Finance Issues in Health Care

As one of the most expensive industries, health care encompasses a wide range of technologies, goods and services. As a result, controlling costs within this sector involves a multi-faceted approach that examines processes and results within the different areas that encompass health care. Finance issues affecting the health care industry involve the delivery of services, the services provided and insurance protections.

Health Care Delivery

• Health care delivery deals with the processes that determine how patients receive services and how those services are administered, according to the Merck Manual Online reference site. In general, patients can receive care and treatment from a primary physician or a specialist. And while many cases may warrant the attention of a specialist, services provided by specialists are typically more expensive than those from primary care doctors. Incidentally, the overuse of specialty care represents one of the financial issues affecting costs within the health care industry. As far as administrative processes go, the use of multiple private insurance coverages, the marketing of services by providers and insurers and insurance underwriting costs make up an estimated 20 to 30 percent of total costs within the health care industry. Attempts to address finance issues involving service delivery and administration needs work toward developing more efficient processes.

Health Care Treatments

• Health care treatments encompass the use of medications and the procedures used to treat patient conditions. According to Merck Manual Online, the ongoing development of new drug technologies has had the greatest impact on rising costs within the health care industry. The costs to properly develop and test a new drug averages around $1 million, which ultimately has an effect on the types of drugs a company is willing to develop in terms of profit potential. Finance issues arise as the marketing of newly approved drugs further increase costs within the health care industry as a whole. Cost increases also result from new technologies used within treatment procedures, such as angioplasties and stem cell agents. And while many new procedures have improved upon earlier approaches, the technologies involved carry a larger price tag.

Health Care Protections

• Health care protections have to do with the costs incurred by providers and health organizations to insure against malpractice claims and the precautions taken to avoid malpractice suits. According to Merck Manual Online, malpractice insurance costs include claim settlements payments as well as the cost of maintaining insurance coverage, which includes the added expenses tacked on by insurance companies to cover overhead and generate profits. Attempting to avoid malpractice claims, providers within the health care industry may take certain precautions when determining treatment approaches. This practice, also known as defensive medicine, promotes unnecessary treatment procedures, such as hospitalizations or referrals to specialists. In the process, providers and organizations avoid making diagnostic or treatment errors, which reduces the likelihood of being sued for malpractice.