Skip to Main Content

Chapter 11: Hospital Finance

Ajay Sial; Jaklin T. Orlowski; Bhan Sial

INTRODUCTION

In this chapter, we will discuss the following topics:

  • What is the current cost of healthcare in the United States?

  • What changes are being faced in healthcare reimbursement models?

  • How does a hospital chief financial officer (CFO) measure success?

  • What are some of the key payment mechanisms received by a hospital?

  • How does a physician benefit by understanding hospital finance?

CURRENT COST OF HEALTHCARE IN THE UNITED STATES

The Centers for Medicare and Medicaid Services (CMS) calculate the historical and projected National Health Expenditure (NHE) data. The historical spending NHE measures annual health spending in the United States by the type of good or service delivered (hospital care, physician and clinical services, retail prescription drugs, etc.) and the source of funding for those services (private health insurance, Medicare, Medicaid, out-of-pocket spending, etc.), and the NHE projections are estimates of spending for healthcare in the United States over the next decade using the same information as the historical NHE.1 Included in Table 11-1 are the historical NHE for 2015 and the projected NHE between 2016 and 2025.

TABLE 11-1Historical and Projected NHE
View Table||Download (.pdf)
TABLE 11-1 Historical and Projected NHE
Historical NHE for 2015 Projected NHE Between 2016 and 2025
NHE grew 5.8% to $3.2 trillion, or $9900 per person. NHE is projected to grow at an average rate of 5.6% per year for 2016–2025.
NHE accounted for 17.8% of the gross domestic product (GDP). Healthcare spending is projected to grow 1.2 percentage points faster than GDP per year over the 2016–2025 period; as a result, it is expected to be 19.9% of GDP by 2025.
Medicare spending grew 4.5%, to $646.2 billion, or 20% of total NHE. Medicare spending is predicted to grow by 5.9% over the projection period, in part due to ongoing strong enrollment growth in Medicare by the baby boomer generation coupled with continued government funding dedicated to subsidizing premiums for lower-income marketplace enrollees.
Medicaid spending grew 9.7%, to $545.1 billion, or 17% of total NHE. Medicaid spending growth is projected to decelerate sharply to 3.7% in 2016, as enrollment growth in the program slowed significantly.
Private health insurance spending grew 7.2%, to $1.0721 trillion, or 33% of total NHE. Private health insurance spending growth is projected to slow to 5.9% in 2016, which is also largely attributable to slower expected growth in enrollment.

Reproduced with permission from Centers for Medicare and Medicaid Services (CMS). NHE Fact Sheet. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.

In 2015, hospital expenditures were $1.361 trillion, which accounts for approximately 32% of the total NHE of $3.2 trillion; physician and clinical service expenditures were $634.9 billion, which accounts for approximately 20% of the total; and prescription drug spending was $324.6 billion, which accounts for about 10% of the total.2

HISTORY OF AND SUBSEQUENT CHANGES TO HEALTHCARE REIMBURSEMENT MODELS

...

Pop-up div Successfully Displayed

This div only appears when the trigger link is hovered over. Otherwise it is hidden from view.

This site uses cookies to provide, maintain and improve your experience. MH Privacy Center Close