Financial Trends

Financial Issues in Healthcare

Ponchie McCollough

Dawn Chiabotti

HCS 385

Health Care Finance

15th September 2019

Financial Issues in Healthcare

Healthcare Industry is vital to the general well-being of the society. It is tasked with provisioning of cheap, affordable and quality health care services. Currently, the industry is under immense pressure to provide quality services at reduced costs. The sector has put in place measures that makes them remain operational and afloat in the current health care industry climate, with regards to financial matters. With respect to financial and economic matters, the health care sector is faced with high costs of equipment, facilities and drugs, increase in salaries and remunerations (Parente, S. T. et al., 2017 and Mack, M., 2016) as well as need to create high value health care services at lower costs. The main economic and financial challenges in the sector are comparatively universal respective of the size and location of the health care facility. The biggest financial and economic issues are: rising cost of healthcare, advancement in healthcare technology, retaining physicians, Insurance, health care compliance and regulations requirements by various government bodies and Managing healthcare investment in the financial constrained environment. The Main financial issues that is faced is offering cheap, quality and affordable healthcare services despite the ever-rising cost. Herein in the paper, we have discussed cost of healthcare as a major financial issue in the health care sector.

Rising cost of health care

It is important understand the use of the term “cost of health care” with respect to the healthcare stakeholders. Here in the cost refers to the amount healthcare providers (health care clinicians or organizations) incur in delivering a healthcare services to patients. This cost is normally calculated from all categories such as specialist personnel, equipment as well as other supporting services.

The main drivers of health care cost are; acquisition of advanced medical technologies, rise in pharmaceuticals (Hirsch, B. R. et al., (2014), rise in the overall cost of training and retaining medical specialist as well as insurance premiums.

Pharmaceuticals – currently the cost of pharmaceuticals has risen tremendously posing a great a financial challenge to health care providers providing affordable and quality services. Pharmaceutical companies have in the recent past hiked prices for vital medication and drugs, and this has a become a financial issue to the healthcare sector and some even opting for generic drugs.

Recruiting, training and retaining physicians – the cost of retaining specialist personnel in the health care sector is on the rise and therefore, health care organizations need to look for money/funding to stay afloat and at the same time pay specialist their salaries. Some healthcare providers have in the recent past been faced with strikes due to salary issues, such as German doctors strike that occurred in April 2019 demanding better pay, paralyzing the operations of health care providers.

Insurance and premiums – most of the patients have different insurance and premiums. Insurance and premiums affects the general operations of the healthcare providers because some of the premiums complexity in billing and delay by insurance providers in remitting the patients payment.

Acquisition of latest medical technologies – in order to provide quality and effective healthcare services, health care providers must acquire the latest technologies that will enable effective diagnosis and improve patients’ outcome. Acquiring of these latest medical technologies is expensive, and for the healthcare to offer affordable services it has to look for other sources instead of passing the cost to the patients. Administrative cost also plays a key role in the rise of the health care cost.

Payment system in the health care sector has undergone significant reforms in the recent past. The most commonly used payment model is FFS (fee for service). The reforms were aimed at improving the efficiency and patient satisfaction. Current payment trends are based on: Transparency, patient driven, personalized insurance packages and online payment systems

The supply and demand challenges in provision of health care services by health care providers is the need to provide quality and affordable services. The demand for quality and affordable care is on the rise due to increase in the aging population, advanced medical technology and quality of care whereas the supply of enough or adequate healthcare is insufficient due to increasing health care cost such as cost of retaining specialist as well as acquiring and maintain latest medical technology and therefore, patients are becoming dissatisfied.

Regulatory and compliance issues in health care sector greatly impacts its financial status in many ways. Health care providers have to improve their standards to meet these regulations and be compliant and this comes at a cost. Introduction of ACA (affordable care act) with its subsequent repeal will greatly affect the financials of the health care providers in that they must pay to meet and adopt to the changes. Another compliance requires health care providers to upgrade their coding system to a uniform one, ICD10.


Rising in the cost of health care can be managed satisfactorily. Below are recommendations that healthcare providers can adopt to manage the cost of healthcare.

Leasing of latest medical equipment – healthcare providers can lease the latest medical technology equipment and retain the cost of maintaining to the leasing party. This will enable the health care provider to cut operational cost.

Outsourcing for vital tasks – the provider can outsource the services for expensive tasks to trusted parties will help reduce general cost. This will greatly cut cost, the trusted parties will efficiently handle the tasks, cost for hiring personnel will reduce.

Negotiating with pharmaceuticals – health care providers should keep in touch and come to a win-win situation with pharmaceuticals firms with respect to the price drugs. This will enable the health care providers to access affordable drugs and avoiding generic ones and cutting costs in the purchase of drugs.


Hirsch, B. R., Balu, S., & Schulman, K. A. (2014). The impact of specialty pharmaceuticals as drivers of health care costs. Health Affairs33(10), 1714-1720.

Mack, M. A. R. K. (2016). What drives rising health-care costs. Government Finance Review32(4), 26-32.

Parente, S. T., Feldman, R., Spetz, J., Dowd, B., & Baggett, E. E. (2017). Wage growth for the health care workforce: projecting the Affordable Care Act impact. Health services research52(2), 741-762.