Hospital Cost Shifting: Challenges and Opportunities

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Table of Contents

Introduction
Challenges and opportunities
Relevance of the topic in current and future health care
Conclusion
References

Introduction

Shifting of cost is an economic practice. Shifting can either be forward or backward. Cost shifting allows “cost demands to be met by shifting some of the liability to different groups of users” (Frakt, 2011). In health care system, this practice is common. The state may decide to provide health care services at low cost to low income communities. These charges are often lower than the prevailing rate for the services. To cover the difference, management of a hospital may decide to charge a higher price to a group of patients. Such groups may have patients with private insurance and those who pay for themselves.

Alternatively, high income patients can be charged a higher price than the market rates. Cost shifting is not similar to price discrimination. The later entails charging different prices for same services or goods to different groups of users (Frakt, 2011). Cost shifting help in minimizing job loss or inability to provide services as a result of unpaid cost (Frakt, 2011). This treatise discusses the challenges and opportunities associated with cost shifting. It also talks about the relevance of the topic in current and future health care environment.

Challenges and opportunities

Medicare Prospective Payment Assessment Commission’s report done in 1992 “asserted that hospitals could recoup underpayments by Medicare from private payers” (Frakt, 2011). This was necessary so that hospitals could not fear inadequate government payments. From various research studies that have been conducted, it was found out that commercial insurers pay the highest markup. In practice, cost shifting faces a lot of challenges (Feder & Hadley, 2010).

First, providers of private insurance may find it costly to provide health insurance to patients. They may not fully cover some ailments due to cost implications. Alternatively, they may charge very high premiums which can be afforded by few people. Therefore, patients with private insurance may be reducing over time. This implies that hospitals may not find avenues for charging higher rates. This indicates inability to shift cost. Cost shifting is no longer a remedy for hospitals to cover their cost. As an opportunity, hospitals may target high income citizens and charge them high. For instance, hospitals may have branches in different localities.

For instance, in low and high income regions. Hospitals in high income regions may charge higher for services than those in low income regions. This is a great opportunity for hospitals (Feder & Hadley, 2010).

Relevance of the topic in current and future health care

Cost shifting is currently not relevant in healthcare industry. For instance, the recent global recession hindered the ability of hospitals to shift costs. As the economic conditions are worsening, hospitals may not be able to charge a higher price to some group of patients. Low income group may be forced to pay the prevailing rates of the services. Other than making low income group to pay the market rate, hospitals need to be efficient in their operations. They have to be profit oriented. Hospitals have to cut cost so as to be profitable. In cutting cost, they target employees. They may decide to do away with some employees benefits such as overtime allowances. To some extent, they may even delay pay increase to employees (Cleverly, Song & Cleverly, 2010).

Conclusion

The significance of cost shifting is reducing overtime. This is because hospitals earn dismal revenue from the practice. Therefore, to be able cover all costs, hospitals have to be efficient. To achieve this, most hospitals prefer to minimize cost especially costs related to employees. In conclusion, the topic of cost shifting in hospitals is losing relevance.

References

Cleverly. W., Song. P. & Cleverly, J. (2010). Essentials of Health Care Finance. Canada:Jones & Bartlett Learning.

Feder, J. & Hadley, J 2010, ‘at the intersection of health, health care and policy’, Health affairs, vol. 4 no. 3, pp. Web.

Frakt, A 2011, hospital cost shifting: brief history and possible future, Contemplating health care with a focus on research, an eye on reform. Web.

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Hospital Cost Shifting: Challenges and Opportunities

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