Strategic Healthcare Spending and finance


Strategic Healthcare Spending and finance





Introduction and Background

Sustainable and secure financing in healthcare may be perceived as an essential aspect of achieving the vital population objectives and goals in health. Spending and financing in health care, which is properly arranged assists the national administration in ensuring the mobilization of adequate financial resources in health. It also assists them in distributing these resources sensibly, as well as, ensures their application is appropriate, equitably, and effectively. Impartial and pro-poor programs and policies in health financing facilitate widespread access to crucial services in health. In addition, they contribute significantly to social protection and the intensification of social networks for safety and security in the socio-economic environments that is changing dramatically. In these wide contexts, financing in health care contributes to the process of social and economic development. Services of health care have increasingly become exceptionally costly in both developed and developing countries. The rise in medical services besides the advanced technological input is a major contributory factor in the rise of health care expenses and costs. According to Hammaker and Tomlinson (2011), poor management of resource and services and the widespread application of service fees are also other key factors that lead to increased costs of health in developing countries.

Lack or failure of having public financing of health has lead to cost recovery that largely enhances charging of user fee at healthcare centers and facilities. In some countries or areas, this has been used as a policy for strengthening the role of the market forces within the health sector. A number of the measures of the reform of health sectors support the role and position 9f the private sector in provision and financing of health care services. These include the privatization of public health facilities. Through the provision of initiatives, some medical products and services including minor surgery, hi-tech diagnostic services, and pharmaceuticals have been offered extensively at full or partial cost to patients. Chronic and non-communicable disease management is a popular concern in many regions across the world. Complications and long periods of treatment lead to increased treatment costs. These high costs become a burden both to patients and the healthcare sector (Hammaker and Tomlinson, 2011).

Many states spend a considerable portion of their budgets on treatment in other nations on chronic diseases. In many times, this is not justified in comparison to health returns. There can be a significant reduction on future health spending through the implementation of efficient and effective measures in health prevention and promotion. In many countries, the share of private financing in the whole spending on services and products of health care has been on the rise over the last decade. Mostly, the increase is due to mean payments. A significant number of studies have revealed that mean payments is an effective means of mobilizing resources of healthcare. Adequate data exists, which shows that families that have low incomes use a higher proportion of their income on services of health as compared to those with high incomes. Increase in out-of-pocket spending by families is viewed as among the major causes of poverty. Low income earners spend their financial resources, which comprise of discarding their assets in order to afford for the essential health care. Most people are, however, unable to afford higher user fees on health. According to Grauman and Harris (2009), poor health leads to a high number of people who are unable to pay for healthcare expenses into poverty.

Significant discrepancies exist in the behavior and health status of seeking healthcare between the rich and the poor, between urban and rural population, as well as, between genders. Poor individuals have poor statuses of health, and they largely rely on public health financing. It has been approximated that a 1% rise in public health financing usually leads to a reduction in child mortality among the poor populations by twice when compared to the rich. There has been and continues to be an increased interest in evaluating of a number of financing arrangements in relation to health outcome, service coverage, equity in financing, and population access. The World Health Organization gave a report concerning improving the performance of health care systems in relation to this demand. This report provided an operational framework for health system financing. It is of no doubts that a health system whereby people pay from their pockets when they become ill develops equity concerns. In other words, this system facilitates the exclusion of the poor from the use of health care services. In return, it limits access to only those individuals who can afford the medical charges (Raethel and Deborah, 2009). In contrast, a health system, which when funded mainly by sources of the public such as taxes and social health insurance, gives impartial and excellent access by all individuals to the basic health services. Effectively, health risks and subsequent finances are brought together to serve as a safety network for individuals, thus, providing the requirement for making payments at times of use or illness. The type of financing based on an arrangement of prepayment usually isolates payment from unemployment, contains costs of health services, and reduces unnecessary financial burdens.

Health care financing strategy

Investment and public spending on enhancing health

Most countries depend on health insurance, government budget, private sources that comprise of out-of-pocket payments and non-governmental arrangements. Regardless of there being different financing sources, the degree of health spending in a variety of regions is considerably low. Most of the countries and regions spend lower than 5% of their GDP (Gross Domestic Product) on health. In addition, the per capita spending on health is less than 30 dollars per person yearly. Therefore, lack of having financial resources for health is a significant part of the challenge. This proportion of the inadequate and limited funding for health is mostly spent on sickness rather than health. Currently, most areas and countries fight to maintain and enhance the role of the government in provision and funding of services with public health significance.

