Get Over It, U.S.A. Healthcare Deliverance is Not Awful!

 

Introduction

            Over the past decade, the United States (U.S.) and its healthcare system have been criticized at the international level, arguing that it is one of the most financially secured countries but fails to deliver on providing adequate comprehensive cost-effective care for all of its people. Although this argument is valid for some, others disagree. U.S. healthcare is being targeted unfairly because the criteria for which the country is being evaluated on does not fair better than the richest countries in the world. Arguments can be made, but without knowing the entire situation and the healthcare criteria metrics of the country, critics need to step back and first learn, and attempt to fully understand, why the U.S. not only spends a lot of money on healthcare but also why many times the outcome from the delivery of healthcare has poor results. This paper will not only explain the unique nature of the U.S. in an effort to show why it is perceived by others that it is underperforming in the delivery of medical care, but will also discuss the quality of healthcare deliverance in the U.S. and how preventative health is given.

Setting the Stage: How Uniqueness of U.S.

            Anyone creating an argument can sound as though his or her opinion is more just and logical than that of any other. When arguing about the U.S. healthcare and how it compares to the rest of the world, one must first learn what makes the U.S. different from the rest of the other countries to which it is being compared. The U.S. is being compared with the top richest countries in the world in the category of healthcare. Currently the following countries are ranked based on the quality of healthcare from 1 to 10, respectively: United Kingdom, Switzerland, Sweden, Australia, Germany, Netherlands, New Zealand, Norway, France, and Canada (U.S. is 11^th) (Munro, 2014; TCWF, 2014). First, these countries do not have to serve as many people as does the U.S. Based on population, the U.S. currently has approximately 320,051,000 people, compared to the U.K. which has 63,136,000, Australia with 23,343,000, France with 64,291,000, Germany with 82,727,000, and Canada with 35,182,000 (Potyra, 2016). It is easier to manage a smaller amount of people compared with a larger group, hence other countries appear better per capita in the accessibility and delivery of healthcare. The most current figures demonstrate that approximately 223 million people in the U.S. have private health insurance, 60.48 million have public insurance, while only 12.8% of the population do not have insurance (CDC, 2015). These figures alone exceed the population of most of the countries by which the U.S. is being compared to, meaning that the U.S. is providing healthcare to more people than most of the other countries.

There is no argument that the U.S. is one of the richest countries in the world. Based on the size of economy, or gross domestic product (GDP), the U.S. ranks first compared to the other countries with approximately $18.5 – 19 trillion (Knoema, 2016; Bergmann & Yellin CNN, 2016). The other countries that rank higher in healthcare have significantly less GDPs, with Germany having $3.5 trillion, U.K with $3 trillion, and Canada with $1.7 trillion to name a few (Bergmann & Yellin CNN, 2016). In healthcare expenditures, the U.S. spends 17.1% of its total GDP, while the rest of the countries, that are being compared with the U.S. as having better healthcare, spend approximately nine to almost 12% of their national GDP on healthcare (TCWF, 2013). What this indicates is that the U.S. has to spend more of its money on healthcare because they have to pay for more people to receive quality healthcare while at the same time attempting to maintain financial stability within the country. Financial stability is important in a country because it measures how comfortable people are living in the country. The U.S. has the highest disposable individual income with an average of $41,071 a year, as opposed to the average individual income of people in the comparison countries who only have an income average of approximately $29,016 (OECD, 2015; Willet, 2013). This means that the average American who needs to spend money on healthcare is more financially stable compared to those living within the other comparing countries who supposedly are being reported to have better healthcare than the U.S.

