S. A., Kovner, C.T., & Mose, J. (2019). Financial Management for Nurse Managers and Executives (5th ed.). St. Louis, MO: Elsevier, Inc.

McWilliams, J. M., Hatfield, L. A., Landon, B. E., & Chernew, M. E. (2019). Spending reductions in the Medicare Shared Savings Program: selection or savings? (No. w26403). National Bureau of Economic Research.

Preston, J. S., Caccavale, D., Smith, A., Stull, L. E., Harwood, D. A., & Kayiaros, S. (2018). Bundled payments for care improvement in the private sector: a win for everyone. The Journal of arthroplasty33(8), 2362-2367.

Timpka, T., Nyce, J. M., & Amer-Wåhlin, I. (2018). Value-based reimbursement in collectively financed healthcare requires monitoring of socioeconomic patient data to maintain equality in service provision. Journal of general internal medicine33(12), 2240-2243.