In order to facilitate public health spending, there should be movement of financial resources towards health programs and policies that are cost-effective. Increasing investment in order to offer a general affordable and access to health care, sustainability of the financial resources should be determined from more constant sources of funding, and provision of sufficient funding for national programs of high priority. It is also essential to ensure that relations between health financing and health policy are intensified (Hernandez and O’Connor, 2010). In order to attain increased public health spending, the policies and strategies to be implemented consist of attaining a balanced mix of private and public financing for health programs of high priority, increasing public funding for promotion and prevention of health, improving the level of access and equity to quality health products and services, approximating the implications of financing of proposed policies of health with the corresponding sources of funding, as well as, strengthening the capacity in health care financing and national policy.

Establishment of prepayment schemes with social insurance of health

Establishment of prepayment schemes including social health insurance faces significant problems. For instance, there exist long lead periods for development of institutional agencies of social health insurance. Furthermore, hardships are experienced din the extension of the coverage of health insurance to the informal sector and the self-employed individuals. Other challenges facing the social health insurance include misconceptions and low awareness regarding the social health insurance among stakeholders and decision makers. There is also insufficient technical expertise for the designing and implementation procedures of social health insurance. Goals and objectives for establishing prepayment schemes include raising the capability for adoption and implementation of schemes of prepayments, extension of the coverage of insurance of individuals and intensified financing policies on health and the wider social protection program and policy (Moseley, 2009).

People at the management level ought to carry out pilot social health insurance and prepayment schemes. Moreover, they should ensure that they make sensible and practical measures and plans to expand coverage of available and existing policies and programs. Information on any of these aspects should be shared and distributed. Additionally, human and institutional capacity should be established for management of social health insurance and prepayment schemes; clear responsibility lines must be created. There should also be an assessment of capacity and development and refinement of health care financing policy and program for social health insurance and prepayment schemes. A clear definition of a process that is consensus-based of key stakeholders in order to ensure efficiency and effectiveness in the scheme (Moseley, 2009).

Supporting of global and national health and development processes

Health status has a high level connection with macro-economic factors such as working conditions, unemployment, poverty, environmental factors, and income. In support of both international and national development and health processes, a variety of issues and challenges are experienced. These challenges comprise of lack of comprehension of relations between investing in education and health, women empowerment, health, poverty, and economic growth. In addition, there is a powerful requirement to have a policy or program advocacy on global and evolving policy concerns such as general agreement on trade in services, trade and health, and social determinants of health.

Goals and objectives on supporting global and national development and health processes have both social and economic development plans and measures at national level incorporating gender, health, equity, and poverty. In addition, achieving dedication for increasing investment in health to achieve millennium development goals is also an objective of this strategy. There is also a need to ensure that national policies and programs alleviate and eliminate gender issues and poverty that is health-related. These policies should ensure that these concerns are supported (Hernandez and O’Connor, 2010).

Approaches and strategies that can be used to attain these objectives may include improving organization of grants from donors to achieve the millennium development goal. In addition, there may be the establishment of partnerships of health ministries with other agencies and ministries. Reduction of discrepancies between the local and global priorities of health and the advocacy of development goals and global health are also strategies that can be used to achieve these objectives. Individuals at the levels of management should establish channels of transparency and accountability between the executive and legislative branches of the government, providers of health care, decision makers, and consumers if these goals are to be attained. There should also be an invention of policies and evaluation of the financial implication for reduction of morbidity and mortality among the disadvantaged and the poor. Efforts to improve awareness regarding the links between health and economic development should be there to ensure the attaining of these goals and objectives aimed promoting the well being of individuals. There existing drivers or factors of the challenges to cost and finance in the implementation of the above discussed strategies. When examining these drivers, analysts focus on a number of concerns including workforce, the system of payment, physician integration, technology, and capital planning (Moseley, 2009).

Drivers for the strategies of healthcare financing and spending


Healthcare organizations need to establish strategies that support information technology with the expected changes in care payment and delivery structures. The need to invest in information technology in healthcare is exceedingly vital especially within systems that are able to gather and assist in the analysis of operational data, support electronic health records of patients, and communicate with systems of Information Technology of other payers and providers. Most important, however, is the capacity of healthcare organizations to make investments to respond to market changes (Raethel and Deborah, 2009).


The biggest trend for healthcare personnel is the decline of skilled and experienced staff. Presently, there has been a decrease in the number of physicians and nurses and studies show that the shortage of healthcare personnel will further decline over the coming years. Regardless of the fact that the present downturn in the economy is giving a bit of relief as nurses with no employment are entering the labor force, the belief that the shortage will continue is still high. This has a higher possibility of momentary modification or short-term change. An effect of the trend of health care providers is that there will be more work for the few workers who will be available. Health care providers are expected to balance the essence of having higher productivity of personnel with the need for hiring and maintaining skilled clinical personnel. Shortage of skilled workforce increases the labor costs, which facilitates the need for productivity gain (Hernandez and O’Connor, 2010).