Another financial reason as to why the U.S. has a higher healthcare expenditure is based on the nature of how healthcare is being paid for currently. Managed care is the most common method of how healthcare is paid for in the U.S. The basic principle of managed care is a patient is enrolled with an insurance provider (commercial like Humana, government like Medicaid, or both) in which the patient pays an agreed periodic payment plan of monthly or quarterly, with premium payments such as co-pay (a set amount of money that a patient pays for a medical service) or yearly fees (Wahi, 2013; ereflect, 2009), also known as capitation. The patient benefits from the insurance provider by receiving discounted medical fees that the insurance provider has negotiated with a medical facility (Gapenski & Pink, 2007; Wahi, 2013). Those without an insurance provider have to pay an out of pocket upfront cost for the rendered care / service they will and / or have received based on the charges that a medical facility has determined are appropriate according to the local, regional, or national market value (Wahi, 2013; Gapenski & Pink, 2007). Since the insurance providers negotiate discounted prices for medical services it now makes profit margins small, meaning hospitals and clinics and medical facilities do not make a large amount of money in the delivery of healthcare; they barely make enough to stay operational (Evans et al., 2016). The lasting affect of this system is expensive healthcare.

Furthermore, the U.S. currently has the Affordable Care Act (ACA) which currently is being implicated as a factor that is making healthcare more expensive. A major contributing factor is that it mandate that every individual who applies for health insurance will be accepted regardless of what medical condition(s) they currently have, and the ACA does not allow for insurance providers to screen for which patient(s) they want to pay for their medical care (Hood, 2014; Yogada et al., 2014). Since everyone is being accepted without restrictions, insurance providers and medical facilities now needed to increase their medical care prices in order to meet the increase demand and to cover everyone who shows up on their doorstep (Hood, 2014). The increase in costs were evident as far back as 2010 when healthcare costs increased by ten percent. Today healthcare costs are estimated to increase by as much as 60% within the next several years (Hood, 2014). The ACA legislation also increased the amount of upfront costs required from patients before an insurance company will pay for the rest of the medical bill. Currently these upfront costs range from $5,000 to as much as $10,000 for major medical expenses such as surgeries (Hood, 2014). These are a couple of the major reasons as to why healthcare is expensive for people in the U.S. Also it should be mentioned that the current well- being of the U.S. population does not help reduce any of the healthcare costs as well.

The current health status of the people in the U.S. is dismal. We have the worst healthiest population in the world in terms of contracting preventable diseases, which are obesity and chronic diseases. The rate of adult obesity is 33.7% (ProCon, 2016), and 20% in children (Hood, 2014). In dollar figures, in 2009-2010, $160 billion was spent on treating health issues in people that were attributable to obesity. The costs of the ailments, which develop related to obesity, is about $150,976 up to as much as $301,952 more a year as compared to a healthy person (Hood, 2014). This is a great deal because obesity leads to chronic diseases such as strokes, diabetes, and cancer. This explains why it equates to spending so much more money on treating these individuals as it would to keep as person healthy (Hood, 2014). With so many unhealthy people, it is no wonder healthcare per person is about $9,523 per person a year (Fox, 2016), but this does not mean that healthcare quality is the worst as compared to other countries mentioned earlier in this report.

U.S. and Healthcare: National and International Views

            Superficially looking at U.S. healthcare, the country does not look good. Currently the U.S. ranks 11^th out of all the other ten countries previously mentioned based on four out of 11 criteria with ranking no better than 3^rd. The ranking criteria were established by the World Health Organization (WHO), and the Organization for Economic Cooperation and Development (OECD) (TCWF, 2014). The U.S. was ranked 11^th in cost-related problems, efficiency, equity, and healthy lives. Also the U.S. received an overall ranking of 11^th based on the entire healthcare related data that was collected in 2013 (TCWF, 2014). The two highest ranking countries were the U.K. and Switzerland and the two lowest ranking countries were Canada and the U.S. (TCWF, 2014). Fortunately, this does not mean that the U.S. has the worst healthcare in the world.

