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The immense amount of money spent on health care means lucrative opportunity for innovators.
4 min read
Opinions expressed by Entrepreneur contributors are their own.
Let’s face it, at a staggering $3.3 trillion in 2016, healthcare expenses in the United States is expensive. Many healthcare systems are left cash strapped, throwing the burden onto patients, who end up facing really high costs. Luckily, there are better ways to save money, creating a win-win situation for all.
1. Balancing the drive for technology.
Technology in healthcare is a double-edged sword. On one hand, it offers innovation. On the other hand, it results in pretty high costs.
In the U.S., new technology has a patent system that is cumbersome. If a patient requires a patented life-saving medicine or medical management, the patient is required by law to pay the set price implemented by the patent holder. The insurance company and the government are not able to decrease this cost, despite the patient’s need. Some experts contend that new technology may not always be the best option. Others advocate that the single actions prone to direct healthcare increases over the long term are either the stoppage or avoidance of new medical technology. This means limiting new technology and complete rationing are the single two alternatives that allow sustainable answers. A possible option for long-term reform that some would suggest would be to change the current patent system, so as to avoid monopolies and guarantee that companies face competition to drive the costs down.
Related: More Patent Trolls Are Targeting Startups. Here's What You Can Do.
Solving these issues requires asking pertinent questions during the capital budgeting process.
- Does the needed newer equipment stand for enhanced technology and not just the latest trend?
- Will the technology overwhelmingly impact the safety and superiority of operative procedures, cardiac catheterization, colonoscopy, and many other procedures and, consequently considerably influence cost management? This is especially important if these new technologies can curtail the time it takes to become skilled, thereby decreasing staff and physicians’ training time and costs.
2. Sorting out reimbursement.
Given the sky-scraping costs exhausted on healthcare in the U.S. -- the federal government spent $672.1 billion on Medicare in 2016 -- most of the healthcare issues stem around decreasing spending, which has negatively affected reimbursement to hospitals and physicians. Medicare uses a fee-for-service mode, which is known as the Physician Fee Schedule (PFS) payment system, based on a resource-based relative value scale (RBRVS). Generally, this modus operandi for the PFS payment schedule works according to modifications in volume. CMS has announced the need to drastically cut down on Medicare reimbursement. In order to capitalize on reimbursement, healthcare systems need to be using the most up-to-date billing system and make sure reimbursement codes are accurate and precise to guarantee immediate payments and avoid any issues dealing with fraud.
Related: How Blockchain Technology Is Making Other Industries More Efficient
3. Dealing with regulatory issues.
The government allocates huge amounts of money to healthcare organizations, so it is critical that the groups abide by the laws. Given the large number of Medicare and Medicaid patients, the consequences of not obeying these laws and regulations can lead to drastic, and sometimes legal consequences. This commonly occurs when the government believes there is fraudulent use of allocated funds. Healthcare systems need to uphold regulations such as the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health Act (HITECH), which have been implemented by the government. It is important that the awareness of these regulations is continuous. Not only should newly hired staff be trained to uphold the law; your current staff needs to be required to attend annual workshops on legal updates.
4. Switch to strategic pricing.
Healthcare systems need to stay up-to-date with technology while keeping costs down. The main cost areas would be maintaining the electronic records system, as well as having not just the latest, but most practical technology. This will require working with management to create suitable capital budgets. The healthcare system will have to use effective cost allocation methods in order to offset the costs of new acquisitions of equipments. These overhead costs should be allocated. In situations where departments share equipment, the reciprocal services method of cost allocation will be utilized.
Related: Towards Digital India: Why Hospitals Should Become Innovation Centres
Given the costs of these investments, in order to maximize revenues, a possible solution is switching over to strategic pricing. This means focusing more on our inpatient services and chronically ill patients. Although initially, the use of financial assisting in the form of loans will be used to fund these ventures, in the long term, the generated income and revenues will be used to fund larger scale capital budgets and acquisitions in the future.
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