Current Federal Laws And Events That Will Impact The Hospital
There are many laws and events that may end up impacting the hospital in terms of financial management. First, hospitals that fall under the CMOs’ Inpatient prospective payment System are considered to have agreed to the pre-determined rate so as to serve the Medicare patients (Finkler, Jones, & Kovner, 2012). Therefore, the government reimbursement greatly controls the medical prices for these hospitals. With such a rule, it becomes impossible for the hospital evaluate and plan, make long term investment decisions, make effective financial decisions, and even to manage working capital. Second, there are regulations expecting that hospitals will only be reimbursed upon quality performance (Finkler, Jones, & Kovner, 2012). This is yet another regulation that will greatly impact the hospital as the control of finances is no longer within control. Any complaints, or unclear instances will lead to lack of payments due to poor performance, since the federal government only pays for value.
Third, due to the predetermined price for treating certain cases, the hospital may fail to balance its financial statements due to the extra costs that may be incurred during the process (Finkler, Jones, & Kovner, 2012). Therefore, if a patient is suffering from a disease that is yet to be determined by a series of tests and scans, the federal government may fail to cater for extra expenses once the disease is determined, and a price for treating the ailment was low compared to the incurred value. Similarly, if a patient is admitted for a long period such that the admission costs exceed the DRG rate, the hospital will be at the losing end. Fourth, the option of negotiated rates is also available, and this may positively impact hospitals (Finkler, Jones, & Kovner, 2012). This is because MCOs are sometimes given an opportunity to negotiate capitated rates. These usually feature flat monthly payments per patient, regardless of the level of medical service consumption. Therefore, the hospital will benefit from the extra amount of payment offered. Lastly, hospitals are expected to offer services to any individual needing care, even though they may not be able to pay. The federal government set this regulation as a way of balancing the excess income received from negotiated pays (Finkler, Jones, & Kovner, 2012). This, however, may lead to loses for hospitals as they may end up using expensive resources to offer services to these people.
Basically, the factors that will have an impact on the financial decisions of the facility involve regulations that expect the hospital to spend a lot more on treatment services than what the federal government is willing to pay. For instance, charity care can be very risky as individuals will constantly go on to seek medical care without payments. If the other insured individuals complete their monthly visits that have already been catered for, there will be no other way for the hospital to retrieve the losses (Finkler, Jones, & Kovner, 2012). As a result, the hospital will have to constantly depend on its own financing to balance the books. Making future plans with such a system can be very difficult as it is not reliable. The hospital will not know what to expect every month. Therefore, starting a project may lead to it being abandoned before it is completed due to lack of funds. The possibility of great profits followed by great losses that is presented by the various regulations named above will impact the financial management decisions of the hospital.