Maintaining financial health and flexibility is very important in any hospital. The healthcare industry faces many financial challenges. Let's take a look at current issues in healthcare financial management.
Current Issues in Health Care Financial Management
COVID-19 will continue to impact the healthcare industry financially in the upcoming years. Hospitals and healthcare systems in the United States suffered losses of $320 billion in 2020. Furthermore, the report estimates that pandemic-related losses will range from $53 billion to $122 billion by 2021. CARES Act Provider Relief Fund funding provided $178 billion in federal aid to hospitals, which would have led to even greater financial burdens.
To restore healthcare services to a healthy financial position, chief financial officers (CFOs) will lead the effort. In addition, the changing healthcare market will be complicated by the emergence of new technologies upending traditional health care models, changing health care regulations, and anesthesia billing services.
Health Care Financial Management Objectives
The primary objectives of financial management in the health care industry are to identify new revenue sources, reduce spending, and manage investments over the long term.
- A financial manager should evaluate the revenue potential of new services, such as the purchase of innovative diagnostic technology, in addition to keeping the prices of healthcare services at market rates.
- Maintaining tax-exempt status: Governments often challenge the tax-exempt status of nonprofit healthcare providers to increase their tax revenue. Tax exemptions can be protected by capping charges for indigent patients and opening affordable nursing schools in underserved areas.
- Spending Control: Healthcare financial managers monitor expenditures to prevent wasteful spending on medications and equipment and detect fraud and misuse of funds.
- A health care institution's future stability relies heavily on the revenue generated by its long-term investments, including returns from the purchases of new technologies.
- Work capital is the difference between an institution's current assets and liabilities, including cash, marketable securities, receivables, inventory, and other current assets. Managing these assets and liabilities efficiently helps organizations reduce costs and improve efficiency.
Managing contracts, ensuring compliance with regulations, and implementing sound risk management strategies to protect patients are other aspects of health care financial management. Aside from preventing costly mistakes and ensuring adequate funding through fundraising, loans, or cash on hand, are other aspects.
Health Care Market Trends
To recover from COVID-19 patients' high medical costs and implement pandemic-related restrictions, health care providers work closely with their financial managers. Among the areas where telehealth can improve revenue for health care services is the treatment of chronic conditions, which will be a larger share of overall health care costs in the future.
Shortly, the following trends will have the greatest impact on the health care industry:
1. Transforming health care to value-based care
By moving from volume-based to value-based payment models, the health care industry is replacing the outdated model of volume-based payments with alternative payment models (APMs). For example, accountable care organizations (ACOs), bundled payments, and specialization-based models attribute financial responsibility to specialty physicians' patient outcomes and expenditures.
2. Consumers' growing influence in health care
Consumers are demanding more control over their health care experience as they become more responsible for the cost of health care services. Patient engagement in changing health behavior is critical to improving health outcomes, as is avoiding unnecessary health care resources. Patient access to services is also a crucial element of outcomes-based payments.
3. Transformative innovation in health care and new regulations
The changing regulatory environment affects clinical care and healthcare business management. Furthermore, technologies such as telemedicine, artificial intelligence, and others can be used to control healthcare costs in innovative ways. Financial management in health care must understand how to improve operational efficiency and reduce costs through regulatory changes and technological innovations.
As the administration seeks to expand health insurance coverage to as many people as possible, the Biden administration strengthens the Affordable Care Act (ACA) and promotes value-based care models. There could also be a national patient-matching system that would track patients across providers, improve interoperability between health care services, and a system to aggregate and report data on emergency preparedness.