HCA 610 DQ Types of Financial Risk in Health Care Organization
HCA 610 DQ Types of Financial Risk in Health Care Organization
Recent turmoil in the capital markets underscored for hospital leaders the negative impact of various liability-side risks. These risks for the liability-side include market and liquidity risks as applied to investments, such as equities (stocks), bonds, securities, and property, plant, and equipment. What are several types of financial risk that the health care organization could take in the course of operations?
Financial Risk in Health Care
Everyone seems to assume that because healthcare budgets are so big that they are immune to chance-based risk. Since most healthcare systems operate using capitated budgets, i.e. a fixed budget, you would think that the literature would be full of papers on how to calculate the risk associated with such budgets. For the UK, all you will be able to find are a few studies from the early 1990’s when GP fundholding was first introduced. It turns out that financial risk in healthcare is unacceptably high to provider and purchaser alike. This explains why achieving break even is such a strenuous task with high levels of swapping between budgets. Even very large healthcare providers and commissioners can accumulate huge debt simply due to chance variation in volume and case mix. See the financial risk series of articles below.
In particular, emergency admissions are a source of exceedingly high risk and studies by HCAF have shown that the ‘real world’ risk is up to 3-times higher than simple chance variation. This is in addition to the financial pressures arising from the three to eight year pattern in medical emergency admissions (see ‘Emergency Admissions’ page). Many health care cost types are characterised by high spatio-temporal volatility. This behaviour arises from the interaction of the environment (weather, air quality and infectious outbreaks) with health. The spread of infectious outbreaks and their knock-on effects to unrelated conditions would appear to be a major contributing factor. The issue of financial risk has a huge impact on the area of GP commissioning and many of the current policies in this area need significant revision to work in the real world. Refer to the ‘HRG, PbR, PBC’ page for details regarding additional financial risk arising from limitations in the structure of the Health Resource Group (HRG) tariff.
The ‘Emergency Admissions’ folder contains details of the research relating to trends in emergency admission from both a UK and international perspective. Based on two decades of experience HCAF support the idea that the not for profit Clinical Commissioning Group (CCG) support organisation, which should ideally be jointly owned by its CCG members (similar to a co-operative), should cover around one to three million head of population for the following reasons:
1. It minimises the cost of the executive & statutory functions per head of population
2. It gives sufficient size to provide high quality decision making support functions (information analysis &
synthesis, geo-demographic tools, etc)
3. It minimises the total financial risk and allows a more rational approach to statistical fluctuation (including high
cost individuals) at local level within a higher level risk sharing envelope
4. It maximises the available funds to support effective implementation of change using managers with local
knowledge
5. It provides the necessary size for clinical networks to be effective and to disseminate good practice
6. It provides sufficient size to evaluate gross differences in counting and coding exhibited at some acute trusts
and gives the leverage to bring them to task (see ‘Forecasting Demand’ folder)
7. While gaining all the benefits of size it does not preclude the freedom for localities to implement the schemes
of their choice where otherwise distracting and potentially crippling financial risk issues are covered by the
larger organisation.
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Please read through the following information on writing a Discussion question response and participation posts.
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Important information on Writing a Discussion Question
- Your response needs to be a minimum of 150 words (not including your list of references)
- There needs to be at least TWO references with ONE being a peer reviewed professional journal article.
- Include in-text citations in your response
- Do not include quotes—instead summarize and paraphrase the information
- Follow APA-7th edition
- Points will be deducted if the above is not followed
Participation –replies to your classmates or instructor
- A minimum of 6 responses per week, on at least 3 days of the week.
- Each response needs at least ONE reference with citations—best if it is a peer reviewed journal article
- Each response needs to be at least 75 words in length (does not include your list of references)
- Responses need to be substantive by bringing information to the discussion or further enhance the discussion. Responses of “I agree” or “great post” does not count for the word count.
- Follow APA 7th edition
- Points will be deducted if the above is not followed
- Remember to use and follow APA-7th edition for all weekly assignments, discussion questions, and participation points.
- Here are some helpful links
- Student paper example
- Citing Sources
- The Writing Center is a great resource