Healthcare Finance
Medical care pricing is a critical component in achieving comprehensive health coverage since it not only guarantees that all individuals have accessibility to medical care treatments but also safeguards them from economic pressure and victimization while paying for these services. Health care services might be difficult to foresee, rationalize, or even comprehend. Health plans are designed in such a way that the concept of price sharing with members is introduced, encouraging individuals to make improved healthcare decisions (Bundorf & Mahoney, 2012). The cost of health care is also connected to health insurance coverage. Having insurance coverage entails sharing medical care expenses with the health care plan. Deductibles, coinsurance, and copayments are all features of health plan insurance that are closely connected to the amount of money spent on health care. Furthermore, health plans offer various systems of health care practitioners and healthcare facilities from which a patient can decide to receive medical care treatments. When a person seeks treatments from a networked institution or medical care provider, he or she will spend less. Nevertheless, when one buys medical services from a third-party practitioner, he or she frequently pays a greater fee. A health plan often includes pricing details for various health care professionals (Viscusi, 2020).
Investments in information technology are a significant factor in setting health care prices. This is an important step in determining payment rates because the procedure of computing pricing is directly reliant on the accuracy of information gathering methods for input volumes and expenses, as well as outputs. Developing organizational capabilities is another important component, and it is characterized by the enhancement of the organizations developed to negotiate the amounts to be reimbursed for health care services. This is primarily related to governmental and bureaucratic practices, but it touches on a vital component of health, namely health price (Bundorf & Mahoney, 2012). The independence and dignity of such organizations must be protected at all means in particular to safeguard the vulnerable and low-income workers. If the charges are set too expensive, people will be less likely to use the services.
Health care pricing is more than just establishing and financing medical care expenses; it works best when rewards are provided that assist in accomplishing medical care system objectives. Crucial parts of medical care pricing, such as valuations, health care reimbursement methods, and foundations, must all be fine-tuned to benefit everyone in order to reach more medical care system goals. Furthermore, continual surveillance and assessment should be carried out with influencing elements such as price and payment systems in consideration. They should all be assessed to guarantee that they contribute to wider health policy objectives. Payment mechanisms and price settings are incorporated. Price setting is important in establishing sound reimbursement methods that may be utilized to remit payments to medical care practitioners. The units of action on which costs are obtained and established are one of three parameters for payment systems for medical care services. Another aspect is the price per unit or payments levels, followed by the administrative procedure that results in the specified price. The procedure could also be economically beneficial. The three aspects are vital in closing the gap between compensation methods and the objectives of the medical care organization together with the economic dangers assumed by clients, organizations, and also medical care practitioners.
The most prevalent techniques are international and budget-based line elements, which are frequently seen in poor and middle-income regions. The line-item budgeting describes the expense of every line item, which may comprise medical bills, staff and equipment, and is calculated using previous costs. Its primary benefit is that it is readily regulated and predictable. Nevertheless, this strategy does not give excellence or efficiency-related rewards. International budgeting, which offers set financing for certain demographic categories, has largely superseded this technique. Furthermore, it allows for modifications in the operation of resource distribution. Moreover, global budgeting provides rewards for productivity and excellence, and, like budget-based line item, it is based on the previous year’s budgetary appropriations.
Other types of payment include fee-for-service, per diems, and diagnosis-related groupings that are closely associated with the activity. In this open-ended fee-for-service paradigm, the participants (clients and clinicians) select the type and effectiveness of health care while bearing minimal economic impacts. The future or contractual method entails agreements between the buyer and practitioner on compensation arrangements and restrictions, as well as more clear definitions of the volume and quality of service. There is also an integrative model that combines the functions of buyer and seller under a single organizational framework (e.g., a local or central government). These efforts to reduce disastrous costs will assist consumers, insurers, and health professionals. The fee-for-service technique is based on a cost list for each particular service. Its charges are calculated using comparative value units and weights, such as the resource-based relative value scaling. This strategy is more appealing since it stimulates activity. There are, nevertheless, other approaches, such as universal capitation, which comprises a singular compensation paid to a health service supplier and is typically modified to account for age, gender, and health status changes (Robinson, Whaley & Timothy, 2017). Personal talks, which refer to agreements between a person or his insurance and the medical care service practitioner, are one method by which costs are established. This strategy, nevertheless, has been chastised for its dearth of price clarity. Practically, cost discrimination is critical in this strategy since distinct clients can buy similar services at vastly differing costs. It is also largely reliant on both parties’ negotiating power, as the strongest side will have greater bargaining leverage (Cleverley, 2018).
Collective bargaining is a way of determining prices in which organizations of payers, such as health insurance, bargain with medical care suppliers, such as medical care facilities, and the outcome of such agreements is a universal charge service that applies to all persons covered. This strategy is helpful because it eliminates price discrimination, which is common in individual negotiations. A distinctive component of healthcare pricing takes into account the cost of insurance, pharmaceuticals, medical equipment, doctor-provided services, and rehabilitative center care. Considering the details in the table, the needed price for this one is $115. Because the typical expense per client or volume is $110, the typical overall price is $110,000 ($110 multiplied by the overall volume of 1,000). The goal is to earn $5,000 in gross profit. This implies that the minimum required income is $115,000 (add $5,000 to the typical overall price of $110,000). Divide the targeted income of $115,000 by the entire volume of 1,000 to get the appropriate pricing. The total is $115.
References
Bundorf, M. K., Levin, J., & Mahoney, N. (2012). Pricing and welfare in health plan choice. American Economic Review, 102(7), 3214-48.
Cleverley, W. O. (2018). Essentials of health care finance (8th ed.). Jones & Bartlett Learning
James C. Robinson, Christopher Whaley, & Timothy T. Brown. (2017, August 2). Reference pricing changes the ‘Choice architecture’ of health care for consumers | Health affairs journal. Health Affairs: Leading Publication Of Health Policy Research & Insight. https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.1256
W. Kip Viscusi. (2020, November 2). Pricing the global health risks of the COVID-19 pandemic. Journal of Risk and Uncertainty. https://link.springer.com/article/10.1007/s11166-020-09337-2
Leave a Reply