Financial planning and healthcare funding are important parts of any healthcare organization given that everything requires financial support to be effective. For example, funding is necessary for the hospital to facilitate the management to purchase new equipment and machinery to the hospital. Also, the money is necessary when purchasing drugs in cases the stock runs out. Furthermore, these finances may be as well required in sustaining the admitted patients since they will need to feed for the drugs administered to be effective. Almost all the activities in a health care organization require finances and a good plan to be effective. This discussion discusses the sources of funding within a healthcare organization and its financial planning.
Financial forecasting can be referred to as the tool of fiscal management which presents the probable data basing on the projected, current, and past financial conditions. The data is necessary identifying the expenditure and revenue trends in future which may as well have the long-term or immediate effect on community services, government policies, or strategic goals. The operating revenues for hospitals result from two main payment sources. They include private payers and public payers (Florida Hospital, 2013)
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Private payers
Private payers mostly entail self-payments, private insurance cover for individual health purchase for instance plans that are present within the current Health Insurance Marketplace and the health coverage sponsored by the employer (Florida Hospital, 2013). Examples may include the Preferred Provider Organizations, Indemnity Insurance, Health Maintenance Organizations and Point of Service plans. The beneficiaries of this source may incur charges on their own treatment depending on their plan details. This arrangement is known as cost-sharing and includes the deductible payments, co-insurance, and co-pay (Florida Hospital, 2013).
Public payers
These are the programs under health insurance which are government funded, which include Medicaid and Medicare. Public payers accommodate the most number of patients around Florida Hospital in the United States (Florida Hospital, 2013). Medicaid billings are paid by the state and the federal government from the taxes they collect. The health coverage provided by the Medicaid targets the eligible low-income families and individuals across the U.S (Florida Hospital, 2013). More so, it covers the disabled or any other person who is afflicted by any chronic disorder/condition. On the other hand, Medicare bills are taken care of by the federal government alone, also with the taxes collected across the country. The health coverage for this is for the individuals who have specific disabilities and also those who are over 65 years old (Florida Hospital, 2013). Furthermore, for a non-profit organization more revenue can be generated from contributions from well-wishers and as well as grants (Revenue Recognition, 2016).
HRP (Healthcare Reimbursement Plan) is the tax-advantaged health benefit plan to the employer, an employer-funded plan. This plan can reimburse the employees for the individual’s premiums of a health insurance plan. HRP is a method of providing allowances to the health insurance of an individual, and thus cannot be considered to be health insurance. Reimbursement methods that a healthcare organization may decide to use include capitation and fee-for-service.
Capitation
Capitation involves the payment of a certain amount of money to the health providers basing on the number of assigned patients (members) to him/her. Basing on the served population amount set for reimbursement remains fixed despite the workload handled to the population. As a result of this, the provider instead of the insurer faces the risk for utilization. This is because the higher utilization per member results to higher costs for the provider hence no additional revenues (Paying for Health Services, n.d).
Fee-for-service Reimbursement
In this method, payment to a healthcare organization bases upon the number of provided services, which may include reading the CT scan or even a visit to the office. The hospital can receive reimbursements as a result of the cost that it incurs for every patient day or single admission. The clinical laboratory will get payment for each single test that it performs. In this method, the more services are provided, the higher the revenues. Hence, the utilization risk unlike in the capitation is insurer borne and not the provider (Paying for Health Services, n.d).
Every health organization needs funding and planning for the swift functioning of the health providers and the organization itself. Without proper planning, there will be losses which will eventually lead to the closure of the healthcare facility. Thus, the reimbursement method picked should be fitting with the organizations’ visions and mission. This will help to save more for other activities within the organization.
References
Paying for Health Services. (n.d.). In Fundamentals of Healthcare Finance. Retrieved from https://www.ache.org/pubs/PDF_Preface/Sample%20Gateway%20Chapter.pdf
Florida Hospital. (2013). Hospital finance basics: Part 1 revenue. Health Issues Brief. Retrieved from https://www.floridahospital.com/sites/default/files/finance_part_i_revenue_hib_november_20131.pdf
Revenue Recognition. (2016). Revenue Recognition Impact: Healthcare industry. Retrieved from http://www.revenuerecognition.com/industry/healthcare-providers
