Final Project : Policy Research and Organizational Analysis Report
Southern New Hampshire University
IHP-620-Q1591 Economic Principles- healthcare 22TW1
OctoberÂ 20, 2022
The purpose of this report is to focus on economic principles and how they apply to the field of healthcare. Healthcare facilities need to make economic decisions because they need financial resources to run. They need economic consultants that will help in making strategic economic decisions that will guide healthcare facilities on where and how to spend their money (Hicks, 2020). This ensures that they are wise in their undertakings. This report focuses on Jackson Memorial Hospital, a facility that has more than 1,500 licensed beds. Despite providing healthcare services, the facility is also a research center. This implies that huge financial investments need to be made. In such cases, economic decisions need to be made to ensure the right investments are made. The report looks at how economic principles apply to facilities such as the Jackson Memorial Hospital.
The scope of the report narrows down to the healthcare sector. This is a sector that plays a vital role because it affects the lives of people. The paper focuses on particular areas of economic principles and how they affect healthcare. For instance, the theory of demand and supply is focused on. It helps healthcare facilities to determine the services that are demanded the most and how they can be met. The focus is on a microeconomic level because it does not look at the industry in general but one healthcare facility.
The overall subject of the report is the application of economic principles in healthcare. It is noted that economic principles are applied virtually to all sectors. However, this report narrows down to healthcare. It looks at principles, theories, and policies of the economy and how they affect operations and decision-making in healthcare organizations. Regardless of whether a facility is for-profit or non-profit, economic decisions must be made wisely (Bender, 2020).
The primary teaching facility for the Leonard M. Miller School of Medicine at the University of Miami is the accredited, non-profit Jackson Memorial Hospital. Jackson Memorial Hospital, which has more than 1,550 licensed beds, serves as a referral facility, attracts researchers, and is the location of the Ryder Trauma Hospital, the only adult and pediatric Level 1 trauma center inÂ Miami-DadeÂ County. The primary teaching facility for the Leonard M. Miller School of Medicine at the University of Miami is the accredited, non-profit Jackson Memorial HospitalÂ (Jackson et al., 2002). Jackson Memorial Hospital, which has more than 1,550 licensed beds, serves as a referral facility, attracts researchers, and is the location of the Ryder Trauma Hospital, the only adult and pediatric Level 1 trauma center inÂ Miami-DadeÂ County.
Patients bear a significant financial burden due to lower insurance payments. In addition, COVID-19 pandemic victims and their families are being compelled to pay extra for even simple and commonplace services due to job loss or layoffs. The patient is now the third-largest payer, after Medicare and Medicaid, according to Jackson Hospital’s vice president of revenue cycle; therefore, the financial risk these developments posed to Jackson Hospital had to be addressed.
The management aimed to implement contemporary methods to involve patients early in discussions about financial obligations, payment alternatives, and agreementsÂ (Jackson et al.,2002). To improve patient collections, Jackson Hospital looked for effective ways to convey patient balances and payment choices for services provided. Among the objectives were lowering collection expenses and raising patient satisfaction.Â AÂ $1.2 billion, not-for-profit, independently run acute care hospital, Jackson Hospital is located in a working-class neighborhood with blue-collar residentsÂ (TookesÂ et al., 2015). Their population’s payer mix is 56% Medicare, 11% Medicaid, and 6% self-pay, and their patients’ average credit scores are under 600.Â From the financial statements available, this organization has no notable spike inÂ revenue attributable to increased injuries and accidents related to the ice during the winter season.
Economic Theories and Principles
A.Â Â Economic Disparities
The provision of healthcare requires financial resources. A healthcare organization needs to be financially stable for it to offer the needed healthcare services to its patientsÂ (Hicks, 2020). Jackson Memorial Hospital, despite being a non-profit organization, is financially stable and this implies that the facility can afford to offer the best quality healthcare services as well as research opportunities.Â When the facility is financially healthy, there is a demand of investing the excess money into new healthcare services so that patients can access more and better services. According to the demand theory, when there is more disposable income,Â there is an increased demand for more goods and services. In other words, the financial well-being of an organization affects its demand for services.
