Cost estimation and pricing decisions

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Planning, obtaining, and leveraging resources to improve the efficiency and value of healthcare are the fundamental roles of financing in the healthcare system. It is put into action through specific tasks such as planning and budgeting (Gapenski, 2009). Healthcare services are likely to deteriorate without proper financial management. With the current state of the economy, more people are looking for ways to cut costs. It implies few healthcare visits, posing a significant risk of job loss (Williams & Torrens, 2008). The need for hospitals, nursing homes, and special care increases the role of finance. The act requires employees to follow and adhere to the company’s best pay practices. Financing is fundamental for all levels of healthcare organization; hence there should be awareness of changes influencing funding globally (Gapenski, 2009). It assists in controlling procedures for cost, and increasing the effectiveness and healthcare organization value.
Diagnosis Codes and Their Use in Impacting Reimbursement
Diagnosis codes serve for grouping and identifying the reasons that patients face – symptoms, disorders, effects of chemicals and drugs. Diagnostic coding is the interpretation of written ailments descriptions into codes from a particular order which gets utilized as a significant aspect of the clinical coding process. It helps in presenting the episodes admitted in the healthcare environment (Williams & Torrens, 2008). The diagnosis codes are applied in finance as they can influence the aggregate financing which a health facility may get for any patient. Medicare coding and principle guide a majority of the health plans available; many of the reimbursement strategies depend on the diagnosis coding to determine the amount to be reimbursed. Therefore, it is important to have accurate diagnosis coding as it assists in maximizing reimbursement.
Features of Third-Party Payers
Third-party payers are groups apart from the patient or provider of healthcare that participates in the health services funding. A significant portion of the payment received is made by the third-party payers; for instance, company pays for its workers, business insurance agencies, and government programs. The manner of the peculiar components of healthcare institutions impacts the use of standard financial guidelines and practices. Today, third-party payers are required in negotiating, signing, and observing healthcare contracts. They encourage providers to establish outpatient service through necessary approval for inpatient administrations and mechanisms of payment to incentive the services to be dispatched on an outpatient premise (Gapenski, 2009).
Reimbursement Methods and their Effects from Coding
Despite the payer for a particular service, a predetermined number of payment strategies are utilized to reimburse healthcare facilities. Payment techniques fall into two categories – fee-for-service reimbursement and capitation reimbursement. With the former, the providers are paid on the premise of the services offered. For instance, a doctor might be paid for every procedure performed. Healthcare facilities can be reimbursed for expenses incurred, individual admission, or the number of days a patient is admitted. The diagnosis code for each service dispatched needs to be captured in fee-for-service reimbursement, since each service is accounted for and hence the higher the number of services offered the greater the revenue (Gapenski, 2009). With capitation reimbursement, providers get paid a set sum on the premise of the number of individuals healthcare serves. Thus, the amount reimbursed is fixed basing on the number of people served, paying little attention to the services number offered. The diagnosis codes hence have no impact on money reimbursed.

Gapenski, L.C. (2009). Fundamentals of healthcare finance (1st ed.). Chicago: Health Administration Press, 376.
Williams, S.J., & Torrens, P.R. (2008). Introduction to Health Services (7th ed.). Clifton Park, NY: Delmar/Cengage Learning, 400.

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