The U.S. most assurdly understands the importance of healthcare deliverance, hence it ranks number one in healthcare expenditures with 17.1% of the GDP going towards healthcare costs (TCWF, 2015; OECD, 2015). This means that the U.S. wants to take care of its people no matter the costs. Also, even though the U.S. was evaluated based on healthcare data collection, data collections are not fully accurate, though they represent a general idea, they can also present an inaccurate depiction of the atmosphere of the U.S. healthcare. Healthcare practice in the U.S. is based on evidence-based practice, vetted by scientific method research studies that are repeatable to increase their validity (Claxton et. al, 2015). Also, the oversight of healthcare is managed by highly respectable, recognizable, professional organizations committed to the annual improvement of healthcare in the U.S. Professional organizations committed to this improvement in healthcare include, but not limited to: WHO, OECD, National Quality Forum, Agency for Healthcare Research and Quality (AHRQ), The Centers for Medicare and Medicaid Services (CMS), Institute of Medicine (Claxton et al., 2015). These organizations work with the government and medical providing facilities (both for-profit and non-profit) to improve healthcare. Over the years the U.S. has steadily improved in the deliverance, quality and accessibility of medical care. With so many organizations helping the U.S. to properly change its healthcare system it is no doubt that it takes time before positive effects are seen for patients.

In the past three decades, the U.S. has made advances in over 20 medical outcomes. Most notable ones are mortality rate, resulting from 96 per 100,000 patients in 2004-05, to 86 per 100,000 (Claxton et al., 2015). From 1990 to 2010, pre-mature deaths and changes in poor health status improved by 14%. The number of individuals indicating as being in an excellent health status was also reported to be 19%, but 18% reported fair or poor health in 2013 (Claxton et al., 2015). Death rate in hospital admissions for strokes, heart attacks and pneumonia also showed positive improvements, with another 14% decrease rate of hospital acquired adverse conditions (bed ulcers, infections, drug interactions errors) (Claxton et al., 2015). Also notable was the reported number of amputations due to diabetes had decreased from 37.5 per 100,000 in 2006, to only 17.1 in 2010 (Claxton et al., 2015). There were also increases in patients receiving care who needed care with a rate change of 66% to 70% from 2005 to 2010 (Claxton et al., 2015). Also reported was an increase in the favorable outcomes, treatments and cures, of cancer in the U.S. had improved in the last decade as compared to that of other countries (Claxton et al., 2015). Overall, mortality rate in the U.S. went from 1200 per 100,000 to less than 850 per 100,000 over the span of 30 years, showing that the U.S. healthcare is steadily improving (Claxton et al., 2015).

U.S. healthcare achieved another major improvement by including preventative care benefits in all insurance under Affordable Care Act. This allowed 18 preventative health and wellness screening tests to be involved in patients’ healthcare plan. Below is the specific tests that are included. This is a great achievement as more children and adults received important health essentials, especially vaccines and lab tests that detects early diseases and potentially prevent them from becoming chronic diseases (Claxton et al., 2015).

Earlier, it was mentioned that U.S. not only has the largest population compared to all the other nations by which it is being compared, but also has the largest number of unhealthiest people as well. Such challenges contribute to the U.S. having some of the worst medical outcomes as compared to the other nations previously mentioned. The more people who are difficult to medically manage the poorer the overall outcomes will be as compared to the other less numbers of people in other nations. Also another contributing factor for poor healthcare outcomes and unhealthy individuals is related to the declining number of physical education classes given in schools across this nation. The U.S. needs to increase active participation and numbers of gym classes that are offered in schools as well as place an increase emphasis on health education, making it mandatory to implement health classes across all education levels up to senior year of high school. As mentioned previously the U.S. is leading the way in the incidence of obesity in its population. This again relates to the importance that physical fitness and health education classes should be an integral part of each grade level in primary and secondary schools. Internationally, all the other countries faired better than the U.S. in critical aspects of medical care such as overall mortality rate, diabetes rates, hospital admissions, and wait times for acute care visits (Claxton et al., 2015). Together these results make sense based on the fact that the nation with the unhealthiest population was the U.S. based on a variety of healthcare data collected and why we were ranked as number 11 out of the most richest countries. Again keeping in mind that we have the most population to take care of, the U.S. healthcare system did show improvements overtime. Such improvements are a positive outlook for the future of U.S. healthcare.

