Financial Trends

Benchmark Assignment – Finance Trends


August 13, 2018

Finance Trends

A healthcare system is an organization of funds, individuals, and institutions which provide healthcare to satisfy the health requirements of a society. Globally, healthcare systems vary depending on the specific healthcare needs of specific states. Nevertheless, the common aspects of public and private care are often similar (Drummond et al, 2015). Over the years we have witnessed the systems evolving, and with this constant change, it is vital to analyze the financial trends. In this paper, we take a look at some of the financial and economic issues in the healthcare industry and take a step further to analyze the rising cost of healthcare as a major challenge by outlining its financial impact on the healthcare industry and providing recommendations on the issue.

Economic and Financial Issues in the Healthcare Industry

The Rising Cost of Healthcare

One major factor that has been linked to the increase in the cost of healthcare is the Fee-For-Service Payment Model. This is an economic trend whereby healthcare providers are paid for each service provided. That is, services are unbundled and therefore every time a patient visits the hospital for a procedure, it is paid for separately. Healthcare providers are thus motivated to provide more services concentrating on their number and monetary value instead of the quality of care provided (Mayes, 2017).

Another cause for the rising cost of healthcare is the introduction of government programs, for example, Medicare to assist those without insurance which led to an increase in demand for services thus increasing the cost of healthcare. Additionally, the rise in the healthcare costs can be attributed to an increase of illnesses such as heart diseases, high blood pressure, and diabetes amongst Americans and lack of a progressive market. This means that patients cannot preempt, calculate and compare the explicit cost of healthcare. The cost of services may also end up differing with the provider (Kim et al, 2015).

Supply And Demand Challenges for Health Care Services

The healthcare industry has witnessed an increase in demand over the years as a result of a rise in client base, chronic diseases, and an aged populace. However, there is still a deficiency of healthcare providers. This fact has inevitably led to increased healthcare costs. To offset this imbalance various recommendations have been put forward, for example, incorporation of telehealth and employment of more healthcare providers to improve on the supply.Meeting Compliance and Regulation requirements

With the development of medical technology and increase in the regulations of the healthcare industry, compliance has become a major issue for most healthcare providers. A good example is when it comes to telehealth which may involve different geographical locations. Therefore, it becomes difficult to know which regulations apply.

Managing the Shift to Value-Based models.

Most of the health care providers have continued to incur various healthcare challenges as they attempt to move from the Fee-For-Service payment model to Value-Based models. They have had to incur additional costs in putting in place infrastructure and regulations in accordance with the model whose ultimate success is still uncertain.

The Financial Impact of Rising Health Care Costs in the Health Care Industry

Rising healthcare costs have led to increased waste in finances and budget due to the cumulative number of unnecessary services and prescriptions as a result of the rising costs. Moreover, research has shown that there has also been an escalation in hospital administrative costs due to, for example, increase in insurance billing that has to be processed for the services provided. Additionally, there has been a rise in medical fraud, more so when a third party is making the payment. As well, there has been an increase in medical errors linked to doctors wanting to perform more services at higher costs.

Recommendations for Improving the Issue of the Rising Cost of Healthcare

Adoption of Value-Based Care to Replace the Fee-For-Service Payment Model.

The value-based model encourages healthcare providers to provide the best healthcare at reasonable costs. The health care providers are given incentives if they are successful in proving quality care to patients at lower costs. With the implementation of value-based care, health care costs will irrefutably decrease as the focus of the healthcare providers is shifted from quantity to quality care (Burwell, 2015).

Implementation of Current Technology in Healthcare.

Use of specific software and systems such as financial management systems. The outcome of this implementation would be reduced overall operating costs of hospitals as the system eliminates redundant processes.

Introduction of a Free Market in Healthcare

With this, there will be competition among health care providers and insurers leading to a reduction in costs. Patients will also be accountable for a percentage of the costs they incur in healthcare making them receive healthcare services responsibly thus reducing the cost.


Burwell, S. M. (2015). Setting value-based payment goals—HHS efforts to improve US health care. N Engl J Med372(10), 897-899.

Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the economic evaluation of health care programmes. Oxford university press.

Kim, S. H., Tanner, A. H., Foster, C. B., & Kim, S. Y. (2015). Talking about health care: News framing of who is responsible for rising health care costs in the United States. Journal of health communication, 20(2), 123-133.

Mayes, B. R. (2017). Christy Ford Chapin, Ensuring America’s Health: The Public Creation of the Corporate Health Care System.