Retrospective Reimbursement Systems Used to Fund Public Hospitals - Assignment Example

Insert Student Name: Course Name: Course Number: Institution: Lecturer Name: Date of Submission: 1. The limitations of traditional retrospective reimbursement systems to fund public hospitals The retrospective reimbursement system refers to a payment means for settling a bill after provision of a service. This method is embraced by insurance firms making payments to service providers, like health facilities on service rendered to their clients. Fees reimbursed under these systems are based on service rendered to every person. The systems are dependent upon individual patients with health insurance. The underlying principle governing the retrospective payment scheme is to provide utmost freedom of choice for the needed services for the patient and the health provider (Purdy and Cargo 27). These reimbursements systems keep the choice of health provisions service in the hands of competent healthcare specialists, bringing into line the consolation of the patient. Beside its noble idea of settling bills for service rendered, retrospective systems have faced a number of limitations. The systems have come under criticism for its bloated expenditures, in spite of provision of quality healthcare incentives. Inability to control costs and inadequate healthcare facilities as well as personnel has also been a key drawback to the systems. As pointed up by Medicare, some service providers have overestimated service costs and held on patients to overstay in hospitals with an aim of reaping more from the systems. Such interventions by hospitals or health specialists effect to misuse of funds, as a result straining scheme funds and sometimes, could impose extra charge to individual patient (Atkinson and Sue 73). Another limitation has been the complexity that surrounds the new payment and rules, which many have termed as key threats that hinders the future development of healthcare reimbursement systems. 2. The key features of prospective DRG system and case mix accounting and how they overcome the limitations of traditional retrospective systems of public hospital funding Policymakers propose that for efficiency and effectiveness to be realised in healthcare sector, organisations involved in reimbursement systems need to conform to societal norms of acceptable practices. DRG systems were created by federal government and state agencies, along with insurers to improve the hospital payment frameworks. Whereas, the hospitals developed case mix accounting systems to produce information concerning the costs of delivering DRG products and services to patients (Saltman et al 17). A number of features make prospective diagnostic-related groups (DRG) systems and case mix accounting overcome the limitations of traditional retrospective systems in public hospital funding scheme. The two have been created as both reflect on the economic reality that underlies the product lines of several hospital, and aid coherent decision making among stakeholders in regard to resources acquisition, deployment and use. Both systems reveal to a great extent a need to be conventional to societal expectations of satisfactory practice as the technical essential of nurturing rationality in public hospital funding. Consistent with this point of view, within the health-care sector, DRG and case-mix accounting systems, ostensibly help hospitals control costs and encourage planning by permitting them to improve the management of their product lines. The systems groups patients into different classes based on the nature and intensity of medical services they are diagnosed with. Once the division of services is done, case mix accounting systems are employed to monitor each product line so as to attain optimum efficiency and effectiveness within the healthcare sector. For this reason, the linkage between the two makes it hard to manipulate the medical fees as commonly seen in traditional retrospective systems. The uniqueness of case mix accounting system is believed to offer hospital administrators with a precise form of accountability as well as measures of efficiency that support comparisons among relevant departments along with medical specialists, in that way establishing correct documentations of costs for respective patients. Hospitals have utilised DRGs and resulting case mix accounting facts to provide those products and services that capitulate certain threshold of profitability, patients whose medical needs are not offered by the hospital they have visited are referred somewhere else for treatment. Additionally, the benefits of DRGs and case mix accounting systems overrides traditional retrospective systems as it offer several managerial techniques for hospital value: through improved patient treatment listing, allocation of more budgetary and accounting activities to heads of department thus increasing budgetary involvement and employment of medical staff in response to patients needs, and a more information to medical doctors and cost-control committees of the scheme. In general, these improve the operation of healthcare scheme in funding public hospitals and develop the health facilities. The DRG framework and case mix accounting systems being the major payer utilised by major healthcare insurers, are expected to play a keen, though ritualistic functions in the deeply institutionalised setting of hospitals. As such, being as formal frameworks for creating and reinforcing planning and significance, for implementation procedures in legitimate ways and giving accounts of accomplishments in terms that make them seem reasonable and acceptable in the society. 