Conclusion

            It is clear that U.S. healthcare looks to be behind ten other of the richest countries in the world. This is with good reasons, these include that the U.S. has the greatest population to take care of who are the unhealthiest in the world and a pay system that does not increase profit margins for medical facilities. These contribute to the increasing price of healthcare. Fortunately, the U.S. does most assurdly show that they have made gains over time, and with the help of the government and medical organizations more improvements will come. Before criticizing how awful the U.S. healthcare system is, one must first be educated with what the U.S. has to deal with, then venture another judgment, because there are far worst places in the world that have far less quality and accessibility of healthcare. Lastly one should also realize that they will make more money in the U.S. than those other countries so they (you) can afford healthcare in this country.

Reference

Bergmann, A., Yellin, T. (2016). World’s largest economies. Cable News Network. A Time Warner Company, CNN Money. Retrieved from http://money.cnn.com/news/economy/world_economies_gdp/

Claxton, G., Cox, C., Gonzales, S., Kamal, R., Levitt, L. (2015). Measuring the quality of healthcare in the U.S. Kaiser Family Foundation, Peterson-Kaiser Health System Tracker, Insight Brief, p1. http://www.healthsystemtracker.org/insight/measuring-the-quality-of-healthcare-in-the-u-s/

CDC. (2015). Health insurance coverage. Centers for Disease Control and Prevention, U.S. Department of Health & Human Services, p.1. https://www.cdc.gov/nchs/fastats/health-insurance.htm

CMS. (2016). Preventative care benefits for adults. U.S. Centers for Medicare & Medicaid Services. https://www.healthcare.gov/preventive-care-adults/

ereflect. (2009, November 16). What does managed care mean[Video file].http://www.youtube.com/watch?v=ipkKEScKuRM

Evans, D.V., Cawse­Lucas, J, Ruiz, D.R., Allcut, E.A., Andrilla, H.A., & Norris, T. (2016). Family medicine resident billing and lost revenue: A regional cross­sectional study. Department of Family Medicine from Univ of Washington and PeaceHealth Southwest Medical Center 47(3). http://www.stfm.org/FamilyMedicine/Vol47Issue3/Evans175

Fox, M. (2016). United States comes in last again on health, compared to other countries. NBC News, Health, Health Care. Retrieved from http://www.nbcnews.com/health/health-care/united-states-comes-last-again-health-compared-other-countries-n684851

Gapenski, L.C. & Pink, G.H. (2007). Understanding healthcare financial management. Retrieved from http://www.ache.org/pubs/chap1-3gapenski5th.pdf

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Munro, D. (2014). U.S. healthcare ranked dead last compared to 10 other countries. Forbes. Retrieved from http://www.forbes.com/sites/danmunro/2014/06/16/u-s-healthcare-ranked-dead-last-compared-to-10-other-countries/#310634701b96

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ProCon. (2016). Global obesity levels. ProCon.org, nonprofit public charity. http://obesity.procon.org/view.resource.php?resourceID=006032

Potyraj, J. (2016). The quality of US healthcare compared with the world. American Journal of Managed Care, p. 1. http://www.ajmc.com/contributor/julie-potyraj/2016/02/the-quality-of-us-healthcare-compared-with-the-world

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TCWF. (2014). Mirror, mirror on the wall, 2014 update: how the U.S. health care system compares internationally. THE COMMONWEALTH FUND, Publications, Fund Reports, p. 1 http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror

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For needed corrections, contact j.serrano5422@email.ncu.edu

Own Your Capital, or Face Closing Down your Medical Facility!

            It is not a secret anymore that healthcare costs are continually increasing. These increases are reflected in both patient healthcare expenditures and in the costs of operating medical facilities throughout the country. The time is now that medical facilities focus more to stay open to serve the population that are growing sicker year after year. All medical facilities must manage their resources prudently in order to remain relevant in an environment that requires increases in expenditure costs and demands the best and most efficient delivery of care that, in many situations, generates a narrow amount of revenue for the facility. The root of the solution is to manage finances smartly and make smart organizational decisions. This paper will explore the aspects of managing finances within the healthcare industry, look into capital budgeting, and tie it with operational budgeting in order to learn the importance of how healthcare organizations can continue to provide cost efficient medical care.

