Health Care Supply and Demand

image2.png NHS-FP6008 Assessment 1 Context

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Assessment 1 Context

Health Care Economics: An Industry Overview

Providers and consumers of health care services have experienced significant changes following the enactment of the Patient Protection and Affordable Care Act of 2010 (Affordable Care Act). New terminology, concepts, methods of valuation, reimbursement, and decisions accompanied this landmark legislative change. Health care leaders are responsible for maintaining the financial viability of their organizations, aligning with both the organizational mission statement and directional strategy, and allocating finite resources. This task has become increasingly complex due in part to changes associated with the Affordable Care Act.

Conditions of participation in state- and federally-funded health care programs have generated new requirements, and some represent major challenges with respect to implementation and compliance. An example of this can be seen with the electronic medical records initiative, which has been an ongoing challenge. Leaders must grapple with questions such as:

· What is the actual cost to the organization?

· Are there funding shortfalls for full implementation?

· Are there unexpected additional costs that result from existing software incompatibilities?

· Are there additional security measures to ensure HIPAA compliance, such as staff training?

· What about patient satisfaction scores and how these can affect reimbursement?

The role of the health care executive in exercising sound economic decision making has become increasingly challenging, especially when one considers the potential adverse financial and operational consequences, or civil and criminal penalties, that can result from oversights or errors. Health care executives serve in a fiduciary role within their organizations and communities. To this end, it is helpful for leaders to understand applicable laws that drive economic decision making and its accepted tools from authoritative sources, industry standards, and risk management.

The Provider Organization

How have recent changes in health care affected your current or future desired role within the industry? Do you recognize new concepts and terminology emerging with our changing health care system? To illustrate this point, consider your familiarity with the following economic concepts and their associated implications for providers: accountable care organizations, Readmissions Reduction Program, HCAHPS scores, HAC Reduction Program, never events, value based purchasing, open payments public data, cost shifting, risk sharing, and medical capital equipment (lease versus purchase). These are just a few examples of facets that involve financial, and thus economic, decision making.

It is important to maintain the environmental, larger perspective and to understand what resources are available from the government for economic problem solving and decision making. It is also important to maintain “bifocal vision” as you consider demand, supply, and finite human and financial organizational resources.

As a health care leader you will be challenged to maintain organizational financial viability and to participate in team-based decision making. A few examples of critical economic decision-making topics are the acquisition of necessary capital medical equipment, adjustment of clinical staffing ratios, funding unexpected implementation and maintenance costs of electronic medical records (EMRs), and funding under- and uninsured patient care.

Health Care Supply and Demand

Economics in health care can vary from the typical dynamics of other industries. The rules of supply and demand are influenced in unique ways. Examples of this can be seen in the fact that physicians can both supply services as well as control demand for health care services. Additionally, consumers of health care services can have a need or demand for services, but may not be able to access supply or available care due to geography or financial constraints (such as a high insurance deductible).

Suppliers or providers of care can deliver a service and not be reimbursed for the service by the consumer if various quality and satisfaction standards are not met. Government regulations can also impact reimbursement. An example of this can be observed in a problematic readmission within 30 days of a patient’s discharge from a hospital. If the readmission meets criteria for being preventable, the provider may not be reimbursed for services, nor may the provider bill the patient for services already consumed.

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