B.Â Â Economic Theories
One of the most useful economic theories in the healthcare industry is the theory of demand and supply. According to this economic theory,Â the demandÂ forÂ a product will decline if the price goes upÂ (Bender, 2020). Conversely, when the prices are high, the supply of a productÂ is boostedbut when prices drop, the supply is diminished. This theory is relevant to the field of healthcare,Â especially in chronic illnesses. For instance,Â if the supply of medicine for a particular disease decreases but the demand persists, then the price of the medicine will go up. The proponents of this theory argue that the level of demand and supply affect the prices of commodities in the market until the point of economic equilibrium is reached.Â This is true in the healthcare industry because there are situations where there is aÂ shortage of particular drugs or services while the demand is high. Thismakes them expensive and inaccessibleÂ toÂ many patients whoÂ requireÂ the services.
C.Â Â Use of Economic Principles
Economic principles are important to organizations because they help in making informed decisions especially financially.Â For an organization to operate, it needs to invest in various areasÂ whereÂ it intends to provide goods and services to its clients.Â In such cases, economic principles must be applied to determine the cost-benefit analysis of the potential investment. This helps to tell whether or not there will be a reasonable return on investment in whichever project an organization takes.Â If there is an indication that investment will be successful, resources should be providedÂ forÂ the project. In other words, economic principles play a key role in informing an organization about the chances of success or failure of what they want to do. For the best results to be achieved, a variety of economic principles such as the cost-benefit analysis and the SWOT analysis should be utilized.Even if an organization is a non-profit, it needs to make the correct economic decisions for it to survive in the industry.
For Profit and Non-Profit
A.Â Â Financial Differentiation
As the names suggest, for-profit healthcare organizations, apart from offering healthcare services, are also established to make financial gains. On the contrary, non-profit healthcare organizations are majorly established for public and social benefit.Â They do not intend to make profits for their owners.Â For-profit organizations sell their services at a costÂ thatÂ enables the organization to earn a profit. The proceeds are used to finance the operations of the facility(Rice & Unruh, 2015). On the other hand, non-profit healthcare organizationsÂ usually offer free services or charge a subsidized fee. Their operations and services are funded by donors and well-wishers. As much as the two types of organizations might offer similar services, they are established for different reasons.
B.Â Â Economic Differentiation
As aforementioned, for-profit and non-profit organizations are established for different reasons even if they might be operating in the same industry. As far as economic differentiation is concerned, for-profit organizationsÂ utilize economic principles that focus on buying goods at a lower price or manufacturing themÂ andÂ then reselling them at a higher priceÂ (Bender, 2020). The economic model for for-profit organizations focuses on minimizing losses and maximizing profits. On the other hand, non-profit organizations only utilize economic models that focus on sustainability;Â as long as the organization can sustain itself, that is what matters. Such organizations pay a lot of attention to employee accountability and responsibility to make sure everyone works responsibly to keep the organization functional.Â Non-profit organizations focus on best practices that revolve around client satisfaction rather than maximizing profits.
Policies, Changes, and Disparities
A.Â Â Economic Policies and Disparities in Healthcare
Economic policies have a direct impact on healthcare, and sometimes they cause disparities. For instance, health insurance is an economic policyÂ thatÂ is intended to make healthcare affordable,Â especially in emergency cases that require substantial financial resources. Insurance determines the kind of servicesÂ different patients receive depending on how much they contribute towards their coverage.Â Economic policies such as healthÂ insurance make access to healthcare affordable. The difference is differentÂ patientsÂ receive different types of care determined by their contributionsÂ (Rice & Unruh, 2015).Â There are disparities in healthcare occasioned by economic policies as seen above.
