Health Finance and Reimbursement: Draft of Financial Principles

Running head: HEALTH FINANCE AND REIMBURSEMENT 1
Southern New Hampshire University
Title: Final Project Milestone One: Draft of Financial Principles
Name: Arnold Opoku
Course: Healthcare Fin & Reimbursement
Professor: Paul A. VanAssche, JD, MBA/HCM
October 21, 2018

HEALTH FINANCE AND REIMBURSEMENT 2
Introduction
Health insurance plans refer to the process of determining causes of action in making the
health services cheaper and affordable across the disadvantaged societies. It's fundamental for
individuals seeking health care to have the services enshrined within their financial picture
(UnitedHealthcare, 2018). Therefore, this essay is set fundamentally to explore different
elements of the health care plans while expressing the implication of the financial management
principles on health insurance plans.
Elements of the Financial Insurance Plan
When choosing a health care insurance plan, different elements should be considered
including Provider network, Drug formulary, Premium, Plan benefits, and Deductibles. Provider
networks, in this case, entails all the healthcare facilities that the plan contracts with for
delivering the needs of the clients (STI, 2016). Drug formulary on the other hand refers to the list
of prescription drugs entailed within the health insurance plan (STI, 2016). The premium, on the
other hand, refers to the total amount paid to the insurer usually measured on a monthly or yearly
basis (STI, 2016). Deductibles do not apply across all the plans but entail the total amount that
must be paid before the insurance begins paying (STI, 2016). Finally, plan benefits which refer
to the advantages and areas that need to be entailed in the plan in promoting the needs of the
clients.
Overall Impact of Financial Management Principle
Financial management plays a role in managing money and risk for the achievement of
financial goals in healthcare organizations (Kearrney, 2018). Financial management principles
help in achieving the financial goals by selling doctor’s skills to get steadier payment stream to
enable healthcare organizations to purchase more modernized equipment. Additionally, financial

HEALTH FINANCE AND REIMBURSEMENT 3
management principles control the future cost of a medical condition. The financial management
in health organization plays a role in preventing the future cost of the medical condition through
running practices such as vaccination and cancer screening to avoid the occurrence of subsequent
diseases. Managing the expense of treatment Insurers educate the physicians and doctors on
effective cost of medicine the curative effect and the descriptive dosage, to avoid wastage and
misuse.
Financial Principles and Reimbursement
Reimbursement Strategies
Reimbursement refers to the process of repaying the money that has been lost by an
individual. A strategy, on the other hand, is a method that is chosen by an individual or an entity
to enhance the achievement of a particular predetermined goal and objectives. In other words, a
strategy can be a solution to a particular problem. Therefore, a reimbursement strategy refers to
all incentives that are aimed at enhancing higher performance regarding cost recovery or
maintenance of lower costs within a health care system. One of the fundamental strategy to
employ is the pay-for-performance technology. The pay-for-performance strategy is a
compensation structure whereby the employees of the organization are assessed with regard to
their levels of performance. Another reimbursement strategy is the Value-Based Purchasing
(VBP) method. The VBP method involves the process of linking provider payments as a
strategic approach in enhancing professionalism among the health care providers
(HealthCare.Gov, 2018). Value based purchasing is preferred to pay-for-performance.

HEALTH FINANCE AND REIMBURSEMENT 4
Reimbursement strategies are basically ways used by the healthcare organization to
ensure that the activities or performance are timely paid. Some of the reimbursement strategies in
most of the health center include but not limited to, collaborating with clinical officers in margin
management of revenue, supply cost management, continuous improvement and buying of health
saving account by the board. Financial support is required in health services as with a purpose of
increasing demand for healthcare. Example of financial support is pay-for-performance which
connect provider’s payment to some measure of performance. Finally, the need for healthcare
increases because of the simultaneous effect of the aging population and increasing expectations.
Methods of Reimbursement
Reimbursement is categorized into two main methods. The two categories include the
fee-for-service and the capitation method. Following the fee-for-service method, several
variations exist whereby the amount paid is directly proportional to the amount of
reimbursement. Under the capitation method, a fixed amount of reimbursement is provided to the
health care providers for each enrollee or covered life regardless of the amount of services
provided.
The fee-for-service reimbursement is further divided into three that is the charge based,
cost based and the prospective payment reimbursement (Gapenski, & Pink, 2007). Under the
cost-based reimbursement, the payer reimburses the provider of the health care services based on
the cost incurred during the process. Compensation is limited to the allowable costs (costs
incurred during the delivery of the health care services). Charge-based reimbursement involves
the payment of the billed charges as per the rate schedules prepared by the medical provider
(Chargemaster). In prospective payment, the payer establishes the rate to be paid before the