Where is the Money! U.S. Health Care Today.

According to Jay Sterns, the director at Barclays Capital, if we combined the largest nonprofit health systems in the United States, that organization would have an annual operating revenues of $77 billion and a cash or cash equivalent of $35 billion. This equals to approximately $0.50 cash on hand for every dollar of annual operating revenue. Compare to a normal United States large public company, which usually has estimated $0.77 cash on hand for every dollar of annual operating revenue, the health care system’s cash on hand seemed insufficient (Zismer, 2013).

Although most health care organizations are not-for-profit, it is still important for the organizations to have a balanced budget. There are not stockholders and investors for nonprofit organizations to report their earnings to, but in order to maintain financial viability,  it is preferable for the organizations to have their revenue at leave equal to their costs if not exceed their cost.

The two biggest financial uncertainties that healthcare industry are facing today come from the government budget cut and the health care reform. The automatic federal budget cut, call the sequestration, would reduce the federal budget by $85 billion. Jobs and government programs are the first to get effected by the sequestration. iVantage Health Analytics, a Maine health care research firm estimated that about $3 billion would be lost from approximately 4200 hospitals. The budget cut may cause nearly 100 hospitals’ operating margin turn from positive to negative (Pugh, 2013).

The Patient Protection and Affordable Care Act (PPACA), also referred to as healthcare reform, makes health care insurance coverage obtainable for families and individual that are otherwise not able to afford the cost of health care insurance. PPACA provides financial assistance for people to purchase insurance plans through the health care insurance exchanges. Under the act, states have the option to extend coverage in Medicaid to the majority of population with incomes under 138% of poverty. It also provides tax credits, reduced cost sharing that are paid by the federal government.

The federal budget cuts and the health care reform can lead the United States health care system into an uncertain future on top of an already volatile environment. According to Sterns (2011), one of the authors of Capital Efficiency and Integrated Health System Designs, the health care systems are often weak on capital and budgets due to reasons like the governing rules of tax-exempting borrowing, and difficulty in raising funds because of nonprofit status. The health care reform implemented and will be implementing many major changes that will affect health care organizations both financially and operational. 

The following YouTube video gives a brief description of the U.S. health care today and future!
http://youtu.be/y51eT-1-BE8 

Resource

Pugh, T. (2013). Looming Federal Spending Cuts Will Hit Hospitals Where it Hurts. McClatchy. Retrieved from http://www.mcclatchydc.com/2013/02/28/184476/looming-federal-spending-cuts.html

Standard & Poor’s (2013). U.S. Not-for-Profit health Sector Outlook: Providers Prove Adaptable but Face a Test in 2013 as Reform Looms. Ratings Direct. New York, NY: Standard & Poor’s Rating Services.

The Henry J. Kaiser Family Foundation (2012). Focus on Health Reform. Menlo Park, CA: The Henry J. Kaiser Family Foundation.

Zismer, D. K. (2013). How Might a Reforming U.S. Healthcare Marketplace Threaten Balance Sheet Liquidity for Community Health Systems?. Journal Of Healthcare Management, 58(3), 168-172.

Zismer, D. K., Sterns, J. B. & Claus, B. (2011). Capital Efficiency and Integrated Health System

Designs. Healthcare Financial Management, 65(7), 88-94.