                       General Overview of Finance in Healthcare Industry

            Medical facilities are there for patients to improve and manage their health at the highest possible level. The delivery of care within a hospital is noted in the U.S. today by both Not-For-Profit (NFP) facilities and For-profit facilities. Both types of medical facilities must make a profit in order for them to continue to operate but For-profit (investor owned, IO) medical organizations primarily exist to make the most return on investments, on equity, and on assets (Jones and Bartlett Learning a, n.d.). NFPs organizations (voluntary like churches, private schools, foundations and government medical firms) do not pay income taxes and IOs organizations do (Jones and Bartlett Learning b, n.d.). For both to continue to give care, they both have to manage their finances well.

Financial management consists of accounting and finances. Finances are all gains and losses reflected from transactions, while accounting provides the financial data that are analyzed into information (Jones and Bartlett Learning a, n.d.). Accounting comes with financial and managerial accounting. Financial accounting is recording the financial history of the medical firm, while managerial accounting uses financial statistics to create a picture of future use of the organization’s capital or money (Jones and Bartlett Learning a, n.d.). Financial accounting looks at previous year, while managerial accounting looks at future financial capabilities of the firm. The Accountant officer plays a critical role in helping decision makers evaluate the present financial status and status of future financial capabilities.

Increasing profit margins are essential for many reasons other than staying in business: to expand services; increase access to care; introduce new technology; overall increase quality of care; replace old facilities and equipment; and have money to cover unexpected financial uncertainties (Jones and Bartlett Learning a, n.d.). Achieving all of these goals require shrewd capital budget management in the medical organization. Capital budget manages investments, expenditures, loan repayment, buying new equipment and other assets that are all governed by decision-making plans made by the organization (IAC Publishing, 2016).

A smart way to increase profits is by selecting projects that will make money. Healthcare firms look to choose projects by analyzing all courses of action using discounted cash flow (DCF) bundle, which is a tool to find the least risky investment(s) that will yield the more favorable financial outcomes. DCF is an equation that calculates weighted average cost of capital, net present value, profitability index, and internal rate of return (Mukhersee et al., 2016; Investopedia, 2016). This is an aspect of capital budget management when decisions have risks versus return outcomes, and being able to select the best probable outcome is a sign of well-managed capital budget. Decision makers create the organizational goals through financial outlook.

Healthcare facilities use profit margins for business survivability. They take the amount of capital they have and allocate it to resources that are used in less than one year, called liquidity (Jones and Bartlett Learning a, n.d.). Capital budgeting also forecasts using money on hand for more than one year to provide resources or plans that will account for five to ten years, which is called managing solvencies (Jones and Bartlett Learning a, n.d.). Managing liquidities and solvencies are essential to decision makers, giving them their left and right limits when they plan for the present and future. When dealing with capital budget, accounting information is important to provide the decision makers in order to create and execute plans that will achieve increasing profit margins and financial survivability of the medical organization.

For-profit (IO) organizations are more effective financial managers, because they hold their company accountable to strictly monitor every financial decision and selecting decisions by identifying the most profitable with least amount of risks with tools like DCF than Not-For-Profit organizations. NFP organizations tend to give physicians the power to make business decisions, and they usually do not seek for accountant information to make plans, because they are patient-centered not finance-centered with poor capital budget management (Mukhersee et al., 2016). Recently, more and more NFP organizations are declining, because they are being owned by IO organizations, due to the strong viability of IO, using appropriate capital budget management (Mukhersee et al., 2016). This supports the assumption that well managed capital budget increases the viability of healthcare organizations. IOs are getting bigger and becoming multihospital regional system because of acquiring NFP medical facilities, due to poor profit margins of NFP that is associated with expensive patient-care investments without regarding financial business consideration (Mukhersee et al., 2016). From 1972 to 2012, IO organizations grew by .95%, and in 2013, 53% of community hospitals, 3,144 of 5,686, are part of multihospital system (Mukhersee et al., 2016), further supporting that IO organizations are better financial managers than NFP organization. Figure 1 below shows the steady increasing trend from 1972 to 2006, and the increase is more evident in the years to come.

