Discussion

Organizational Analysis Final Project: Policy Research Report

Maria Williams

Southern New Hampshire University

08/23/2020

Policy Research Report

1. Introduction

Health care organizations operate to meet the needs of patients and societal members. The University of Maryland Medical Center (UMMC), for instance, is driven by the desire to increase access to care and reduce health disparities across its jurisdiction. Headquartered in Maryland, Baltimore, the organization operates as a state-owned not-for-profit organization with a capacity of 757 beds in the state alone. The firm has also expanded its operations beyond the state borders to include the national market. UMMC believes in policy changes that can not only improve its operations but also meet the health needs of its target market.

2. Economic Theories and Principles

a. Economic Disparities

Disparities in the distribution of financial resources across populations and organizations affect availability and access to health. Health and personal finance issues individually and collectively affect millions of American households. Many Americans lack the financial capacity to subscribe for insurance of any form while those with insurance are nevertheless exposed to financial risks because of high premiums, deductibles, copays, limits on insurance payments, as well as uncovered services (Dufour, 2019). Therefore, financial constraints limit their capacity to seek quality and affordable health care services. The global and local economic conditions also affect health care firms’ financial capabilities. Health care organizations that cannot obtain the financial resources or capital specified in their strategic financial plans cannot attain their long-term objectives. Indeed, when the health care institutions find it challenging to acquire any amount of capital when required and at a cost that is reasonable, then their performance may decline. The sources of financing for health care firms can be grouped into equity and debt. In the hospital sector, about 50 percent of total assets are funded with equity while the rest are acquired through debt.

b. Economic Theories

c. Use of Economic Principles

Economic principles are widely used in designing long- and short-term organizational plans in the health care sector. The modern patterns of increasing competition across different health firms and the growing effects of globalization collectively contribute to firms’ use of economic principles to seek new, more efficacious instruments for economic systems management. Such principles can guide long- and short- term planning if the economic systems successfully function (Kutran, 2017). This can result in understanding environmental conditions that are necessary for managerial decision-making and timely development that is aimed at their adaptation to environmental changes. Managers utilize economic principles to undertake a market assessment, analyzing trends, and improving systems, and participating in effective organizational and economic arrangements of such systems management. Through such principles, organizational leaders determine ways of introducing structural, technical, administrative, and cultural changes to improve performance.

3. For-profit and Nonprofit

a. Financial Differentiation

There are various financial differences between for-profit and not-for-profit health care organizations. For instance, not-for-profit organizations do not exist with profit optimization goals while for-profit health care firms are driven by the desire to maximize sales and revenue. As such, non-profit organizations do not have a single indicator of financial performance compared to business enterprises’ net income or bottom-lime (Bragg, 2010). The most efficacious indicators of the performance of a non-profit health care firm are generally not measurable in financial metrics such as dollars but rather in the readers’ qualitative judgment about the effectiveness of the organizations in realizing their overall mission, goal, or objectives. However, the dollars are often the commonly mentioned language of financial reporting in a business organization.

Information that is required to support the process of assessing performance is often provided in financial statements through reporting revenues and expenses gross as opposed to the net, as well as categorizing expenses based on mission-related programs and supporting activities that they sustain. On the other hand-for-profit organizations assess success and goals using financial metrics such as revenue change, salaries, utilities, depreciation, and change in market share. Unlike business organizations, the bottom-line of a non-profit organization’s statement of activities is not always performance measures (Bragg, 2010). Rather, it can be assessed through changes in net assets for the reporting periods. As such, there is no need for a non-profit organization to distinguish the components of comprehensive income as business enterprises often do. On the contrary, all the revenues, gains, expenses, and losses are often reported in a single statement that is ambiguous rather than being subdivided into specific financial records and documents such as income statements, balance sheets, as well as profit and loss accounts.

b. Economic Differentiation

For-profit and non-profit organizations in the health care sector often differ significantly concerning economic dynamics. Economic forces such as changes in macroeconomic conditions may affect the overall performance of for-profit organizations (Bragg, 2010). For instance, periods of economic recessions may result in the overall reduction in demand for health care products and services, which in the long-run affects the performance of business enterprises. On the other hand, non-profit organizations may not be affected by changes in economic forces because their main sources of finance are donors and well-wishers. Even in periods of economic downturn, they may deliver their specific goals, which are not often measured financially.

Non-profit organizations often receive money through contributions, a form of transaction that is often without counterpart in business enterprises. These contributions are always subject to donor-imposed restrictions and standards that can affect the types and levels of services that a non-profit organization offers (Bowman, 2011). Due to the prevalence of donor-imposed restrictions, recurring, and in some situations, permanent, financial reporting by non-profit health institutions must reflect the nature and extent of donor-imposed restrictions and changes in them that take place during the reporting periods. On the other hand, for-profit organizations often operate under the control of shareholders and corporate leaders (Bowman, 2011). Their sources of funding also differ because they can generate revenue and profits to support their business endeavors. Unlike for-profit organizations, non-profit firms generate income from sources other than selling goods and services.

