Accounting and Financial Principles

Accounting and Financial Principles

The Impact of the New Payment Models on Krona’s Revenue

There is a positive impact that is likely to result from the new value-based payment model on Krona’s revenue. Notably, this is so because the patients served by the hospital attach importance to the value received. Therefore, Krona Community Hospital should ensure they offer quality care to patients in the long run. Regarding the accountable care organization payment model, the organization is likely to achieve improved revenues. Essentially, this is so because the accountable care organization payment model ensures enhanced accountability of all workers in providing services to clients, and no wastage takes place, which could result in losses and a reduction in revenue. Since the accountable care organization model adopts a collaborative approach among physicians, hospitals, and other healthcare providers, medical errors will be reduced, and the organization will avoid unnecessary utilization of medical resources and services. There will be a positive impact on revenue because the expenses incurred will be reduced.

The impact of the bundled care payment on Krona’s revenue can be understood by considering its four models that affect the incentives and payments received by the facility. The first model is concerned with acute care hospital care to inpatients. The second and third models of bundled care payment entail a retrospective arrangement for bundled payment in which reconciliation between actual expenditures and target prices is done. Notably, this plays a role in monitoring the progress regarding expenditure, and if revenue is affected negatively, corrective measures can be taken to improve the revenue (Bosco et al., 2018). The last model of bundled payment creates one prospectively focused bundled payment to a healthcare facility that entails all services relating to a client’s inpatient stay, such as services offered by practitioners, physicians, and other workers within the healthcare facility. It is worth noting that without proper governance of the new payment models, they can negatively affect Krona’s revenue.

Possible Issues Surrounding Next Year’s Forecasting

The new payment models form a major issue influencing Krona’s forecasting next year. Their impact on revenues must be established before the forecasting process. For instance, if the new payment models contribute positively to the facility’s revenue, forecasting will predict a promising future characterized by improved services and better revenues. However, if the models prove to have negative impacts on the revenue in the current fiscal period, then next year’s forecasting will predict reduced revenues. Another issue likely to influence next year relates to the time available to implement and evaluate the impact of the discussed models. Limited time can result in inaccurate forecasting.

Challenges, Benefits, and Risks of Utilizing Capitation

The utilization of capitation presents a challenge regarding a mental shift among practitioners in the facility. Notably, this is so because the culture surrounding payment in the organization will require a change when capitation is utilized. Another challenge relates to data used in launching the capitation model. There is a need for ample actuarial input and ample historical data regarding how to reconcile codes and costs, which can be challenging (Nurlaily et al., 2021). Finally, capitation requires resilience because it takes time and cannot happen overnight. Despite the challenges, capitation can benefit healthcare providers and patients. When the two parties are well-informed on the capitation model, more savings can be achieved, which aligns with the need for Krona Hospital. Capitation presents a financial risk to the healthcare provider since payment to the facility is based on a fixed amount, irrespective of resources, effort, and time needed to offer care to a patient.

References

Bosco, J. A., Harty, J. H., & Iorio, R. (2018). Bundled payment arrangements: keys to success. JAAOS-Journal of the American Academy of Orthopaedic Surgeons, 26(23), 817-822.

Nurlaily, N., Ernawati, T., & Zain, F. I. (2021). The Effect of Capitation Value of Healthcare and Social Security Agency on Service Quality at Primary Clinics. Indian Journal of Forensic Medicine & Toxicology, 15(4).

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Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions with your classmates. Be substantive and clear, and use examples to reinforce your ideas.

Due to decreased funding caused by value-based models of payment, accountable care organization payment, and bundled care payment, discuss the following:

What impact will these new payment models have on Krona’s revenue?
Address the possible issues surrounding next year’s forecasting.
Discuss the challenges, benefits, and risks of utilizing capitation.
Responses to Other Students: Respond to at least 2 of your fellow classmates with at least a 100-word reply about their Primary Task Response regarding items you found to be compelling and enlightening. To help you with your discussion, please consider the following questions: