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Healthcare System Management: Healthcare Financing Expository Essay

Many governments today have made it their duty to put in place mechanisms that would ensure their citizenry is provided with an effective and affordable healthcare service. Healthcare is an expensive undertaking that needs proper financial planning.

However, the sector, as the paper reveals, encounters a terrific deal of issues, which include staff and physician issues, cost-related issues, competition, and the drive for technology, just to mention but a few.

Further, as a chief finance officer, the paper gives me a chance to point out the strategies that I can put in place in a bid to curb the aforementioned issues in an attempt to make health care available to the majority without compromising its quality.

Healthcare finance issues

Staff and physician shortages affect the healthcare industry in so many ways. Staff and physicians who can be described here as health professionals are the backbone of the health industry without whom there will be no health industry thus doing away with healthcare.

A logistic regression analysis on staff to patient ratio indicates that more staff per patient in the health industry increases the satisfaction of service provided to patient, as well as by the individual healthcare giver. This increases the patients’ confidence in the healthcare system, which will therefore lead to the patient investing further in the healthcare sector.

Shortage of staff leads to burnout among staff members, as they are overworked therefore leading to a gradual compromise of the service provided (Zhu & Yu, 2012, p. 266). Such outcomes lead to patients losing their faith in the system thus leading to pullouts that will affect the financing of the whole program.

The drive for technology is another issue that affects the healthcare sector together with its financing in a positive and negative manner. Technology, as an industry, evolves every day. With it, it comes with better and efficient ways of solving problems. Improved technology in the diagnostic equipment leads to more accurate diagnostics and exact solutions to a problem.

This leads to increased faith in the healthcare system, which will lead to further investment in the system and thus leading to financial stability. At the same time, technology is extremely expensive, as it leads to escalated costs in the services being provided.

This influences negatively on the financial position of healthcare service providers, as they will also have to raise their premiums for them to stay afloat (Ganz, 2011, p. 111). Such financial implications influence the scope of services provided, as well as the numbers of people who can afford it thus making it both an enhancing factor as well as a limiting factor.

Increased competition is yet another issue that has had an impact in healthcare finance in different ways. Big companies with large capital bases have used their financial power to dominate the industry by developing exceptionally large networks of their businesses within the markets in which they operate.

This follows because their financial capacity and networks enable them to provide cheaper services, and an almost omnipresent presence makes them enjoy the benefits of the economies of scale. To dominate the market, the giant guns make takeover bids for the smaller providers.

The small providers also merge with other small providers to enhance their capacity. Stiff competition has also led to the closure of healthcare providers who cannot compete effectively with others (Cleverly & Cameron, 2011, p. 461). It has also led to healthcare providers seeking further financing through tools such as equity and borrowing to enable them raise enough funds for stability in the market.

Cost issues in the healthcare financing sector are one of the principal factors that affect the industry because the cost is heavily dependent on financing for it to move on. The basic drive of any investor is to make a profit, and if possible, in the shortest time possible. Therefore, when people invest in healthcare, they are there primarily for profits.

The demand for profit, as well as the need to provide a quality service, has to be balanced to come up with a winning situation for the investor and the clients. Reimbursement is a weighty and an urgent issue in healthcare management because healthcare firms provide services for which they are later compensated.

Therefore, reimbursement, as a major component in healthcare, determines whether a firm will be paid for a service that it has already provided, and cannot be retracted. It also determines whether the firm will recoup its money, as well as profits.

Reimbursement in healthcare is a complex issue, as it mostly involves a third party who makes the payment on behalf of the patient way after the patient has received the service. It also involves a complex billing system that varies from one provider to the other (Casto & Layman, 2006, p. 16). A poor reimbursement structure will lead to losses, which can be irrecoverable.

This makes financing healthcare a devilishly tricky matter for investors because any investor will only put his/her money in a system that guarantees positive returns. Therefore, reimbursement will dictate the financing of a healthcare program.

Strategies to Put in Place if I were a Chief Finance Officer (CFO)

As a chief finance officer of a healthcare system, I would come up with measures that would define the different cost areas in terms of service and administrative costs. The service cost would be the cost the firm incurs when it provides a given service to the client, and the administrative costs being the costs of running the firm. Other cost areas would be statutory costs, as well as costs related to credit obligations of the system.

