Financial Resource Management in Healthcare
I would propose to move away from the fee-for-service model of healthcare provided to the employees of Seamus Company. Fee-for-service models are reimbursed based on the amount of services provided. The more services the more billed. Therefore, the costs can become very high very fast. As the Chief Financial Officer (CFO) of Seamus Company I would recommend moving to one of three different types of Managed Care Organization (MCO’s) models. MCO’s are goal oriented to provide only the medical services required. The three different strategies of MCO’s is Health Maintenance Organization (HMO) plan, Preferred Provider Organization (PPO) plan and Point of Service (POS) plan.
A HMO is the most common type of MCO. (Gapenski, 2013) A HMO plan uses one physician in the network that you choose to become the primary care physician. That physician coordinates all the care required to include referrals to specialists or such that is within network. HMO also doesn’t cover most care outside the network except urgent care or emergency room visits. HMOs generally have lower premiums and low to no deductible. PPO plans are more flexible than HMOs.
The PPO plan does not require a primary care physician and provides some coverage out of network. PPO is a group of providers that offer services to a specific group generally at a discounted price, which is known for being in network. Therefore, one is able to decide to stay in network and have better coverage or go outside network and pay more. The PPO premiums are higher and is known for having deductibles. PPO’s sometimes are less likely to provide preventive services.
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The POS plan is a mixture of a HMO and PPO. The POS’s typically has no deducible and limited out-of-pocket costs. The POS plan also requires one to have a primary care provider and all other care to be coordinated through the provider. POS allows one to see providers out of network but only as referred by the provider. POS therefore has cost similar to HMO’s but freedom of choice between HMO’s and PPO’s (2019).
The best strategy for Seamus Company to utilize with moving from a fee-for-service model to a MCO model is dependent on cost-savings, tax deductions, fiscal management, and other tax advantages. Each one of these aspects need to be considered with each of the three proposed strategies to ensure the best one for the company as a whole is chosen. Based on consideration of the above criteria a HMO is the best strategy for Seamus Company.
The cost savings associated with a MCO shows that HMOs typically have more cost benefits than the other two models. Deductibles and Premiums are typically lower in HMOs than the other two models. HMO’s with lower premiums would allow the company to save money for the percentage of premiums they would foot for employees. HMO’s typically have no deductible and low co-payments which is different from the expected deductible and co-payments or coinsurance with PPO’s.
Therefore, this would decrease the cost for the employee as well. Also, due to the care coordination and lower costs better clinical outcomes and increased participant satisfaction is a result. With the actual cost and better health of employees the expense to the company is lowered not just in healthcare costs but in sick days and productivity of employees.
Premiums paid after tax are able to be deducted from employee’s taxes annually. Also, medical expenses more than 7.5% of adjusted gross income can be deducted.
Company wise the company’s portion of premiums paid toward employee healthcare can be written off as a business deduction.
In order to improve fiscal management one needs to manage the healthcare money in a way to be financially effective and minimize risk in an effort to achieve the goal of the company. In this instance the goal is to minimize the cost for healthcare the company is paying. This would be done with any of the choices because the cost of a fee-for-service model is expensive. However, since HMO’s have lower premiums then the other two models it would be the better choice for the company.
HMO’s also have a better financial look for the employees with lower premiums, no deductibles and low co-payments. POS’s would be next in line as far as costs for the employees would go. Finally, PPO’s known to have higher premiums, deductibles and either co-payments or co insurance would cost the employee more. The company would also have to pay more for their portion of the employee premiums. Another tax advantage for employees is if they have premiums taken out before taxes then it decreases their earned income therefore lowering their tax bracket.
Two financial management principles of Seamus Company that would support my recommendation is cost and control. MCO’s are more effective in cost because of the control of seeking out only the care required by the insured. HMO’s have the most control by requiring all care to be coordinated by a primary care provider. The extensive control allows for lower premiums which would benefit the company. Also, due to the cost if the employee chooses to not use the primary care provider to obtain treatment then it is simply not covered and at the employees cost.
The PPO is less controlling allowing employees to see providers in and out of network, but covering a higher percentage for those in network. However, with that freedom comes higher cost of premiums, deductibles and even co-payments or coinsurance. POS being a middle road of HMO’s and PPO’s allows more freedom than HMO’s and less costly then PPO’s. Therefore, in this instance cost and control go hand in hand.
Any of the strategy options from the MCO plans would reduce costs of what the company pays for health insurance for their employees. MCO plans control costs therefore allowing a more conservative premium. The HMO plan would be the cheapest plan that would still provide great care to employees. Therefore, Seamus Company would be able to obtain their goal of reducing costs associated with health insurance plans.
