Healthcare Financial Paln

Issues may affect Next Year Forecasting

The healthcare industry has become quite huge till today with the feature of fast growing and facilitating industry. The financial plan for next year must be made with the consideration of cutting in the budget. Being a healthcare organization, a reduction in the budget will be more necessary due to the rumors of the Medicaid budget. Medicaid is a program which US government has introduced for making healthcare facilities for low budget families. This program has spread rituals that healthcare organization’s budget can be reduced. Therefore, in the upcoming year, the organization should come with reduced budget (Kliff, 2012). In this instance, the whole department should make efforts to find new ways to cut the budget and facilitate low income group patients.


The Inclusion of some new addition or change in management structure may help to forecast such budget. Change in administrative techniques may help in this cost reduction area. If there is simplified system rum at administrative level then the cost of treatment can be negotiable for both the sides. Along with this, transparency in pricing technique can help with such reduction because if customer know the price before the treatment then negotiating discount can be possible (Patel & Rushefsky, 2006). Along with this, the inclusion of a new fee structure can facilitate some way of reduction in budget. The organization should take a fee on bundle of service in-spite of charging fee for each service.


Capitation for Budget Reduction


Capitation is the method of payment arrangement, developed for healthcare service providers. This method is preferred the payment to the physician or group with pre-setting of the amount where they are paid for some particular period of time. In this concept physicians is generally appointed on contract basis which can help in management of cost effectively (Bohmer, 2009). In the process of forecasting budget for next year, the organization should involve this technique so that objectives can be achieved easily, one is a reduction in budget and another, service can be provided to lower income people.


Challenges with Capitation


As the method is helpful in the budget reduction process but there are some threats that can stop the process. Risk adjustment in capitation method can be a challenging task because it can be varied by time or sudden disease occurrence. In this method, rate of common people is estimated and according to that the payment of physicians is decided. If the rate becomes higher from the estimated one than the whole budget will be messed up (Geithner, 2010).  Along with this, a loss in the limit can affect the whole budget within capitation. If any patient’s illness belongs to higher costs than decided then the whole procedure can be disturbed and the aim to reduce cost of care will run oppositely.


New Trends in Capitation Payments


The use of capitation has made some new trends in the healthcare industry. The procedures of making risk free environment with a selection of favorable risk can facilities new ways of cost cutting.  The trend of eliminating the option of selection and rejection of patients makes healthcare organization controversies free. This also helped people to prefer suitable healthcare systems with poor information regarding treatment and payment over treatment (Hodapp, 2012). The decision to hire a physician on contract basis has elicited risk of over budget as all people are aware of this structure among healthcare organizations.



  • Bohmer, R.M.J. (2009). Designing Care: Aligning The Nature and Management of Health Care. Harvard Business Press.
  • Geithner, T.F. (2010). 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. DIANE Publishing.
  • Hodapp, R.M. (2012). International Review of Research in Developmental Disabilities. Academic Press.
  • Kliff, S. (2012). Democrats want to cut our health-care budget. Here’s how they’ll do it. Retrieved from
  • Patel, K. & Rushe

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