Healthcare Costs and Their Effects on Healthcare

Subject: Healthcare Financing
Pages: 3
Words: 594
Reading time:
3 min
Study level: College

To organize powerful strategic management within a health care organization, its leaders need to realize the extrinsic environment surrounding their hospital. They need to comprehend and promptly react to the crucial changes happening in this environment. Companies that are unable to prepare for alterations, disregard the external factors, or confront the changes, will eventually fail to understand the market requirements. Such failure becomes more probable under the condition of obsolete technologies, unproductive delivery schemes, and out-of-date management methods (Ginter, Duncan, & Swayne, 2013).

Changes in the general and healthcare environment involve new trends in information technology, challenges in outlining the hospital information structure and keeping track of the development of the outlined goals (Haux, Winter, Ammenwerth, & Brigl, 2013).

Health Care Costs as a New Issue Affecting Health Care Organizations

One of the challenging new trends in the health care environment is presented by costs. This challenge significantly affects the health care organization’s operations because it has the power of restricting some of the hospitals’ possibilities.

The core reasons for the health care cost increase are the new treatment development and the population’s aging. Furthermore, difficulties occur due to the participation of third-party payers such as governments and insurance companies. The problem is that these payers only compensate for the undertaken procedures and not the obtained results (Kaplan & Porter, 2011). Therefore, when a patient needs further treatment, there appears a problem of additional costs which was not initially considered.

However, the biggest problem with rising health care costs is presented by the system of measuring these expenditures. According to Kaplan and Porter (2011), there is too little perception of what it takes to administer proper patient care. Also, the researchers emphasize that it is necessary to check the correspondence between the expenditures and the achieved results. Payers concentrate on analyzing the costs necessary for a particular service, while they should focus on estimating the amount of money needed for a complete treatment cycle (Kaplan & Porter, 2011).

Ways of Controlling Health Care Costs and Their Effect on Health Care Organizations’ Operation

The most productive solution to regulate the issue of health care costs is to make physicians reconsider their expenditures and find ways of eliminating cost waste (Tilburt et al., 2013). The ways of reducing health care costs include revising the amount of money spent on the physicians’ salary, the advancement of evidence-based practice decisions, the increase of efficiency of care, and adjusting the ways of payment for care (Tilburt et al., 2013).

The issue of health care costs dramatically affects the organizations’ operations. First of all, hospitals cannot provide sufficient care due to a lack of financial support. They need to cut down on some kinds of expenditures, and within a health care organization, any type of operation is important. Thus, whatever part of a hospital’s functions becomes underpaid, it will have adverse outcomes for the people. Another problem is that due to insufficient financial support, health care organizations are not able to perform the research necessary for improvement in treatment approaches. All of these negative results of health care cost issues urge the stakeholders to come up with resolutions of how to make the process more efficient and bring the most positive results for the patients.


The issue of health care costs is becoming a danger to the country’s economy in general and health care organizations in particular. To eliminate the adverse outcomes of this problem, novel approaches to regulating the expenditures are needed. Collaboration between the government and physicians is necessary for coming up with the most efficient solutions.


Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations (7th ed.). San Francisco, CA: Jossey-Bass.

Haux, R., Winter, A., Ammenwerth, E., & Brigl, B. (2013). Strategic information management in hospitals: An introduction to hospital information systems. Baltimore, MD: Springer.

Kaplan, R. S., & Porter, M. E. (2011). How to solve the cost crisis in health care. Harvard Business Review, 7, 47-64.

Tilburt, J. C., Wynia, M. K., Sheeler, R. D., Thorsteinsdottir, B., James, K. M., Egginton, J. S., … Goold, S. D. (2013). Views of US physicians about controlling health care costs. JAMA, 310(4), 380-388.