Physician incorporation

The increase in the shortage of physician in the healthcare provision has made hospitals employ physicians to ensure that specialists of surgery and trauma are available. It is noticeably clear of the tendency towards an increase in the recruiting of essential physicians. A significant concern in the pursuit of this strategy is the avoidance of earlier errors. A present approach to this strategy needs to take into consideration how the physician’s compensation will be related to productivity or quality improvements (Davis et al., 2008). For most hospitals and health care systems, the direct hiring of physicians might not be the best alternative to an integration strategy. There exist many options that range from simple to complicated models whose autonomy degrees and affiliation are different, but could be modified. Healthcare organization and management must assess the best and appropriate integration strategy that will meet strategic and operational objectives including quality initiatives, ancillary revenue, and on-call coverage.

Capital planning

There is lack of certainty in the prospects for access to capital. Healthcare providers are modifying their strategic plans and capital in order to report on the possible long-run revenue movements of revenue, costs of capital, and reassessing of risk in the investment portfolios. There should be consolidations in the number of healthcare facilities that are aimed at promoting gains (Youngberg, 2011). Hospitals should evaluate the feasibility of capital spending realistically and take into account options based on the result of the evaluation.

System of payment

A majority of individuals hold the perception that future payment will be strongly influenced by results of patients. Most of them believe that Medicare will make payments for most care in the coming years. Currently, there are schemes that link payment to certain measures of quality performance. Consequently, this has stopped payments to hospitals for happenings unavailable at admission. There exist unanalyzed payments to physicians for inpatients and post healthcare for patients of cardiac and orthopedic diseases. On the other hand, on the private sector, there is a possibility of a decrease in the insurance offered by employers. There is also a probability for an increase in the number of patients who pay for healthcare services using individual resources. One of the reforms in healthcare, in place, is establishing an alternative of public insurance to compete with insurers from the private sector on a national exchange. This action may result in a considerable effect on the degree of patients who pay using their own resources especially when the development of this alternative is in line with a personal covering mandate. It could, however, mean that the higher proportion of care to patients will be paid at same rates to those of Medicare.  It is essential to consider the fact that private insurers also watch payment depending on the result with concentration and in some cases they carry out their own studies (Aaron et al., 2009).


It is clearly evident that concerns related to technology, workforce, physician integration, capital panning, and payment system are beginning to affect healthcare organizations. Many health systems and hospitals have began adjusting to these modifications in a manner that increase the strategic objectives but reduce costs by optimization of available resources, demanding careful evaluation of capital spending needs. Health systems must work to establish areas of perfection and objectives that can be achieved. The administration should establish an open debate on results of all investigations on health matters and such investigations should be able to determine whether cost reduction or quality improvement can be achieved. As the requirements for the present will certainly change in the future, actions needed for assessing the performance of healthcare organizations will unavoidably change. Each day, the healthcare sector goes through a significant transformation. Organizations are required to adjust to these changes in order to solve any arising problems. A shared concern is on the value of the strategy and cost-efficiency as they are exceedingly essential in the healthcare sector. These strategies are vital in improving the health and lives of individuals, which is what all people desire.



Aaron, H. J., Lambrew, J. M., Healy, P. F., Century Foundation., & Brookings Institution. (2008). Reforming Medicare: Options, tradeoffs, and opportunities. Washington, D.C: Brookings Institution Press.

Davis. K., Jones, L., & Richard S. (2008) Continuous innovation in healthcare: Implications of Geisinger experience Health affairs, Vol. 27, Issue 5 p. 1235-1245

Hammaker, D. K., & Tomlinson, S. J. (2011). Health care management and the law: Principles and applications. Clifton Park, NY: Delmar/Cengage Learning.

Hernandez, S. R., & O’Connor, S. J. (2010). Strategic human resources management in health services organizations. Clifton Park, NY: Delmar Cengage Learning.

Moseley, G. B. (2009). Managing health care business strategy. Sudbury, Mass: Jones and Bartlett.

Raethel, K. & Deborah, C.G. (2009) Tips for building sustainable cost-effective staffing strategy,

Healthcare cost containment, p14-15

Youngberg, B. J. (2011). Principles of risk management and patient safety. Sudbury, Mass: Jones and Bartlett Publishers.


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