Download Organizations cannot function without money, money that

Chapter 4
Basic Clinical Health Care Economics
Organizations cannot function without money, money that is free from liability and that
has an excellent bond rating. In order to provide services that are competitive, accessible,
and applicable to market need, organizations must invest money into their system in order
to survive in the market today. Revenue must cover expenses and provide a profit that
would cover the cost of purchases, replacing old equipment, maintenance, establishing
new services, and construction.
Contrary to the typical market, the requestor of services in health care is not the payer of
services received. For example, the physician or nurse orders a treatment, but they do not
pay for the services rendered, nor does the patient pay the majority of time. The payer is a
third-party payer such as an insurance company or government. Hence, health care
organizations have received very stringent and rigid criteria from the insurance
companies and federal agencies that must be adhered to prior to receiving any type of
reimbursement.
The long-standing tradition of health care is to help people achieve their optimal level of
health so that they can experience the greatest quality of life. The concept of altruism,
which is the unselfish concern for the welfare of others, prompted the creation of a health
care system many years ago. However, egoism and greed have dictated the direction in
which organizations must go in order to be successful, profitable, and competitive. The
cost of health care was not questioned until the early 1960s. Even so, the utilization of
acute care services has skyrocketed due to demand and often, unfortunately, the prices
rise while quality plummets.
Because of the initial inquiries into the provision of health care, the government enacted
amendments to the Social Security Act and Medicare and Medicaid. These checks and
balances provided a more concise, clear picture as to where the funding was going and
whom it was being dispersed to. Insurance companies and other third-party payers
attempted to get involved in order to promote the regulation of health care spending and
frivolities.
In the 1980s, health care reform and budgeting evolved because of the escalating costs of
health care services. Managed care emerged as an organized system that was intended to
coordinate care through the health continuum while using financial incentives to achieve
cost efficiency and resourcefulness. This concept included the preferred provider
organization (PPO) and point of service (POS).
Health care organizations must have direction or strategic planning in place in order to
guide their decisions, investments, and purposes. Strategic planning is created by the
identified needs of the market share, the employees, and the stakeholders. A mission and
vision are created to identify who the organization consists of, the organization’s intent,
and its customers.