Over the last twenty years health care prices for the general public, because of this continuous rise in prices hospitals and health care facilities have given much attention to improving their communication of prices to the public. Most people of the general public are unaware that hospital costs and hospital prices are two different things. Hospital cost is the dollar amount the hospital pays in order to provide patient care. Hospital price is the dollar amount designated to the specific procedures performed in order to provide said “patient care”. This dollar amount is what the hospital bills the insurance company and/or the patient for their care (Cleverly & Cameron 2007). It is important for health care facilities and hospitals alike to provide a sense of reasonableness within their bills so that their patrons do not get the feeling that they are being “ripped off”. Many people feel that the reason their health care bills are so high is because hospitals feel they can charge whatever they want for a product people have to have. In general, sick people will not turn down a life saving treatment because it is too expensive, because the health care industry is aware of this, they charge whatever price they can get away with, like charging the patient’s insurance three times the base price (Cleverly & Cameron 2007). What the general public always seems to overlook is the fact that even hospitals need to turn a profit in order to keep their doors open and keep providing genuinely good health care to their patients.
There are three generic factors that influence the way any firm, including health care facilities influence their pricing. These three factors are, the desired net income of the firm, the firm’s competitive positio...
... middle of paper ...
...They are held to “reasonableness of charges” and it is important that the public knows the facts before speaking out against their local hospital. Health care costs money, therefore like any business hospitals must charge for their services, plain and simple.
Works Cited
Devers, K, Casalino, L, Rudell, L, Stoddard, J, Brewster, L, & Lake, T. (2003). Hospitals negotiating leverage with health plans: how and why has it changed? Health Services Research, 38(1), 419-446.
Cleverley, W. O., & Cameron, A. E. (2007) Essentials of health care finance. Mississauga, Canada: Jones & Bartlett
Long, R. (2002). Long: financial turnaround focuses on revenue cycle, managed care contracts - executive insights - ronald r. long, outgoing chairman of healthcare financial management association national board of directors - interview. Healthcare Financial Management
Flinker S., Ward D., Calabrese T., (2013). Accounting Fundamentals for Health Care Management, 2nd edition.
Blomqvist A., Busby C., (2012). How to pay family doctors: Why “pay per patient” is better than fee for service. C.D. Howe Institute Commentary, Commentary 365.
The Bitter Pill by Brill Steven addresses the problem attached to medical bills in small towns across the country. Brill feels that American health care is eating away our economy and our treasure and discusses the costs associated with the provision of health care services in the U.S. The article explores the medical world through the medical experience encountered by a 50-year-old Scott S. and his wife Rebecca S. from the surrounding suburb near Dallas Texas. How is it possible that a laboratory work for a breathing problem cost $132,303?
This consolidation, along with others in the health services industry, factors a drive to cut costs and thus, increase revenues. By combining purchasing power and control over a large percentage of the drug industry, PBM’s can negotiate reductions in drug costs for themselves and their consumers. They can procure less expensive generic drugs from generic manufacturers, negotiate rebates and disc...
Baker, J. J. & Baker, R. W. (2014). Health care finance Basic tools for nonfinancial managers (4th ed.). Burlington, MA: Jones & Bartlett Learning
Leverage can be achieved through numbers, competition, and quality of care. Jamie Oh (2010) lists the following strategies that physicians and hospitals can use to effectively negotiate future service-delivery contracts:
Miller, H. D. (2009). From volume to value: better ways to pay for health care. Health Affairs
It would be necessary for a hospital administrator to look closely at ways to lower healthcare costs and provide more efficient care when a large employer like BRPP states they are thinking of relocating their employee inpatient hospital services to a company like InduShealth. InduShealth is offering substantially lower prices for several surgical procedures and a U.S. hospital administrator would not want to lose this large consumer population if it was possible to find more efficient methods of providing healthcare to their patients (McLaughlin & McLaughlin, 2008). One pricing strategy that a hospital administrator could advocate for is a bundled...
Davidson, Stephen M. Still Broken: Understanding the U.S. Health Care System. Stanford, CA: Stanford Business, 2010. Print.
Zuckerman, A.M., Healthcare mergers and acquisitions: strategies for consolidation. Healthcare Financial Management. 2011 Summer; 27(4):3-12; discussion 39-41.
Traurig, G., (2008/2009). Turmoil in the healthcare industry: what about the patients? The Americas Restructuring and Involvency Guide. Retrieved from http://www. americasrestructuring.com/08_SF/p100-106
One primary key to a successful health care organization is having a strategy to achieve the mission of the organization. This is particularly true in reference to creating a budget and generating revenue for a profitable bottom line of a hospital. Executives are experiencing a gap that is continuously widening between technology and hospital demands, which is causing additional conversation around pricing. According to Nugent (2004), there are three major themes to consider when it comes to strategic pricing. These themes include pricing at the margin (pricing new business to cover variable costs and margin, if capacity exists), cross-subsidizing (funding one service with profits from another service) and testing what the market will bear
Porter, M.E., (2010). What is the value in healthcare? New England Journal of Medicine. 363:2477-2481
How has the healthcare industry changed (pre-1983 to post 1983)? What are the implications for BD? How has BD managed to build up an 80% market share in this market? Which many competitors bigger than BD have tried to enter without success?
Some economists suggest that the market for healthcare is different from other competitive industries and therefore cannot act the same way. In principles, we learn the basic assumptions of a competitive market, (1) goods offered for sale are homogenous, (2) there must be many buyers and sellers so that each has a negligible impact on the market price and (3) For markets to work efficiently there can be no significant information failure affecting the decisions of the producers and consumers. In perfect competition, product’s must be homogeneous which means that goods that individual producers cannot alter or differentiate to collect a higher price. Health care is a heterogeneous product because the patient can experience a range of outcomes. There is an ongoing battle between hospitals and insurance companies. In theory, insurance companies negotiate with hospitals for a reduced rate. One of my favorites quotes I stumbled upon is from economist Uwe Reinhardt in regards to Obama and Obamacare “I wish I had a half hour with him to explain it to him. If you pit hundreds of little insurers against each other, what makes any one think that each of them has enough market clout to bargain successfully with a hospital? So I don 't think this public health plan, adding yet one more competitor, is going to bring costs down at