Example Of Essay On Financial Management And Reimbursement Methodologies
Dear Mr. Ross,
As a new fiscal year is approaching and taking into account constant developments in the healthcare industry, it is crucial for our pediatric private practice to work on strategic financial planning for the coming fiscal year and long-range plans for the next 5-year period.
As the manager of our practice, I propose to preliminarily meet with you before having a meeting with our entire physician group. Please find below a proposed agenda of our meeting containing my comments with regard to relevant issues to be considered.
1. Discussion of the key factors influencing the pricing for the pediatric services
1.1. Reimbursement methods for the pediatric services
Brief comments: There are several concepts of reimbursement for the pediatric services. Thus, the reimbursement may be determined on the basis of costs incurred by a provider of the pediatric services or on the basis of a number of clients that receive the pediatric services from the provider. Furthermore, the provider may also receive a bonus for the provision of certain kinds and/or quality of the pediatric services. As a result, the price for the pediatric services directly depends on the reimbursement scheme.
1.2. Role of external agencies in the price determination process
Brief comments: It is common for government and state agencies to set specific rates that apply to the price for the pediatric services. In this regard, the provider of the pediatric services may not determine the price higher than the set limits by the external agencies.
1.3. Bargaining power of insurance companies
Brief comments: Insurance companies often have bargaining power over clinics, as they are considered to be large corporate clients for the providers of the pediatric services and may bring a lot of clients into the business at once. As a result, the provider of the pediatric services is often forced to grant a discount for its services to win the potential client.
1.4. Role of inside forces in the price determination process
Brief comments: As every business, a pediatric clinic incurs direct expenses, including medical materials, payroll, administrative expenses, etc. These expenses directly influence the price that the clinic may set for its services. In addition, the clinic’s specialization, quality of services and its accessibility play a significant role in the price determination process.
1.5. Role of outside forces in the price determination process
Brief comments: Nowadays, there is tough competition between providers of the pediatric services. Indeed, the clinic’s brand may influence the pricing for the services. To the contrary, some players on the market may introduce lower prices to attract new business.
There is also such a factor as customer loyalty. The providers of the pediatric services often grant discounts to loyal customers and in this way decrease the price of services.
2. Discussion of the key factors influencing revenue collection
2.1. Government agencies
Brief comments: As government agencies usually have bureaucratical procedures for consideration of claims for reimbursement from providers of the pediatric services, the revenue collection process may be prolonged in this regard.
2.2. Commercial payers
Brief comments: The insurance companies often envisage a deductible in their health insurances. It means that some portion of the price for the pediatric services is received from the client and the insurance company pays the remainder of the price.
In this regard, the duration of the revenue collection process depends on the insurance company’s claim processing time, as well as the client’s solvency.
Brief comments: In this case, the revenue collection process directly depends on the client’s solvency and payment method. Thus, such payment methods as cash or credit card payment quicken the revenue collection process comparing to the check issuance.
3. Discussion of what factors should be taken into account in the decision-making process of our practice
Brief comments: At present, our clinic is rather specialized. In addition to the general pediatric services, we also provide cardiology and endocrinology services.
There has been an increase in patients covered by government programs. In this regard, our revenues have decreased. As a result, it is vital to consider available options to increase our client portfolio covered by private health insurance plans.
In addition, the reimbursement methods and offered discounts should be carefully analyzed, balanced and reflected in our financial strategy.
It is also important to optimize the revenue collection process.
4. Current issues pending for solution
Brief comments: There is a pay raise request from our pediatric endocrinologist pending. For more details please refer to the comments below.
5. Proposed developments of our practice
Brief comments: Several partners suggest hiring a pediatric oncologist and concluding a contract with Indian Health Service. For more details please refer to the comments below.
6. Discussion of development of a financial plan for our practice
Brief comments: It is suggested to use a management control process for the budget implementation. For more details please refer to the comments below.
Pediatric endocrinologist’s pay raise request
In my view, the endocrinologist’s current remuneration is reasonable and fair, as our clinic covers his travel expenses and directly bills out him for the rendered services.
Indeed, the endocrinologist’s remuneration does not depend on whether any discount is granted by our clinic to the patient.
In terms of future revenues of the practice, the endocrinologist’s requested stipend will not in any way affect our revenues, but will decrease net profits. In this regard, I suggest considering a possibility to look for another endocrinologist that lives in our state to cut future expenses if the endocrinologist does not agree with our position regarding his salary.
Adding pediatric oncology services
Given the recent decline in the reimbursements from the government programs, hiring a pediatric oncology may provide an additional source of the clinic’s revenues in the future.
At first, we may expand our specialization by attracting new line of services. At the same time, oncology services are very socially oriented and their provision by our clinic may positively impact on our brand and practice.
Nevertheless, this type of pediatric services may require acquisition of special medical equipment and materials. Thus, we need to analyze whether our clinic has its own financial resources to start the oncology practice. If not, we should look for available funding options, including bank loans.
Secondly, the clinic will spend less on covering oncologist’s travel expenses comparing to the endocrinologist’s travel expenses, as the oncologist lives in the state.
Managed care contract with Indian Health Service
It is important to note that we should carefully examine a chance to conclude a contract with Indian Health Service (IHS) despite a possible increase in a number of patients served by our clinic. Thus, Indian Health Service is a government program serving about 2.2 million American Indians and Alaska Natives with average planned medical expenditures in 2015 of USD 3,099 per member comparing to average nationwide medical expenditures in 2015 of USD 8,097 per capita (Indian Health Service, 2015).
Taking into account the above-mentioned figures, it seems that the clinic’s future revenues and quarterly disbursement to the physicians may further decrease following the conclusion of the contract with IHS. This is due to the fact that one or two pediatricians will spend a portion of their working hours on traveling to IHS reservations to treat patients when this time could have been spent on serving patients with better healthcare plans in terms of the clinic’s remuneration.
Thus, if we decide to conclude the contract with IHS, the following components should appear in a managed care contract considering that the future revenue collection process may be prolonged, as IHS is “the payor of last resort” and eligibility assessment process on IHS side may take some time (Indian Health Service, n.d.).
In my view, the managed care contract should limit a possible discount that could be granted to the IHS members. The contract should also provide for an explicit list of pediatric services that will be granted for the government funds and contain provisions regarding the maximum deadline for the clinic’s reimbursement. The contract should also contain an additional fee for urgent calls, i.e. the fee for unscheduled visits.
Our clinic’s financial plan
I believe that we can grow our practice only if the management control process is used for implementation of budgets for the new fiscal year, as well as the following 5-year period. In this regard, it is crucial to have a meeting with all the partners regarding planning our clinic’s future activities given available human resources, funds, medical equipment and materials. As a result, specific action plans should be developed that will also serve as a basis for the clinic’s financial plan.
The further implementation of the financial plan should be regularly monitored, analyzed and, if needed, modified by the clinic’s senior management. In this way, the clinic’s performance will be controlled and be on the budget to the best possible extent.
Indian Health Service. (2015, January). IHS year 2015 profile. Retrieved from http://www.ihs.gov/newsroom/factsheets/ihsyear2015profile
Indian Health Service. (N.d.). Requirements: eligibility. Retrieved from http://www.ihs.gov/chs/index.cfm?module=chs_requirements_eligibility