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Financial Principles and Reimbursement

Maria Williams

Southern New Hampshire University

October 3, 2020

Financial Principles and Reimbursement Report

Healthcare administrators play a significant role in today’s healthcare settings-they ensure equitable access to quality healthcare through effective leadership. They manage financial responsibilities within healthcare organizations. Hence, healthcare administrators must prioritize the value of service reimbursement because it is a major component of financial wellbeing in healthcare organizations. Effective management of reimbursement can enhance a healthcare organization’s revenue, which depends on the number of patient visits, the type of treatment offered, and their insurance coverage. This report assesses the impact of different reimbursement methods and strategies on an organization’s strategic plan. It also covers other important areas significant for effective operations such as financial management principles, management of accounts receivables, teamwork, and maximization of reimbursements.

Reimbursement Strategies

Patients are willing to pay for exceptional healthcare service if healthcare organizations perform and offer high quality healthcare services. One of the most commonly used reimbursement strategies employed by hospitals and other facilities is the pay for performance approach. Casto (2018) indicates that pay for performance is a type of payment arrangement used to reimburse providers and includes incentives. The pay for performance measurement can be targeted to individual physicians or a healthcare organization. While pay for performance consists of fee for service and capitation payment approaches, it also incorporates increase in payment and other incentives to providers based on quality and efficiency. Case rates such as increases in hospital visits can affect pay for performance in the form of bonuses and direct incentives to healthcare providers. Utilization of data such as increase in healthcare costs, cost of equipment and drugs, and economic performance can also influence pay for performance incentives.

Reimbursement Methods

There are three major reimbursement methods for healthcare organizations- fee for service, capitation, and discounted fee for service. Under fee for service, doctors are paid for each service and test they provide based on customary charges of doctors in a given local area (Rudmik, Wranik & Rudisill-Michaelsen, 2014). A healthcare organization can use this strategy to provide high healthcare services by hiring experts on contract basis. However, administrative costs would vary depending on the volume of expert services offered during a given period of time. In discounted fee for service doctors are paid for every service and test offered based on predetermined discount of customary prices prevailing in a given area (Hagland, 2014). Hence, a healthcare administrator can use this strategy to negotiate for better payment terms. However, a healthcare organization may fail to attract specialists because of discounted fee for service. Under capitation method, doctors are paid a fixed amount per patient on a monthly basis (Rudmik, Wranik & Rudisill-Michaelsen, 2014). Thus, an organization can benefit from economies of scale. The main disadvantage can arise if an organization experienced reduction in the number of enrollees and has a high charge per enrollee.

Financial Management Principles

In addition to reimbursement strategies and techniques, healthcare administrators must recognize the significance of financial management in improving work procedures and outcomes. An analysis of financial data may help understand performance of revenue reimbursement. Reiter and Song (2018) indicate that healthcare administrators must assess movement in payments for expenses already incurred such as physicians’ remuneration and work towards managing such expenses. It is also important to benchmark against industry standards by exploring the prevailing pay rates for physicians so that an organization manages its administrative expenses. It is also important to conduct a payer mix assessment of payers for effective financial management. Reiter and Song (2018) assert that the analysis percentage of revenue emanating from private insurance visas via government insurance is important because Medicare and Medicaid pay healthcare organizations less than the cost of healthcare. An evaluation of case rates and healthcare service utilization data can also help in comparing administrative costs versus operational performance.

Accounts Receivables

Collection of payments is a major issue for healthcare organizations. There are many players involved during collection of payments, with claim processors submitting claims for payment for services offered (Casto, 2018). Insurance firms act as middlemen and negotiate for what they will pay and what a patient owes a healthcare organization. In this regard, healthcare administrators must communicate with payers to ensure that their organizations are reimbursed the correct amount. They can then engage patients to pay for the balance

Teamwork Principles

Teamwork is a key component of successful organizations. Challenges among employees can result in missed billing codes and diagnosis codes, failure to enforce collections, and inability to determine necessary services. These misses can result in legal cases, patient dissatisfaction, and lost revenues. Within a healthcare organization, employees must work as a team to ensure delivery of quality healthcare. The American Hospital Association (2017), for instance, has partnered with TeamSTEPPS that provides training tools involving patient quality care, mutual support, team leadership, as well as communication.

Reimbursement Maximization

One of the major roles of healthcare administrators is case rate maximization and utilization management. According to Casto (2018), healthcare administrators must capitalize on incentives introduced by the pay for performance strategy. These incentives help financially and enable healthcare organizations to remain accountable for their actions with possibility of a reward. Thus, healthcare administrators must focus on internal audit to detect mistakes before they escalate to other stages. This way, they can save their organization’s much money and time.

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