B.Â Â Policy Changes
One of the recent policy changes is the introduction of the Temporary Marketplace Premium Tax Credit Enhancement. This is a policy change that enables more people to afford healthcare coverage by widening the coverage. It is a move by the Biden administration to ensure there is more affordabilityÂ in terms of accessing healthcare. If congress passes this into law, more than 14 millionÂ Americanswill receive affordable healthcare coverage.Â The impact that this policy has on the healthcare economic policy is theÂ fact that organizations will have to adjust their policies so that they can accommodate the new development. There will be more demand for healthcare services because they are affordableÂ tomore people. Healthcare organizations will be required to increase the supply of their products, services, and manpower to match the newlyÂ increased demand. When policies are made by the government, organizations in the affected industries need to adjust their strategies so that they can fit in the new environment.
C.Â Â Disparities Planning
Disparities must be factored into healthcare strategic planning because they affect operations and the productivity of the organization. It is essential to pay attention to such factors so that operations are streamlined and uninterrupted.Healthcare disparities, in simple terms, refer to differences in healthcare components suchÂ asÂ insurance covers, types of diseases, types of healthcare needed, and income disparity among patients. The more disparities, the more challenging a situation is.Â WithÂ suchÂ aÂ huge difference, there needs to beÂ effective strategic planning for an organization to handle the situationÂ (Hicks, 2020).Â For instance, in the case where a healthcare organization serves people who speak a different language than the native one, there needs to be a plan to have permanent language translators to ease the communication between patients and caregivers.
Organizational Impact and Recommendations
Leonard M. Miller School of Medicine is a constituent college of the University of Miami (Miller). The University of Miami gives top-of-the-line patient care as it houses the region’s best doctors, backed by the extensive research conducted by the School of Medicine. The health care system brings together patient care, innovative research, and education, a critical approach to offering health careÂ (“About Us – Jackson Health Foundation”, 2021). Within the Uhealth system, patients can participate in clinical trials and be the immediate beneficiaries of the innovations implemented fast from the laboratory to the bedside. The health system, consisting of over 1800 providers and specialists, provides state-of-the-art medical treatment for every patient.
The university has an affiliate hospital called Jackson Memorial Hospital, a central research area for medical studies, and a referral center. With over 600 doctors and over 1550 beds, the facility offers clinical practice and admits patients for medical care. The hospital comprises the Jackson Health System, which receives donations from the public and people of goodwill, the government, and other institutions. The facility also offers subsidized and funded medical care to the community that depends on it.
Nonprofit or For-Profit
As a nonprofit academic medical organization, Jackson Health System provides top-notch care to everybody who enters its doors. Jackson Health System ensures that all Miami-Dade County citizens are provided with the same high standard of care regardless of their capacity to pay. The Public Health Trust governs the Jackson Health System, a group of citizenÂ volunteers who act on behalf of the Miami-Dade Board of County CommissionersÂ (“Jackson Memorial Hospital | 24/7 Emergency Services in Miami”, 2021). The philanthropic fundraising arm of South Florida’s most comprehensive healthcare system, Jackson Health System (JHS), is called Jackson Health Foundation. A volunteer board of directors oversees the Foundation, founded in 1991, and is dedicated to charitable endeavors supporting JHS’s medical programs and services. The Foundation contributes to addressing the programmatic needs and gaps in significant capital projects that are not covered by public bond financing. This is done through the kindness of caring donors.
Financials, Market, and Demand
AccordingÂ toÂ Goldberger (2019), theÂ demand theory stipulates that the quantity of products or services consumers demand directly affects the prices that the products and services will go for in the market. Typically, when the demand for a product is very high, the supply of the product may be low. With this effect, the prices of the products or services will go up. On the other hand, when demand is low, the supply of the products and services may be high, leading to price drops. This is also happening in the medical sector, where disease outbreaks and pandemonium increase the demand for specific types of medicine and medical services. This is expected to earn a health facility more revenue than the rest of the working periods.
