Critical Analysis Report (health care finance)

a. Applicable General Topic: Relationship between costs and revenue in healthcare organizations
b. Title of Article: Private-Payer Profits Can Induce Negative Medicare Margins
c. Authors Name: Jeffrey Stensland, Zachary R. Gaumer, and Mark E. Miller
d. Name of Journal: Health Affairs
e. Date of Journal: 2012
f. Volume: 25
g. Number: 2
h. Pages: 1-7
i. Publisher of Journal: The People-to-People Health Foundation, Inc.
Healthcare Finance
Synopsis
This Article is about the relationship between costs and revenue in a healthcare setting. It tries to compare the relationship between the self insured health services and Medicare services. It draws relationships of how increase or decreases in medical costs affect revenues of a healthcare organization. The article tries to find out how efficient the assumption that healthcare organizations have little control over their organizations is. The article also views how market share and costs are related and how these organizations operate in order to set their positions in the market. It shows that organizations with high costs realize more profits.
General Theme
The theme of the author is that healthcare organizations costs are related to financial resources of a healthcare organization. The article shows that organizations with higher financial constraints experience lower profits unlike those healthcare organizations that have lower financial constraints. This article draws these relationships basing on empirical findings. Also, it demonstrates how organizations in healthcare industries differ from other normal organizations in terms of relationship between costs and profits. Therefore, the major theme is to draw cost-profits relationships in healthcare organizations.
Point of View
I agree that financial costs are related to profits. In healthcare organizations, high costs mean that the organization is attending to many patients. The more the patients a hospital receive, the more the costs. When a healthcare organization attends to many patients, it incurs more costs and as a consequent, it realizes more profits. However, there are situations where these organizations do not necessarily make profits. This is caused by the type of patients that the organization receives. I agree with the article that this is true. The two kinds of customers are self insured and the Medicare patients. I agree with the article that a health care organization with more patients who are privately insured will realize more profits than those organizations with more patients in with Medicare plans.
This article is based on empirical study and I concur with the article. The research was carefully conducted and the findings are relevant as per the topic of study. This is because the self insured plans will pay higher premium for medical services than those with Medicare plans. This means that if a healthcare organization has more of customers with Medicare plans; it will realize less profit than an organization with more of patients with private insurance. I therefore can infer that the information in this article has been researched and is reliable.
Issue Analysis
The study in the article was aimed at determining the real cause of negative margins in Medicare organizations. The article holds that nonprofit health care organizations would spend more resources because they do not have shareholders to distribute dividends to. It revealed that the nonprofit organizations would use their profits to expand their hospital setting in terms of purchasing more equipment to enhance their services to customers. This would be done to enhance their services in order to attract more of patients with private owned insurance.
The costs such as capital expenditures, enlarging rooms to accommodate more patients, building more structures and increasing patients’ amenities would help to increase the market share for self insured patients. However, these costs lead to increase in cost per discharge and they end up reducing profits on Medicare patients. However, it has been found that when healthcare organizations realize high returns from Medicare patients, they increase their payments to shareholders rather than finding ways of expanding their operations with such returns.
There is a traditional argument that entails cost shifting. It suggests that Medicare co...