At almost 13 million individuals, health care workers represent some 10% of the nonfarm workforce. In addition, firms that provide support to health care provider organizations (medical supply and device manufacturers, pharmaceutical companies, insurance companies, consultants and so on) employ many thousands more. Clearly, these workers represent an important component of the overall economy of the United States. They also represent an important asset, as well as cost, to health care organizations. (Cleverley, 2011)
For provider organizations, total compensation paid to these workers represents a sizable portion of overall expenses.
The cost of labor impacts the overall financial performance of health care organizations. As a result, these organizations must manage within the resources available to them.
Finance and labor issues often are top priority for health care leaders. In a recent poll of chief executive officers, the American College of healthcare Executives (ACHE) found that 72% identified financial issues as their greatest concern, and the area related to financial issues most cited by these executives was the increasing cost for staff, supplies, and so on. (Taylor, 2004)
Likewise, members of governing boards expressed concern about the financial vitality of health care organizations, including controlling costs.
In examining financial Issues, the healthcare Financial Management Association identified four areas of concern to health care financial leaders. Those areas are revenue cycle improvement, consumer-focused practices, Medicare payment trends, and business issues. Within business issues, managing labor cost was a key focus.
Key Finance Drivers
The ability of a healthcare Organization to continue to employ health care workers and thus to provide medical services depend on several factors that impinge on financial performance. According to Moody's Investors Service, the key factors that impact financial performance are:
• Payment rates from public and private payers
• Competition (especially between facilities and physicians) and volume shifts
• National and state economies
• Capital spending
• Management and governance
Following is an examination of these issues that provides a contest for the strategic management of human resources within the financial environment in which health care organizations must operate. (Davis, 2006)Payment Issues
Annually, the Office of the Actuary of the Centers for Medicare & Medicaid Services projects figures for total health expenditures. A major category, "expenditures for personal health services," represents payments to providers for services to individuals. In 2007, those expenditures were projected to exceed $1.8 trillion. The lion's share of that amount is payments to hospital and medical professionals ($697.5 billion for hospitals and $703.9 billion for physicians. dentists, and other professionals). Nursing home care payments were projected at approximately $190 billion, with the remainder, $293.9 billion, going to retail sales of medical products. Of those amounts, approximately 12% are out of pocket expenditures from patients, 33.9% ore from private health insurance, 46.9% are from public sources (mainly Medicare and Medicaid), and the remainder are from other private sources, including foundations.
Payments from sources other than patient payments (third party payments) represent a major portion of the revenue stream for most health care provider ...