While looking at the 2021 audited accounts of the Jackson Health System, compared to the FY 2019 report, during the pandemic outbreak, the hospital system raised more revenues. In FY 2021, the Jackson Health Foundation Inc. reported total revenue of $14,635,358 compared to the audited accounts financial information reported in FY 2019, which showed that the foundation had total revenue of $11,088,938Â (AndreaÂ Suozzo, 2022). This is an indication thatÂ during the COVID-19 pandemic, the need for medical services increased, making the facility record a very high revenue.
Market Behavior Impact
Regarding market behavior, several circumstances can be considered; political climate, health issues, and the availability of medical services. Whereas market behavior is not a perspective that can be controlled, it can only be tackled after it has happened. Looking at the Jackson Health System, the onset of Covid-19 was a health crisis that had not been thought of before. There was no readiness for the pandemic as it was a natural occurrence. This resulted in a shift with which medical services were offered. With the demands to practice social distancing, movement restrictions, and the need to sanitize frequently, the firm changed how to interact with its patients(“Jackson Health System – 2021 Report To The Community”, 2021). The foundation developed an online portal where doctors could interact with patients virtually. In so doing, the hospital continued to operate and made more revenues, as indicted in its books of accounts.
Economic Legislative Changes
Many of the beneficiaries of the Jackson Health System are Medicaid patients; the health system, on the other hand, is the biggest Medicaid provider. The facilities under the health care system need to pay their workers who help serve the community, amounting to $150 million annually. The lawmakers, early in the financial year 2022, cut the additional â€œcritical careâ€ funding to a tune of $71 million for Jackson Health SystemÂ (Gorchow, 2022). This implies that the facility will be financially constrained to offer medical services to the community. This will likely affect the communityâ€™s health services delivery as the facility will be forced to reduce theÂ workforce or the amount of subsidy it gives to the patients on their medical billing. Therefore, the legislative changes are not friendly and will negatively impact the firm.
Policy Changes and Impact
Jackson health system is a non for profit organization intended to make access to affordable health care system easy and manageable. One of the positive impacts that the form has had on the community is to take in as many community members as possible who are interested in offering healthcare services. The cost of operations is rising due to inflation and supply chain issues, making the company work on a very tight budget. The impacts that come with the scrapping of the â€œcritical careâ€ funding will force the firm to look into alternatives that will make it continue to operate. The firm has now embarked on a target to add more paying patients into the system to manage funds deficits. This has a harmful effect somehow to service delivery as the paying patients will be given priority.
The initiative by Jackson health system to offer non for profit medical services is a bold move that has improved the quality of life for many of the community members. This is in terms of controlling and healing diseases and offering employment opportunities to many students in the health sciences academic programs. One of the key pillars or support systems for the sustenance of this program is the â€œcritical careâ€ funding from the federal government. With the scraping of the funding, the health systems will have rising costs that will negatively impact the profits realized. This will see the company register a rising expenses burden, an â€œunhealthyâ€ financial report.
For sustainable operations, the health system must cut nonpaying patients and add paying patients to the system. This will negatively impact the provision of accessible, affordable medical care as the facilities will shift the interest to the paying customers to raise more funds required to sustain the operations in the facilities. The potential disparities in healthcare service provision preferences will hurt the community at large, especially for the patients who come from vulnerable homes and are not on any health insurance plan or are not in a position to cater to their huge medication bills.
About Us – Jackson Health Foundation. Jackson Health Foundation. (2021). Retrieved 6 October 2022, fromÂ Â https://jacksonhealthfoundation.org/about-us/Â .
AndreaÂ Suozzo, B. (2022).Â Â Jackson Health Foundation Inc – Nonprofit Explorer -Â ProPublica.Â ProPublica. Retrieved 6 October 2022, fromÂ Â https://projects.propublica.org/nonprofits/organizations/650077727Â .
Bender, L. (2020).Â Economics: Theories and Applied Principles.Â New York: CLANRYE International.
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