Health care economy


Healthcare economy

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Healthcare economy

Thedocument below analyzes the healthcare economies. There are numerousquestions that revolve around the bills being paid in health care aswell as the mode of payment. It is of great necessity to note thatthere are a number of flaws in modern healthcare as far as thepayment is concerned. These flaws tend to corrupt the primarydoctor-patient relationship. They also tend to affect the connectionbetween the health institutions behavior and their costs. This mayeventually create inefficiency in healthcare making it resourcewasteful. The wastefulness makes the health care very expensive.There are, however, remedies to these flaws that can make the healthcare both friendly and affordable to everyone.

Cost-identifyingcosts and minimizing cost

InCodeBlue, theauthor notes that cost identification especially in healthcare hasbecome very challenging in the world of today. McDermott states thatit is essential to ensure that the charges levied on customers arefair and affordable. He argues that the type of budget that a healthinstitution makes is essential in determining whether the costs willbe high or low. The main problem associated with cost identificationis ever increasing costs of healthcare provision. This eventuallyleads to difficulty in identifying the appropriate cost. In order tosolve this problem, McDermott argues that it is necessary for anorganization to determine the Return on Investment. This can be donethrough ensuring that the strategies applied in the organizationenhance the minimization of costs, and maximization of returns(McDermott,2000).

Lackof transparency of the information related to prices and quality isanother aspect that creates a problem when it comes to costidentification. It will be difficult in identifying the right cost tobe charged if one does not have information of the value, as well asits initial cost (Guinness et al., 2011). In order to address thisproblem, McDermott proposes that healthcare organizations conductregular audits on how the finances have been spent. This enhancesaccountability and ensures that there is minimal misuse of funds thathave been allocated to the healthcare sector. Cost identification isalso faced with the challenge of evaluating and determining the costof insurance plans. At times, it is challenging to determine the costof health insurance plans, especially with regard to the amount ofpremium that should be paid by employees. In order to minimize thecost of insurance, McDermott suggests that the healthcare sectorshould employ the use of such strategies like coinsurance,copayments, as well as deductibles (McDermott,2000).

Cash-havingthe necessary cash to pay bills

McDermottargues that healthcare organizations may face challenges of havingthe necessary cash with which they can pay the bills incurred intheir daily operations. Organizations that provide healthcare have topay bills such as electricity bills, water bills, as well as paytheir employees. In order to raise the cash required, organizationscan get funding from the government and non-governmentalorganizations. Cash can also be raised through the monies charged toemployees who come to seek medical services. The cash raised shouldbe sufficient to pay for the bills that the hospital has incurred(McDermott,2000).

“CodeBlue” also discusses the issue of cash needed by patients to paythe bills for the medical expenses they have incurred. Patients maynot have the necessary cash to pay the hospital bills, but insteadopt to use health insurance. The insurance companies usually enterinto negotiations with the health care facilities and pay reducedbills. To solve these problems, there is need for healthcareorganizations to devise strategies of raising money. This will enablethem access the cash they need to pay bills for the expenses theyincur. In “Code Blue”, the issue of patient bills was solved byproposing health insurance as a strategy to help patients cover theirmedical expenses. With such a method, it is possible for patients toafford health facilities that are not payable through cash (Phillips,2005).

Capital-access to funding through lenders

McDermottcontends that lending can be regarded as a major source of fundingfor healthcare organizations. Since the costs of providing healthservices have increased considerably, it is essential that healthinstitutions borrow money from lending institutions as a way ofensuring that they have the cash required to fund their activities.The problem associated with lending is that there are high costs ofrepayment, as well as complicated conditions imposed by the lenders.This hinders the access to funding from lenders for manyorganizations in the healthcare sector. With high interests, theamounts borrowed may escalate to the extent that an organizationexperiences difficulties in repayment (Guinness et al., 2011).Solving such a problem entails approaching healthcare institutionswhose lending costs are low. This way, it is possible to ensure thatthe healthcare organization does not pay unreasonable interest rateson the amounts borrowed.

Assuggested in the book, capital can also be raised through the sale ofa company assets. This method gives healthcare organizations anopportunity to sell old assets and raise cash, which can be used tofinance projects. However, the sale of such assets may encounter theproblem of depreciation whereby assets are sold at a loss since theyhave depreciated in value. Thus, the capital raised from sale ofassets may not be sufficient to solve the required needs. Thisproblem can be solved by ensuring that assets of an organization arewell maintained so that when they are sold, they can raise a goodamount that can be used as capital. Assets that are in good conditioncan fetch an amount similar to new assets (McDermott,2000).

Othercompanies also face the issues stated in the book. One such companyis John Hopkins University hospital, which is faced with thechallenge of raising about $4.5 billion in order to expand itsoperations. The main reason for raising the money is to ensure thatmore professionals are trained, as well as enhance medical researchwithin the organization. The money raised is also aimed at ensuringthat the organization addresses problems being faced by thecommunity.


Healthcarerequires a critical consideration of its economy the same way othersectors need it. It is a very essential sector since human beingsneed to remain healthy. There is, therefore, a need for individualsas well as governments to pull their efforts together so as to ensurequality healthcare at fair cost is provided. Policies to govern thehealthcare economies should also be formulated to enhancetransparency in all matters related to medical costs.


Guinness,L., Wiseman, V., &amp Wonderling, D. (2011).&nbspIntroductionto health economics.Maidenhead, Berkshire, England: Open University Press.

McDermott,R. E. (2000). CodeBlue: A Textbook Novel on Managed Care.New York: Traemus Books.

Phillips,C. (2005).&nbspHealtheconomics: An introduction for health professionals.Oxford: Blackwell Pub.