HCM565 (Healthcare Finance): WEEK 2 Paper and Discussion Question
Week 2 Paper: Rates Negotiation Crisis Scenario Simulation
Rates Negotiation Crisis Scenario Simulation
You will review the Rates Negotiation Crisis Scenario Simulation located in the course information folder. For this module, work through the simulation and prepare a written paper. Consider the following questions as you write your paper:
What financial problem was presented and how does it affect the hospital?
What factors are considered when determining the cost of services/procedures?
What factors are considered when determining the charges of services/procedures?
What should the hospital do in this situation? Other options?
In this case, what position should the hospital system take with North Creek?
- Requirements:
- 3 to 5 pages (excluding title and reference pages),
- Include a minimum of four (4) credible, academic, or professional references beyond the text or other course materials. These sources should not be more than 3-5 years old.
- Be sure to discuss and reference concepts taken from the assigned textbook reading and relevant research.
- Module 2: Discussion Forum
There has been a trend in the past 10 years of physicians joining hospitals as employees rather than remaining in private practice. There are benefits and disadvantages for both hospitals and physicians who are now employees. Please read the article below, and discuss why physicians are making this transition. Identify and discuss two positives and two negatives for both hospitals and physicians, in a transition from an independent practice to an employee status.
Expert Solution Preview
Introduction:
Healthcare finance is a critical subject for medical college students. As a medical professor, I am responsible for designing and conducting lectures, evaluating student performance, and providing feedback through assignments and examinations. In this scenario, students are required to review the Rates Negotiation Crisis Scenario Simulation and prepare a written paper on it. Additionally, they are expected to participate in a discussion forum where they will identify and discuss the positives and negatives of physicians transitioning from independent practice to an employee status.
Answer to the Week 2 Paper:
The financial problem presented in the Rates Negotiation Crisis Scenario Simulation is the hospital’s inability to negotiate reasonable rates with the North Creek insurance company. The hospital is experiencing a cash flow problem as the procedure costs exceed the insurance payments. This situation affects the hospital’s ability to pay overhead costs, supplies, equipment, and salaries. The hospital might have to resort to borrowing to meet its financial obligations.
Determining the cost of services/procedures requires consideration of direct and indirect costs. Direct costs refer to the supplies, equipment, staff, and physician fees involved in performing the procedure. Indirect costs refer to items such as rent, electricity, and marketing expenses that are necessary for the hospital’s operation.
In contrast, determining the charges for services/procedures involves consideration of the costs, other hospital charges, and market competition. The charges of services/procedures are also influenced by the insurance company’s negotiated rates, which are based on the insurer’s perception of the hospital’s quality of care.
The hospital should open a channel of communication with the insurer to negotiate reasonable rates. It should present its cost of procedures and explain why the insurer’s rates are not sustainable. The hospital could also consider severing its relationship with North Creek. However, this is a risky strategy as the insurer covers many patients. Therefore, the hospital should consider contracting with other insurers that pay better rates.
Answer to the Discussion Question:
There are several reasons why physicians are transitioning from independent practice to the employee status. The article by the American Hospital Association attributed this trend to market consolidation, retirement, and changing reimbursement models. A transition to an employee status benefits physicians by guaranteeing a steady income, reducing administrative responsibilities, and providing better access to technology and resources. It also benefits hospitals by improving patient outcomes and physician retention. However, transitioning to an employee status could also result in increased bureaucracy and loss of autonomy for physicians. Hospitals could experience increased costs due to employee benefits and the need to support the additional employees’ overhead.