3. The need for business oriented or more accountable management control systems in public hospitals The success and development of any organisation is determined by the management systems that are used in operation. Hospital set up forms the most tangible link between management system and the operational activities, thus calling for accountability from administrators of this health facilities. Internal accountability is necessary as it creates full control of the workforce and promotes service delivery. A more accountable management control systems in public hospitals will mostly improve service provision and make good use of available funds. In many countries, public hospitals have come under scrutiny on their expenditures, with plea to reduce costs and focus on quality health care. This pressure leads to need to implement and utilize performance management system and effective management of accounting systems in both public and private hospitals. According to Anthony (8), performance management helps in the establishment of free and interactive work atmosphere and this helps in developing the skills in workers and also builds a successful group of workers and a successful organisation. Presently, the roles of administrators and medical doctors in public hospitals are changing significantly, and at same time transformations in management accounting are also evident. There have been interventions to reform global hospitals performance, in relation to cost reduction and improvement of the service delivery. However, this has not been realised because of economic crisis that has been witnessed globally and also a presence of vast public debt, which have led to posting of negative accounts by public hospitals. Nonetheless, public hospitals have to embrace the challenge to improve service and reduce costs. As such, accounting information takes a centre stage in hospital, at any given level, influence by accountable management systems. Policymakers have pursued a number of reforms to ensure improvement and reduction is enforced in the health care industry. For instance, the alignment of department roles of medical specialists, technical and administrative staffs together. The aim of such restructuring of healthcare organisations has been to instill some medical knowledge to administrators and also impart some management skills to physicians for coherent decision making at workplace. Several hospitals have reorganised themselves in setting up a real operational performance management system for adaptability in the present times and maintain their competitive edge. For public hospitals to effectively execute the management system, it is important that they supervise activities, plan activities and control resources available for the activities. In this view, it is the role of hospital administrators to ensure that activities to be included in implementation are embraced by all the workers so that when planned they will benefit both the individuals and the company. These activities may include rewards and incentives given to technical staffs and physician as a result of good performance in the work place. It is certain that workers will not always appreciate all incentives given and care should be taken when determining what rewards and incentives should be given and in what measure not forgetting the circumstances under which they are entitled to the incentives and rewards. The proper performance management system encourages open contact and dialogue for hospitals with the staffs to support the goal of affirmative work atmosphere creation. As such, staffs and physicians being given a platform to discuss a wide scope of issues such as work-life balance, chances for learning and developing, and provision of quality service to the public. Leaders at all stages have a significant responsibility in instituting a hospitable and a comprehensive working and learning atmosphere for people of all backgrounds and viewpoints. This will motivate the staffs not only work on the specified roles in the employment contract, but will go further to see that there is order in the institution where they are working bearing in mind that any negative action will not only affect the management, but all the entire institution including the staffs (Atkinson and Sue 173). Positive attitude towards the hospital work atmosphere will enable them to fight all vices and encourage all positive virtues aimed at developing and protecting the interest of the organization. A number of options may be used by hospitals in enforcing performance management, for example the balanced scorecard and benchmarking of activities. Balanced Scorecard is deliberately designed to have a comprehensive and focused on results of an organisation (Kaplan and Norton 71). Focus on four elements, that is, customer perspective, internal-business processes, learning and growth and financials in monitoring the progress toward organisation’s strategic goals. Its weakness is that no improvement will be realised if the approach is not implemented from a strong design. While, benchmarking approach uses standard measurements of its services and compare them with other organisations in gaining the perspective on organisational performance. This approach has been common for most hospitals. The goodness with this process is