The US Healthcare Industry Is Complex and Evolving
The US, with over 330 million population as of 2021, has one of the most multifaceted health care in the globe. The system consists of different parties such as providers, payers, and receiving patients. The system is in a constant evolution state. It is not a homogenous system but includes government finance (Medicare and Medicaid) along with private finance. Individual payment and medical coverage are two means of finance and providing healthcare to US citizens. As per data in 2019, 50% of the population has private medical coverage; premium paid by the employer, 6% falls under private insurance (non-group), 20% depends on Medicaid, 14% on Medicare, and the rest 1% on other public health insurance.
Debt and equity financing
Healthcare brokers facilitate debt and equity financing in the US healthcare industry for the acquisition and development of healthcare firms. It is not only about a financial transaction but building a bond. They provide professional advice regarding mergers, demergers, and acquisitions, equity debt finance, and financial restructuring to the healthcare industry. They craft outstanding strategies for mergers and acquisitions that are financially feasible and beneficial to the enterprises.
DRG (Diagnostic Related Group)
Public and private financing is the bloodline of private and government hospitals. An allocated fund for a hospital is designed through DRG (Diagnostic Related Group) depending on the present treatment sequence. Centers for Medicare and Medicaid use DRGs as payment schemes. Medicare pays the amount approved by DRG to hospitals irrespective of the actual cost of treatment. The payment permitted by DRG is inclusive of accommodation, support staff, and drug/medical device costs, except physician fees. In both inpatient and outpatient, physician fees are not included.
Financial management and accounting
In the healthcare ecosystem, finance plays a pivotal role in many if not all aspects of the sector. The term healthcare finance is multifaceted as it depends on the context for which it is required.
Healthcare finance is the resource required by the sector and a separate subject how the society pays for the necessary fund. This issue is complex and has an intrinsic political factor. Healthcare finance involves two spheres; financial management and accounting. Accounting, as the term suggests, reflects bookkeeping and recording of financial transactions. It tallies the interest of both party investors and managers of the organization. It is an instrument to evaluate financial operation and status.
The major objective of finance in healthcare, as in other industries, is to acquire, plan, and ensure the efficiency and value of the organization. In a large entity, two realms of finance, accounting, and financial management, are treated separately. Though accounting is supervised by the CFO (chief financial officer) and thus falls into the overall category of finance.
Healthcare brokers and finance revolves around four Cs; cost, cash, capital, and control. As the sector is service-oriented ample time is required to manage cash, inventories, and collecting cash. Apt management is required for seamless operation and cost reduction. The healthcare industry requires huge resources for infrastructure to support operations. Special knowledge of the sector and unequaled insight is obligatory to match long and short-term objectives by choosing the correct investment instrument, which could be debt, lease, or conventional financing. Investor bankers and senior managers typically make such critical decisions.
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