While capital budgeting is very important for an organization, another part of the well-managed organizational finances includes the efficient management of the operational budget. Operational budget handles the finances for daily expenses, salaries, over head costs like rent and utilities, supplies and any line item that will only last a year (IAC Publishing, 2016; Johnston, n.d.). Operational budget management involves the monthly financial requirements to cover all of the bills that a facility incurs. Capital budgeting is different because it is financial management in order to continue to grow the business by increasing assets. Capital budgeting plans for the future while monitoring the present status of the organization and provides information to the decision makers on how much they can spend. Operational budgeting is short term spending, while capital budgeting is a long term investing that will affect the firm by acquiring assets that will increase profit margins.

Operational budgeting runs the processes of the organization. It pays for the amount of staff, supplies that are used and ordered on a daily basis, and accounts for internal expenditures (like pharmacy provides a clinic with medications, and the pharmacy department charges the clinic with every medications used) (Pritchard, n.d.). Revenues are also accounted for within operational budgeting. Every dollar made through patient services gets calculated to come up with the profit margins. Capital budgeting takes this information and presents it as the financial status of the organization and creates information that decision makers can use when deciding about future development(s) within the organization i.e. expansion of buildings and / or services. Operational expenditures involves the more so use of present monies that the organization current has, while capital expenditures uses future monies for the purposes of growing the company through sound investments and to finance future plans and projects.

Conclusion

            The viability of hospitals in the country depends on the profitability of the medical facilities. Viability is monitored through financial management by way of analyzing accountant data and interpreting it into capital budgeting information. Capital budgeting is the future of the growth of the medical organization and helps to paint the picture of the current financial status of the firm so that sound decisions can be made to aid in future growth. IO organizations in recent years have become bigger by acquiring NFP medical facilities because IO organizations, in most instances, have out excelled NFP medical facilities in the area of capital budgeting. As healthcare costs increase so do the utilization of operational expenditures. The only prudent way to achieve profitability is to financially plan wisely. Efficiently managing the financial aspects will grow the medical organization. A well-managed capital budgeting is truly the way to grow and survive in todays’ competitive healthcare industry.

 Reference

IAC Publishing. (2016). What is the difference between operating and capital budget? IAC Publishing, LLC. Retrieved from https://www.reference.com/business-finance/difference-between-operating-capital-budget-202bda9f181060eb

Investopedia. (2016). Discounted Cash Flow (DCF). Investopedia. Retrieved from http://www.investopedia.com/terms/d/dcf.asp

Johnston, K. (n.d.). Differences and similarities of capital and operational budgeting. Chron: Hearst Newspaper, LLC. Retrieved from http://smallbusiness.chron.com/differences-similarities-capital-operational-budgeting-33149.html

Jones and Bartlett Learning a, (n.d.). Accounting fundamentals for health care management. Available from http://samples.jbpub.com/9781449645281/45281_Ch01_FINAL.pdf

Jones and Bartlett Learning b, (n.d.). Healthcare finance overview. Available from http://samples.jbpub.com/9780763778941/78941_02_CH01_001_010.pdf

Murherjee, T., Al Rahahleh, N., Lane, W., & Dunn, J. (2016). The capital budgeting process of healthcare organizations: A review of surveys. Journal of Healthcare Management 61(1) p. 58-77. http://eds.a.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?sid=397f86f9-7345-4d90-8129-769c1ee4344e%40sessionmgr4006&vid=1&hid=4210

Pritchard, G. (n.d.). How to develop an operating budget for a nursing unit. Chron: Hearst Newspaper, LLC. Retrieved from http://smallbusiness.chron.com/develop-operating-budget-nursing-unit-79824.html

For needed corrections, contact j.serrano5422@email.ncu.edu