Answers to Healthcare Questions

Question 1

The government offers revenue for the healthcare industry through mechanisms such as grants and subsidies. Besides, it offers revenue through other programs, including Medicaid and Medicare. On the other hand, patients contribute to the revenue through direct payments, known as out-of-pocket (Thibodeaux, 2017). Furthermore, insurance companies also contribute to healthcare revenue through contributors’ premiums; in other cases, health facilities get donations from individuals or corporations.

One of the advantages of multiple revenue sources is that it moderates patients’ healthcare costs and ensures that services rendered by health facilities are affordable. Hence, patients can afford and budget for health care services (Pros and Cons, 2015). Therefore, multiple revenue sources reduce the financial risks associated with the provision of health services.

Multiple revenue sources shift healthcare providers focus from quantity of care to quality of care. In addition, multiple revenue sources promise continuous cash flow to providers, who can concentrate on providing better services instead of putting all the focus on generating more revenue (Pros and Cons, 2015). This implies that having multiple revenue sources is an incentive for improved care in health facilities.

Some of the disadvantages of having multiple revenue sources are that they complicate cash flow systems due to the different cash inflows. In addition, they make the distribution of resource difficult, particularly since every source has diverse regulations and different amounts (Pros and Cons, 2015). On the other hand, having multiple sources of revenue burdens health care providers, especially if they do not have sufficient technology, infrastructure, and transparency for proper coordination.

Question 2

The healthcare industry is facing a need for reforms due to challenges related to increased health insurance costs, high unemployment, and augmented deductible plans. Hence, health facilities are experiencing more patients who choose to pay medical expenses out of pocket. Therefore, it has been necessary to draw a debt recovery strategy to keep revenues afloat (Koening, 2010). The first step in formulating a debt collection strategy is to examine the Return On Investment (ROI) of the operating the collection system and maximizing on it to improve communication with patients.

One of the options for handling bad debt is to offer proper communication to patients to pay for services offered by the health facilities. Health service providers can educate patients about their responsibilities and financial policies and encourage them to pay out-of-pockets costs whenever they receive a service (Koening, 2010). The initiative can be done through written communication during contact with the patients.

Secondly, the health care providers should train staff on how to inquire about payment and communicate effectively with patients (Koening, 2010). This will improve the collection of small balances, which could have a major effect on cash flow as well as reducing bad debts.

Thirdly, hospitals should identify patients who are likely to end up with a bad debt before offering services to have them clear payments before they receive any service. This is possible by adopting a system or outsourcing or either denying services when they suspect potential bad debt (Koening, 2010). They can also divert them to other payers, such as third-party payers, Medicaid, disability insurance, or charity care.

Fourthly, hospitals can provide affordable financing by partnering with financial institutions that provide financing options like mini-recourse loans and medical credit cards (Henry, 2015).

Finally, a health facility can hire debt collectors with a wide knowledge of techniques of bad debt collection, compliance issues and even technology. The rule of the thumb is that the outside agency is involved when there is a non-payment period of at least six months to avoid putting off the patient.

question 3

Cash flow forecasting helps predict receipts and payments generated by activities in a healthcare facility. Cash outflows and inflows, which constitute cash flow, are generated from investments, operations, and financing (Cole-Ingait, n.d). Cash flow forecasting is important in monitoring cash collected and expenses that are incurred from operations of the healthcare facility. The cash inflows include revenues made from patients and reimbursements of insurance, while cash outflows include taxes, wage payments, utilities, rent, among others. Hence, by forecasting cash flow statements, it will help in preparations of dynamic operational monitoring (Cole-Ingait, n.d). This process is vital in giving information on utilization of the organizations’ resources.

Cash flow forecasting helps understand investment profile by analyzing the expenses and incomes made from capital assets and investments. This is important in examining if the hospital’s long term investment generates enough income compared to capital inputs  (Cole-Ingait, n.d). This information can be used in adjusting care provision costs to enhance the organization’s financial success.

Cash flow forecasting helps ascertain financing needs by understanding the changes that occur, such as new technology adoption, debt repayment, borrowing money, and issuance of shares, among other aspects (Cole-Ingait, n.d). Hence, cash flow forecasting can help record and follow up on hospital spending.

Question 4

“Healthcare is growing–in some ways more like a new industry than a long-standing one” (Moore, Eyestone, & Coddington, 2014, p. 3). 

I agree with the statement because the healthcare industry has been growing over time due to global transformations. Media, politicians, and business leaders have popularized reforms in healthcare. As the healthcare industry faces increasing cost trajectory, there is also an increase in demand for health services, especially for the patients with chronic illnesses. The sector is expanding since healthcare spending is currently at 17% of Gross Domestic Product (GDP), even in the presence of healthcare costs, economic recovery, and increase in state’s economic growth (Bouwens & Krueger, 2013). In addition, digital transformation has led to the growth of the healthcare industry, so much that competitors outside the sphere of traditional healthcare, such as the technology sector, are looking for ways to invest in healthcare. These competitors are eager to enjoy the revenue of healthcare and participate in innovation and product development of the new industry (Bouwens & Krueger, 2013). Notably, this sector is growing as a new industry due to the new technology and transformations, which are leading to innovation instead of diversification, market access redefinition, healthcare and medicine integration, and patient-centred service.

Question 5

I agree with the sentiment. With the healthcare revolution that came up with an implementation of the Affordable Care Act, there have been changes in the delivery of care as well as models of payment in health facilities. This means that providers have been forced to consolidate systems that are larger than usual, and payments have also had to be aligned to the delivery of value. The Affordable Care Act (ACA) of 2010 requires that hospital financial management systems balance payments, value-based purchasing, and accountable care (Emrick, 2017). The approach makes the process quite complicated.

The Affordable Care Act is associated with changes in hospital operations, including financial management systems. ACA requires health facilities to have Medicare reimbursements matched to rates of readmissions and other factors, such as patient satisfaction and hospital conditions (Emrick, 2017). The process complicates financial computations since some requirements, such as satisfaction, is difficult to quantify.

One of the changes ACA initiated regards how health facilities reimburse patients’ cost of care, especially when readmission is within thirty days after discharge. Medicare reduces reimbursement by approximately 1% and a penalty not exceeding 2% in the year that follows (Emrick, 2017). The process brings logistical problems, especially in the institution’s financial management.



Bouwens, J. & Krueger, D. (2013). Embracing change: the healthcare industry focuses on new growth drivers and leadership requirements. Retrieved from

Cole-Ingait, P. (n.d). Importance of cash flow statement in a healthcare organization. Retrieved from

Emrick, A. (2017). The effect of Affordable Care Act on financial stability of health care system. Retrieved from

Henry, J. (2015). 5 ways hospitals can reduce bad debt. Retrieved from

Koening, S. (2010). Five Strategies for Strategic Debt Recovery of Self-Pay Patient Accounts. Retrieved from

Pros and Cons of bundled payments (2015). Retrieved from

Thibodeaux, W. (2017). What are the primary sources of operating revenue in the health care industry? Retrieved from

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