3 Jan 2023


Quality in Healthcare Financing

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Academic level: College

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In healthcare, quality refers to the provision of care to patients when they need it and in a manner that is affordable and effective (Fatima et al., 2018). It also refers to the engagement and involvement of the patient in care, so that patients can be responsible for their care. The Centers for Medicare & Medicaid Services (CMS) identified several goals associated with the provision of quality care in different healthcare organizations. These goals include increasing the safety of care by decreasing the harm associated with care and strengthening the engagement of individuals in their care (Fatima et al., 2018). The third goal of quality healthcare is the promotion of well-structured communication and coordination of care while the fourth goal is promoting proper prevention and treatment of chronic diseases. The last goals include working with communities for the promotion of best practices for healthcare and providing affordable healthcare. 

There are a wide variety of measures used to assess the level of quality in healthcare firms. The use of these measures is dependent on the healthcare organizations and the quality of approach they decide to take. The top measures for the quality of healthcare in organizations include the rate of mortality, the safety of care, patient experiences, and the perception of care as being effective (Fatima et al., 2019). Existing national standards and financial incentives define most of these measures. Hence, a need exists for the assessment of the relationship between quality in healthcare and aspects of financing. 

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Value of Quality in Cost and Financing 

The quality of care has a significant value during the cost and financing of healthcare organizations. The Food and Drug Administration (FDA) in the U.S approves drugs or devices if they are shown to be effective. The standards are lower for medical devices in which the organization expects the device to be considered equal to other devices already on the market (Van da Craen et al., 2019). No requirements exist for new drugs to be more affordable as compared to drugs that already exist in the market. Payers, such as Medicare, have integrated these new technologies without consideration of the costs associated. Due to this, expensive new therapies have been taken even when no evidence exists that they enhance patient outcomes. 

The introduction of value-based healthcare programs is based on the payment of healthcare providers based on the quality of care that they present to patients. To ensure that a high quality of healthcare is provided to patients, most healthcare providers usually engage in the use of numerous drugs and devices for patients to ensure that the best patient outcomes are obtained. The use of these drugs and devices results in increased healthcare costs for patients. In turn, healthcare providers and organizations are able to receive greater reimbursement for their services. In this way, a direct relation can be established between the quality of care providers and the costs and financing in healthcare organizations. 

Relationship between Cost and Financing in Healthcare Organizations 

With the rapid increase in healthcare costs, most healthcare providers are faced with elevated pressures for the delivery of services in an effective and efficient way. This is further affected by the transition to the value-based payment environment. Due to the changing costs in the healthcare environment, most organizations have also had to change their financing structures. Costing trends and structures within healthcare organizations are used as a guideline for setting up financing systems within healthcare organizations. Healthcare providers are expected to effectively measure the service and actual costs that exist. This measurement is necessary to identify the patient population that the healthcare organization can financially support. 

In healthcare organizations, financing is dependent on a variety of sources such as tax revenues, direct payments, funding by donors, and medical insurance. Based on healthcare costs, healthcare managers are expected to identify channels through which the firm can generate sufficient revenue and offset expenses (Mendoza et al., 2020). Financing also includes the monitoring of internal spending within healthcare organizations. The healthcare costs that patients incur when receiving healthcare is also a significant financing source for the healthcare firm. In this way, existing healthcare costs are an important determinant for financial management and funding sources for organizations. 

Agencies Concerned with Healthcare Quality 

There are several organizations whose roles include enhancing the quality of care in healthcare organizations. The Agency for Healthcare Research and Quality (AHRQ) is the lead federal agency with the duty of enhancing the quality and safety of care in an American healthcare organization (Bindman, 2017). This improvement is through a focus on supporting research, and producing evidence of ways of increasing the safety of healthcare, increase the quality of care while also making it more accessible. The centres for Medicare & Medicaid Services is a federal agency which directs the medicare program while partnering with state governments for the administration of Medicaid. In its role, the CMS structures and designs quality strategies and standards for its partners and healthcare organizations that should be met. By setting these quality standards, the organization ensures that the care provided to patients results in quality outcomes. The National Quality Forum (NQF) is a not-for-profit firm which engages in the promotion of safety and quality of care for patients through measurements and public reports (Ross et al., 2010). While there numerous agencies that evaluate and promote the enhancement of quality healthcare to patients, these three organizations have the most significant impact. 


Bindman, A. B. (2017). The agency for healthcare research and quality and the development of a learning health care system.  JAMA Internal Medicine 177 (7), 909-910. 

Fatima, I., Humayun, A., Iqbal, U., & Shafiq, M. (2019). Dimensions of service quality in healthcare: a systematic review of literature.  International Journal for Quality in Health Care 31 (1), 11-29. 

Fatima, T., Malik, S. A., & Shabbir, A. (2018). Hospital healthcare service quality, patient satisfaction and loyalty.  International Journal of Quality & Reliability Management

Mendoza, R. L. (2020). Cost-Shifting and Cost-Cutting as Joint and Mutually Reinforcing Strategies in the Financial Management of Hospitals and Similar Healthcare Organizations.  Journal of Health Care Finance

Ross, J. S., Chen, J., Lin, Z., Bueno, H., Curtis, J. P., Keenan, P. S., ... & Wang, Y. (2010). Recent national trends in readmission rates after heart failure hospitalization.  Circulation: Heart Failure 3 (1), 97-103. 

Van de Craen, D., De Massari, D., Wirth, T., Gwizdala, J., & Pauws, S. (2019). Leveraging Financial Analytics for Healthcare Organizations in Value-Based Care Environments. In  Data Science for Healthcare  (pp. 347-367). Springer, Cham. 

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