The HMO is the best strategy of MCO plans to use in order to have great benefits for a lower cost for the employees of Seamus Company. The utilization risk with choosing the HMO plan is if enough employees do not choose to use this plan and seeks healthcare options on their own or through spouse employers. Another risk would be if the employees use the plan more than expected which could cause higher premiums next year in order to cover the expected insurance payout for the group. The HMO is the best plan regarding risk though as due to the control the HMO plan has employees will only obtain the healthcare services required. They employees will also absorb the risk and extra payment for services out of network as well as the out of network physician. Therefore, although there are risks, as in anything, the HMO is the best choice for Seamus Company.
Seamus Company would have financial benefits as a result of increased service benefits. Since HMO’s are known to provide great preventative care and options it would be financially beneficial. Preventative care would be financially beneficial because if there are problems it would catch them early and cost less to resolve. Also, with preventative care employees would be kept in their healthiest state which would create a positive culture, increased productivity and less sick days or family leave.
Another financial benefit would be with the HMO the premiums are less and typically there are no deductibles. Therefore, due to the cost being less for employees they would stay loyal to the company decreasing turnover and training costs. Finally, the last financial benefit is that with the HMO one is required to go through their primary provider to obtain other care. The primary provider will ensure that the employee only receives the care that is medically required which will help keep unnecessary visits out of the cost equation.
There are a couple potential financial drawbacks with the implementation of increased service benefits. One being that if employees refuse to utilize the primary care provider as required in the HMO plan then employees would be left with huge medical bills. If employees are left with huge medical bills then they could become unhappy and leave the company, resulting in increased costs of new hires.
Another potential financial drawback would be if employees utilized healthcare services more than expected then their next year’s premiums could be increased. This would result in more money being spent again on healthcare for the company’s premium portion. Finally, another potential drawback is with all the preventative care options then employees will need time off work or freedom in their schedule to incorporate those appointments. This could result in sick time or annual leave being paid out more than normal.
However, if an employee utilized the increased usage of service benefits then it could be beneficial to Seamus Company. As mentioned previous with the preventative care options in HMO’s then diseases or illness could be minimized by being caught early or prevented with managed care. The lack of severe disease and illness would help employees be at their healthiest state, increase productivity and creativity, and create a positive culture. The decreased out of pocket cost for the employees would help them feel confident in Seamus Company and that their health is important. An employee that feels important will be loyal and therefore, decrease turnover, negative culture and training costs. An increased usage of service benefits will benefit Seamus Company in many aspects.
Since Seamus Company would save money on healthcare insurance premiums then the potential of external healthcare partnerships would be opened up. One program would be an external partnership with a nicotine free company. The assistance provided to decrease and stop the use of nicotine would greatly impact Seamus Company and employees. The decrease or cessation of nicotine would increase the health of the employees. Therefore, healthier employees would be more beneficial to the company and decrease the healthcare costs with the morbidity associated with nicotine use. Another benefit would be less smoke breaks or loss time the company pays for employees to smoke.
Another external healthcare partnership that would be beneficial is a wellness app with rewards. A wellness app generally counts steps to encourage activity and exercise, measures calories to encourage a healthy diet, and measures sleep to ensure the body receive appropriate rest. All these things together makes a huge step toward being healthy. Points are thing awarded for obtaining specific goals of each category. The employee then can take the points received and use the points to purchase rewards. A benefit of this would be much like the nicotine program and result in healthier employees. Healthier employee’s decreases healthcare costs, decreases sick time pay out and family leave, and increases the wellness and productivity of the company.
Two drawbacks that could be associated with external healthcare partnerships is lack of utilization and costs associated with partnerships. One drawback with the external healthcare partnerships would be if the employees did not utilize them. Therefore, the costs associated with the partnerships would have been lost, or paid for nothing. Another drawback is simply that the company is putting money that had been saved into something else associated with healthcare.
I believe that one external healthcare partnership would be beneficial for Seamus Company. Since it is highly unlikely that every employee smokes in Seamus Company I believe the health app would benefit the most of the company. The cost to run the program would be greatly less than paying for a fee-for-service plan and would greatly benefit all those that participated. The benefits would also help in reduction of costs in their own ways. Therefore, an external healthcare partnership would be extremely beneficial for Seamus Company in the long run.
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Financial Resource Management in Healthcare. (2023, Feb 11). Retrieved from https://phdessay.com/financial-resource-management-in-healthcare/
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