Key Concepts (2)
Posted on December 26, 2008 - Filed Under Finance
- An agency problem is a conflict of interests that can arise between principals and agents. One type of agency problem that is relevant to healthcare finance is the conflict between the owners of a large for-profit corporation and its managers.
- The value of any income stream depends on the amount of usable, or after-tax, income. Thus, tax laws play an important role in financial management decisions.
- Most provider revenue is not obtained directly from patients but from healthcare insurers that are known collectively as third-party payers.
- Third-party payers are classified as private insurers (Blue Cross/Blue Shield, commercial, and self-insurers) and public insurers (Medicare and Medicaid).
- Managed care plans, such as health maintenance organizations (HMOs), strive to combine both the insurance function and the provision of healthcare services.
- Third-party payers use many different payment methods that fall into two broad classifications: fee-for-service and capitation. Each payment method creates a unique set of incentives and risk for providers.
Because the managers of health services organizations must make financial decisions within the constraints imposed by the economic environment, these background concepts will be used over and over throughout the remainder of the book.
Taken From : HEALTHCARE FINANCE
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