Finance has been called the “Laws of Business”, and it is the linchpin to all successful businesses. 

From the initial conception to the execution of every activity within the organization, the healthcare industry follows this same model. A healthcare facility has finances that are required to ensure that adequate levels of service, superior outcomes and technological advancement are maintained. Without these crucial areas of finance, a medical facility would not be able to function.

There are three distinct phases involved in the process of managing the health care facilities. 

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During the planning stage, various financial aspects are considered including demographics, expenses, competition and demand. At this point, management begins to formulate a comprehensive budget that will address these key issues. The next stage involves the establishment of a comprehensive health care strategy, which includes the identification of the financing options available to the organization.

Private health insurance is one of the more popular methods of financing healthcare. 

Most hospitals opt for this option because it provides a stable revenue stream while also covering expenses and maintaining a consistent level of care. However, the primary drawback with this method is that it tends to increase out-of-pocket expenses. For smaller hospitals, the primary source of income may come from Medicaid, federal assistance programs or other public programs.

Hospitals that are highly structured and can exhibit accurate fiscal stability may choose to utilize the third method of finance healthcare, known as public health insurance. 

This approach requires only that the hospital meet certain criteria and submit an application for assistance. Once approved, public health insurance provides guaranteed reimbursements to the hospital for every patient, depending on the covered treatment. Unfortunately, this option is not always viable, as there are many hospitals that have experienced drastic cuts to public health insurance.

The methods used to finance healthcare require some type of public or private healthcare assistance. 

In Canada, for example, the provinces use a hybrid system, known as a mixed health system. This hybrid system allows hospitals in different provinces to be reimbursed for their services even if they do not receive full reimbursements from the national health insurer. In the European countries, all health-care systems allow public or private reimbursement for healthcare-related procedures and treatments. In the United States, the government reimburses hospitals for their costs in maintaining the quality of care provided to its citizens.

Development assistance has been given an exceptional importance in the past decade. 

Development assistance is provided for healthcare in developing countries. In the United States, there has been much criticism regarding development assistance being used for primarily medical-related activities and few other activities. However, countries in the third world have been able to successfully develop effective systems for combating both types of healthcare-or lack thereof-without receiving large amounts of development assistance.

Several years ago, the U.S. passed a healthcare bill that restructured and continues to reform the healthcare system. The Act is designed to provide tax relief to healthcare providers, reduce healthcare costs, improve workforce training, promote high-quality patient care and make providers more accountable for their actions. Among the many benefits of this legislation is the ability for individuals and employers to deduct medical expenses from their personal income taxes. 

This will ultimately increase access to affordable health insurance, which in turn will likely improve healthcare cost containment. Another effect of the legislation will be to strengthen ties between hospitals and doctors, allowing doctors to expand their practices outside of their hospitals and vice versa.

Even with the passage of these reforms, healthcare expenditure is still increasing significantly. 

The reason for this discrepancy can be traced to government spending priorities. Most state governments are required by law to allocate a portion of their overall healthcare expenditure in line with the projected number of uninsured residents. In contrast, the U.S. government prefers to rely on general funds to support healthcare coverage for all residents. As a result, American citizens continue to pay more for their healthcare coverage than people in other countries.

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