The Current Financial Environment in Healthcare and its Influence on Decision Making

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.

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 nongovernment 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.

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, invasiveness, 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 licensure 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.