4. Policy Changes and Disparity

a. Economic Policy and Disparity

The economic policies of a nation significantly influence health care disparities. Ssypuk et al. (2015) observe that while social and economic policies are not often regarded as part of health services infrastructure, they influence health and disease by altering social determinants of health. The majority of social policies such as housing and economic empowerment programs often target low-income populations. However, they rarely consider health as their initial missions and outcomes. Socioeconomic policies that expand education, increase the minimum wage, and employment opportunities reduce disparities in health care access (Politzer, Shmueli & Avni, 2019). Therefore, policymakers should incorporate health care access to their programs.

b. Policy Changes

Recent legislative changes have significantly impacted health care access. For instance, policies that increase the minimum wage and employment opportunities have increased the rates of seeking insurance cover among low-income neighborhoods. Additionally, the Patient Protection and Affordable Care Act (ACA) increased access to health by increasing insurance cover for low-income neighborhoods.

c. Disparity Planning

The purpose of health care planning is to increase access and availability of health across all populations and groups. Additionally, many public health problems emerge from the existing disparities that stem from social and racial challenges. African-Americans, for instance, have low access to health than their white counterparts. Therefore, health care professionals and policymakers must take into account disparities to implement proper planning.

5. Organizational Impact and Recommendations

a. Organizational Introduction

The University of Maryland Medical Center Corporation (UMMC) is one of the leading health care organizations in the United States. The company operates as a subsidiary of the University of Maryland and provides not only health care services, but also education and research to the residents of Maryland and the Mid-Atlantic region. Headquartered in Baltimore, Maryland, the United States, the organization has expanded its operations to different parts of the country (UMMC, 2019). Currently, the company offers a wide range of health care products and services, which include trauma treatment, cancer care, high-risk obstetrics, neuro care, neonatology, as well as transplants. The organization can admit and accommodate approximately 2500 people because it has more than 2500 beds for acute care. Such inpatient care services are often allocated to critically ill patients who require special treatment for problems such as trauma care, coma emergence, kidney transplants, orthopedic, stroke, and pediatric services.

b. Non-Profit or For-Profit

Maryland Hospital operates as a not-for-profit organization that earns more than $700 million annually on its operations alone. Approximately $700 million of the organization’s 2017 bottom-line was concentrated across 24 facilities in Baltimore. The company’s profitability increased in 2018 by 5 percent. Additionally, it accumulated an extra financial cushion, ending its 2018 fiscal year with approximately $1.3 billion in cash and investments, according to a report tabled by the federal tax filing system. As a not-for-profit organization, Maryland is not bound by the International Financial Reporting Standards (IFRS). Rather, it operates as an entity whose principal objective is not to generate profit but to provide health care services to Maryland residents and other parts of the country. Not-for-profit companies can be categorized into government or public sector firms and private sector entities. Maryland belongs to the former category because it has been established by the state government to provide services such as the provision of health care services, prevention of disease spread, and increasing accessibility and availability of quality and affordable health care services to disadvantaged and underserved populations. Not-for-profit organizations that are formed by the government may be fully owned or their shares issued to members of the public. For a government enterprise to be categorized as a non-profit institution, its primary focus should be on providing more services than merely earning profits.

As a not-for-profit institution, Maryland Hospital is required to support community benefit programs such as providing health services at discounted rates to marginalized groups. Part of this responsibility includes covering medical care costs for uninsured patients and launching health promotional initiatives to provide preventive, response, and treatment programs to vulnerable individuals in low-income neighborhoods. Approximately half of the financial resources that the organization spends on community benefit initiatives stem from the rates insurers, Medicare, as well as different forms of payment for hospital services. The remaining funds come from the organization’s coffers. In 2019 alone, the organization allocated approximately $309, 401 to promote charitable activities across the state of Maryland.

6. Financials, Market, and Demand

a. Demand Theory

The demand theory can be used to explain the organization’s financial statements and performance over the last three years. The company’s financial statements from 2017 to 2020 show that it has been witnessing an increase in profitability and revenue. In 2017, the organization earned an average annual profit of $700 million from its operational activities. This figure grew by 5 percent in 2018 and $1.1 billion in 2019. From the above patterns, it can be said that the organization has been witnessing a steady rise in demand for health care services every year. There are various explanations for this phenomenon. For instance, the populations of people who need health services continue to increase over time. Additionally, the demand for health care services stems from an increase in the number of insured populations. This is because consumers’ levels of income significantly affect the number of goods or services demanded by members of the population.