that, it’s perceived as a quality initiative. Nevertheless, it’s not all widespread approach assured to improve performance, rather than benchmark results which can be compared and employed in entire processes. According to Purdy and Cargo (23), the issue of cost has been a headache to many hospitals especially with the fluctuating number of patients, something that force managers to employ full-time and casual staff to both meet the demand and cut the costs. Most of managers in public hospitals help to determine staffing plan for each department. This includes a budgeted number of full-time nurses, selected by skill level, to meet the forecast patient numbers and a budgeted number of agency staff to cater for fluctuation in demand. A weekly productivity report is drafted for each department, and provides report on staffing reviews. These reports encompass labour variance that helps in staff decision making. The labour variance helps in assessing a departmental performance and deduces whether the department is having excess staff or is spending too much on staffs. Whereas, the labour efficiency variance helps in evaluating whether the department is having an excess or shortage of staffs as it had planned. Basically, what is involved in a performance management system is molding and bringing out the best workforce entity. Such interventions promote a diverse workforce through the channel for upward mobility of staff because of presence mentorships, expertise improvement and opportunities and group nurturing. 4. Tensions or conflict in implementing business oriented or more accountable management control systems in public hospitals Kaplan and Norton (75) assert that the implementation of business oriented or more accountable control systems in public hospital may face some challenges. For example in the implementation of a balance scorecard, incomplete execution of the system will be realised if the approach is not implemented from a strong design. On the issue of cultural change, hospitals may encounter some problems in a form of organisational transformation; thorough a primary form of revolutionise. It entails difficulty in changing of values, norms and beliefs among the organisational members (Atkinson and Sue 177). On the other hand, the deployment of knowledge management system which is meant to increase competence, tend to embrace an extensive use of computer technology in running its activities. The approach is not generally comprehensive process assured to improve organisational performance. Its effectiveness in reaching its wide-ranging results depends on how well the improved in terms of the implementation of decisive knowledge, which most of the time is subjective. Other drawbacks of the System Inactive vision and strategy: If the senior management panel in the hospital has failed to reach a conclusion as to how the vision should be achieved, different staffs or departments will start tracking different opinions and this attempt is neither rational nor related to the plan in an integrated way. Failure to interlink the strategy to the concerned department, team and individuals goals: When this happens, those concerned do not adopt the new performance criteria but quite follow the old one and this can ruin the introduced new policy. This condition is very serious because it will cause the management to go back to the underground to prepare a new policy and this wastes time and resources. Unrelated strategy to resource allocation: This happens when the permanent strategic planning process and yearly budgeting process are separated and may this may cause unrelated funding and resources allocations to departments. Risk of Internal Competition: This occurs when workers compete with others for job status, position and pay, which could lead to failure among team members to communicate efficiently and strong worker enmity. It could also lead to malfunction of the department leading to failure in accomplishing performance standards. Favoritism: some hospital managers tend to trust and rely on few staffs more than others, either the favoured staff is appointed to be the supervisor or the team leader. This leads to dissension and distrust among the group members and cause team division which severely affects the morale and satisfaction of the entire team. Expensive and Time Consuming: most of the systems are costly, involving a lot of administrative work, patience and time. Usually, the areas affected negatively include the human resource department, finance and development. The staffs must be equipped with the right skills and knowledge, and this means that extensive training, retraining and career development workshops for every division and employee level. Work Cited Anthony Roelin., Planning and Control Systems, A Framework for Analysis, Division of Research, Harvard Business School, Boston, 2007, p.8. Atkinson Carol and Sue Shaw. Managing Performance. Human Resource Management in an International Context Journal, CIPD, 2006, pp. 173-181 Behn Daniel, Why Measure Performance? Different Purposes Require Different Measures, Public Administration Review, Vol. 63 No.5, pp. 586–606. Dixon Nancy, The Organizational Learning Clycles: How We Can Learn Collectively, Hampshire: Gower, 1999, p.23 Ferreira Alvin and Otley Dickey, The design and use of performance management systems: An extended framework for analysis, Management Accounting Research, 2009, Vol. 20 No.4, pp. 263-282. 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