Overhead costs, though coming under administrative costs, are at times higher than expected. Therefore, in my view, the cost should stand out as one of the major costs that the firm might face in the future. Firstly, in a bid to fund the costs, I would commission a research survey that would bring out the cost of providing different services by the different service providers.

I would use the health insurance sector as a potential body besides donors who have the health of others at the center of their minds to fund the costs.

Afterwards, I will come up with a cost that is fair compared to other providers and package it in such a way that it will be attractive to the insurance players at the same time being profitable to my firm. I would also price the services in a way that they would be able to cover the costs of the service that would have been provided. I would also apply for any exemptions and subsidies as provided for by the law.

I would allocate resources based on the following factors: the needs of the system, the availability of resources, and the demand for a given resource, as well as the different needs of the different distinctive groups, if any. Basic needs of the system will be allocated resources, as they are essential to the existence of the system. The demand for a given resource also makes it an integral bit of the system (Ganz, 2011, p. 113).

Therefore, the availability of a given resource will determine how much each group will receive based on the corresponding order. Special groups make a system look different from others thus standing out as a decisive factor too.

As a CFO, I would make a decision on individual capital items to discard or retain depending on the factors at hand. Fixed assets like buildings, which appreciate over time, would not be discarded as long as the geographical position of the asset is still relevant to the business.

Equipment will be discarded depending on the following factors: old machines, which have been broken down and are beyond repair, repairable machines, which are cheaper to replace than to repair, old machines, which are working but are obsolete in the industry, as well as equipment that can disposed before they lose value.

I would invest in human capital and technology, as well as assets that will be relevant to the future functioning of the firm. A competent and adequate work force is essential for the provision of services because healthcare is about service delivery, and, for a system to stand out, it has to have a unique touch, which should be different from the rest in the industry.

Healthcare, like many other industries, is dependent on technology for proper, accurate and speedy delivery of services to the clientele. Investment in assets in strategic areas and locations will also be a consideration.

As the CFO of a healthcare system, I would base my financial prognosis on the capital base of the firm, the budget of the firm, and the different sources of revenue that the firm has been using. The capital base of the firm will allow the firm to plan with a given amount at hand without factoring in outside revenue intervention.

Expected revenue will be based on the different services that the firm will be offering, as well as new services that could be introduced to increase the revenue base (Dechow & Larson, 2011, p. 39).

To prepare the health sector for the future, I would invest in research and development. The bit about research would enable the firm to predict expected trends in the market in a bid to come up with packages that would put it up-to-date in the industry.

I would also enter into partnerships with other players in the industry upon which my organization depends. This is a sure way of securing the market and taking control of the market. I would also negotiate for favorable credit terms from creditors as a way of strengthening the organization’s capital base.


In conclusion, healthcare financing is one of the trickiest components about the healthcare system management, as it is intricate and complicated in nature. Healthcare is a gigantic industry in many countries. It is still growing and extremely dynamic in nature. Many factors that are not or should not be seen as main drivers of this system tend to play a prominent role in dictating the direction the industry is taking

. Factors like technology and administrative systems, which should be secondary, have come up as main factors, which tend to dictate the direction and existence of the system. Planning and forecasting have also come up as significant factors due to their determinant nature of the future of the industry. Without planning and forecasting, the industry would simply come to a halt, as the financial industry is at times unpredictable.

Reference List

Casto, A., & Layman, E. (2006). Principles of Healthcare Reimbursement. Illinois: Ahima.

Cleverly, W., & Cameron, A. (2007). Essentials of Healthcare Finance. New York: Jones & Bartlett Learning.

Dechow, P., & Larson, P. (2011). Predicting material accounting misstatements. Contemporary accounting Research, 28(1), 17-82.

Ganz, R. (2011). The impact of healthcare reform on Innovation and New Technology. Gastrointestinal Endoscopy Clinics of North America, 22(1), 109-120.

Zhu, X., & Yu, L. (2012). Nurse staffing levels making a difference on patient Outcomes: A multi study in Chinese hospitals. Journal of Nursing Scholarships, 44(3), 266-273.

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