From the perspectives of the law of demand, consumer behavior is often expressed as a utility maximization problem subject to a particular constraint. The demand functions are often derived by solving the optimization problem. Demand refers to the number of commodities or services per unit of time that individuals purchase and consume within a set of the prices and income of the consumer (Adhikari, 2011). Demand models are often founded on the continued choice or discrete decisions. Continuous choices are premised on the neoclassical theory of consumer behavior whereas the relatively new discrete choice model is drawn from the random utility theory. Within the econometrics modeling of the demand function, the dependent variable often represents the use of health care services. In this respect, the observed utilization levels are representative of the points of intersection of demand and supply functions, a situation referred to as the market equilibrium. Also, the utilization of health care services represents the satisfied demand or observed demand (Adhikari, 2011). In some cases, it is often difficult to succinctly distinguish between these two functions from the observed data. In this situation, the explicit and implicit presumptions often facilitate the estimate of the demand function.

The continued use of health care services has become an issue that attracts widespread attention by health care economists. Indeed, the factors that influence the demand for health care services are important for many reasons. For instance, the task of quantifying such factors is often necessary to examine medical care needs at the community and potential impacts of utilization on the health care medical needs of the community for which the organization services. Additionally, demand patterns can inform the organization of the possible impacts of customer decisions on the utilization of health (Adhikari, 2011). The understanding of demand patterns can also suggest to the policymakers at the state and federal levels the role of consumers’ level of awareness and literacy on improving the use of highly cost-efficient health interventions or health care services.

b. Market Behavior Impact

The changes in market behavior and patterns influence demand and supply of health care services. The behavior of consumerism in health care, for instance, has resulted in a significant rise in the number of patients who seek medical care at a particular point in time. This trend has been occasioned by the change of employers’ health benefits packages into one that places economic purchase power, and decision making in the hands of participants (Vogenberg & Santilli, 2018). This pattern is best attained by supplying employees with the decision-making information and support tools they require, including the financial rewards, incentives, and other benefits that promote personal involvement in altering health and health care purchasing power and behaviors. Additionally, as the health care costs continue to increase for consumers, they are increasingly getting conscious of how prudent they are getting the best value for their money. As such, they continue to ask for transparency and choice in their health care experiences. The success of the organization rests on its ability to meet customers’ health care needs and expectations (Vogenberg & Santilli, 2018). As such, providers are expected to be the main source of education, information, and the resources that penitents require to take ownership of their health. Additionally, there has been an increase in consumer engagement in health care, which has occurred alongside the increase in their benefits choices that are provided to workers by their employers. As a consequence, more firms are particularly providing HDHP, coupled with the traditional plans as employers shift some of the health costs to employees.

7. Economic Legislative Changes

a. Legislative Changes

At the legislative levels, the company should focus on pushing for changes that increase access to health for disadvantaged and underserved groups. For instance, the organization should collaborate with its multidisciplinary teams of professionals to formulate proper legislative proposals to policymakers. Teams comprising professionals such as physicians, nurses, lab technicians, and clinicians can collaborate to petition the state government to allocate more funds towards increasing insurance cover and promoting health literacy programs to prevent diseases (Žibert & Starc, 2018).

b. Policy Changes

There are various policy changes that the organization should consider for it to effectively meet the health care needs of its target population and groups. For instance, the company should consider introducing corporate policies, procedures, and guidelines that facilitate the adoption of technical and technological implementation in its operations. This can be done to increase access to care for patients who are located in remote parts of the country. Additionally, it should introduce policies that enable it to serve uninsured patients. Other policy considerations should include introducing organizational restructuring and process improvement initiatives that can help it to enhance efficacy and serve many clients.

c. Statement Impact

The changes are likely to increase people’s ability to access health care services, which in the long run, can increase the demand for health services. For instance, developing policies and procedures that target social determinants of health such as employment opportunities will increase people’s ability to afford quality health care. This can reflect in the financial statements in terms of changes in the organization’s profitability, return-on-investment, growth, as well as market share.

d. Potential Disparities

The proposed legislative changes are less likely to cause disparities. On the contrary, they will promote equitable access to health care by eliminating the structural barriers such as a level of income and educational challenges that limit people’s access to care. The legislative proposal also advocates for the adoption of technologies that can extend care to rural dwellers thereby increasing their access to quality health.

References

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sustainability (Vol. 2). John Wiley & Sons.

Bragg, S. M. (2010). Wiley GAAP: Interpretation and application of generally accepted

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Dufour, F. (2019). Protecting the US Population’s Health Against Potential Economic

Recessions and High Unemployment and the Endemic Inflation of Health Care

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Osypuk, T. L., Joshi, P., Geronimo, K., & Acevedo-Garcia, D. (2015). Do social and economic

policies influence health? A review. Current epidemiology reports, 1(3), 149-164.

Politzer, E., Shmueli, A., & Avni, S. (2019). The economic burden of health disparities related to

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