Medicaid Reimbursement, Capstone Project Example

Introduction

In the current economic climate, a number of health-care organizations face financial distress owing to the reduced re-imbursements from both Medicare and Medicaid. This creates a shortfall in the funding and creates additional cash flow crisis. Within this economic downturn, the financial officers need to be continuously examining a number of financial issues.

Cash Flow Monitoring

It is essential for any business organization to keep track of its cash flow. This essentially provides a snapshot of how the organization is performing and the status of its liquidity from a cash inflow / outflow perspective. An examination of revenue vs. operating performance provides a good indication of the health and viability of the business.  (Grant Thormton, 2011).

Maintain Lender Relationships

It is important to retain strong relationships with potential lenders.  Hospital lenders are important stakeholders and need to remain involved in important decision making points like financial re-structuring, changes in financial strategy, understanding the healthcare organizational debt structure etc.

Zone Of Insolvency

If the Healthcare organization enters the degree of financial uncertainty that places them near bankruptcy there are imminent warning signs i.e. inability to pay off debts, excess of liabilities over assets, poor cash flow. The Board of Directors of the Organization have a duty of care to the shareholders to try and protect the organization. Here it becomes paramount to get the financial affairs of the organization in order. This means reconciling the cash flow of the organization with the financial statements and taking whatever remedial action steps are required to remedy the measure.

Medicaid Reimbursement in Oregon

In a report produced by the Lewin Group it was found that Oregon Medicaid had failed to pay hospitals and physicians at rates that enabled them to recover costs. Further it was known that Medicaid fee for service reimbursement pays both urban and large rural hospitals below the actual costs incurred for patient care. This resulting in Medicaid payments not keeping up with actual increases in costs and as such creating a significant gap between that of costs and payments over time. The fee for service Medicaid payment system has not been updated in over 10 years.  This becomes self-evident that this has greatly contributed to the financial problems in this State.  The report considered that even if the methods were rebased to that of current hospital and operating costs it would still be receiving less than $17million for treating fee-for-service Medicaid patients. This will increasingly increase the problems of low-income families gaining access to physicians in this State. (The Lewin Group, 2003)

Conclusions

Both Medicare and Medicaid payments continue to arrive late to the Health Care Organizations. This creates the urgency to find new and additional means of funding, this based upon expected future payments from the Government. The stress that this imposes is around financing the debt and incurring unnecessary interest payments because of the Government’s inability to pay its debts on time.  This is compounded by the fact that there is no national standard for post-petition reimbursements. The matter may become even further compounded by State Governments also facing severe hardships and as such slowing the system down even further, forcing more healthcare organizations into the insolvency zone. (American Bankruptcy Institute, 2004)

Works Cited

American Bankruptcy Institute. (2004). Latest developments in health care bankruptcies. Washington DC: Carribean Insolvency Symposium.

Grant Thormton. (2011). Hospitals in distress: What boards of directors need to know. Retrieved 7 25, 2011, from Grant Thornton: http://www.grantthornton.com/portal/site/gtcom/menuitem.8f5399f6096d695263012d28633841ca/?vgnextoid=be15c7d838101310VgnVCM1000003a8314acRCRD

The Lewin Group. (2003). Analysisof MedicalRe-imbursement in Oregon. Portland, OR: Lewin Group.