Healthcare costs are a significant burden for the average U.S. citizen. Costs associated with care can cause patients to avoid seeking care altogether, misunderstand medical information and even fall into unintended debt.
Health literacy is critical to a successful, financially strong population, and the U.S. needs professionals who can help patients understand their medical options.
Healthcare Economics and Its Importance
According to Harvard Business School Online, healthcare economics is a term used to describe the various factors influencing the healthcare industry’s costs and spending. As a field of study, healthcare economics seeks to understand the role that individuals, healthcare providers, insurers, government agencies and public and private organizations play in driving these costs.
Six key areas contribute to the importance of healthcare economics:
1. Spending Growth
Healthcare expenses have been rising in the U.S. in multiple ways. Harvard Business School Online notes that an increase in costs means there is increasing need for providers to help patients understand care. Professionals must understand “the drivers of healthcare spending, how spending varies across different regions and the role technology can play…”
2. The Role of the Patient
Patients play a prominent role in healthcare spending. This is due to the multiple options that they can choose from regarding prescriptions or treatments, as well as undergoing a particular surgery. This plays into the supply and demand aspect of healthcare where certain items become preferred over others and creates a scarce dynamic for pricing and availability.
3. The Role of the Provider and Healthcare Production
While the patient is the demand side of the equation, healthcare providers serve as the supply side. Healthcare providers essentially decide which services and treatments they will offer within their hospital system and determine their own pricing based on the market demand of the item or service being negotiated.
4. Risk & Insurance
Health insurance allows individuals the ability to have a procedure partially or fully covered by insurance within the hospital or clinic. Oftentimes, the insurance provider will cover the cost so the patient does not have to find the means to pay for it on their own. This helps society to manage the cost of healthcare, but it also provides a type of risk for those who are not signed up for insurance programs.
5. Benefit Design
Employee benefits packages have the potential to control healthcare costs by forcing individuals to weigh the pros and cons of each insurance plan. According to Harvard Business School, “an insurance plan which features high deductibles can serve to prevent frivolous spending while still ensuring protection in the face of medical emergencies.”
6. Payment Reform
Similarly, insurance companies compensate healthcare providers for their services in many ways. With the introduction of fee-for-service, episode-based payment and population-based payment models to the healthcare world, it is easier for providers to decide the least expensive route for payment.
Top Ways to Understand Costs
Most patients do not understand the basics of healthcare costs, which is why it is important to have nurses or educated business supervisors within the industry to guide patients.
In order to provide patients with a basic understanding of the breakdown of healthcare costs, providers must make an effort to simplify certain terms that might be difficult for patients to comprehend. The best way to do this is to compile a list of the items that they might be paying for.
According to Managed Healthcare Executive, the top eight tips are:
- Share cost estimates
- Educate consumers
- Simplify the user experience
- Encourage cooperation with incentives
- Provide cash-back rewards
- Offer financial counseling services
- Offer patient advocates
- Provide simple, per-visit copayment options
Explaining this information to patients allows them to fully understand the cost of a specific treatment or procedure, as well as the payoff. If they are not made aware of these healthcare costs, they are likely to avoid the treatment or procedure because they believe that the price is too much for the risk. Even patients who do have health insurance might be hesitant to proceed with a treatment or procedure because they have not been informed of all of the advantages that their plan can offer.
Healthcare professionals need to sit down with patients and discuss care complexities in order for patients to confidently make the decision and go through with treatment. They need to know what they will expect to pay upon completion of the treatment period or procedure.
Maximize Your Healthcare Business Skills With an MBA Degree
One way to uplevel your knowledge regarding economics within the healthcare industry is to further your career and earn your Master of Business Administration (MBA) degree. Those who enroll in the MBA with a concentration in Healthcare Economics and Management online program at William Paterson University will strengthen leadership abilities and solidify a foundation in healthcare economics.
In as few as 12 months, students will gain in-depth knowledge of the role economics plays in healthcare and learn how to make strategic, financially-sound decisions.
Graduates will be able to work as various administrators or managers within the healthcare industry and develop their leadership styles using practical insights to create awareness, act ethically and understand the psychology of change.
Learn more about William Paterson University’s online Master of Business Administration in Healthcare Economics and Management program.
