Reimbursement and Profitability

Published: 2023-04-23
Reimbursement and Profitability
Type of paper:  Essay
Categories:  Management Economics Food
Pages: 3
Wordcount: 611 words
6 min read

Just like any other business enterprise, hospitals must generate more revenue to cover for the operating expenses through the utilization of cost-shifting. Cost shifting in a hospital involves the act by the hospital management to impose more charges to the privately insured individuals for the services delivered compared to fewer charges for the same services offered to the public insured individuals such as Medicare and Medicaid which are mainly government-financed (Porter, 2009). However, to ensure lasting profitability the hospital has to ensure an appropriate and negotiable price is maintained as well as practicing service contraction. This essay will aim at establishing the existing relationship between cost-shifting and other players and the importance of appropriate negotiable pricing as well as the contraction of services in retaining profitability.

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As the term expresses, cost-shifting involves imposing charges to cater to the losses that might occur in other sectors. These losses may be a result of the bad debt or liability risks countered from the services offered in the health centers. For instance, some programs such as Medicare that are mainly government provided incorporate mainly the old and the disabilities despite their financial status yet they are very less funded. Additionally, programs such as the Medicate which are also government-funded provide health cover for individuals with lower income. To cater to the losses that may result from delivering services to the individuals under the two programs (Medicare & Medicaid), the hospital has to increase the charges on the insurance cover for the private insured people receiving the same treatment in order to counter the loss. This cost-shifting relationship with this other payers enhances the continuity of service delivery in the health centers.

However, for any organization such as the health care to remain profitable, the power of proper price negotiation as well as contraction of services must prevail. Successful price negotiations of payment such as from the contracted services not only preserve the organization's revenue but also yield additional income through other new insured products as well as models from different established insurance programs. Through negotiation with the contractor peer on the side of the payer helps in gathering the key information mainly the payer goals for the negotiation and establishes the payer plan in promoting the product. Additionally, through negotiation with the payer help in establishing the quantity of outsourcing that should be adapted. Through engaging in these two mechanisms (price negotiation and contraction of services) the organization is able to establish the exact amount of resources that they should use without incurring any loss thus retaining their profitability.

Also, the idea by a health organization to contract for services offers less infrastructure cost compared to when conducted inside the organization a condition that enhances savings that boosting profit (Robinson & Scott, 2009). The companies operate with less waste and maintain equipment. However, to ensure this profit remains, proper negotiation of the price must be applied.


Based on the essay, cost-shifting play an important part in ensuring the organization remains profitable through countering the losses by the privately insured individuals that are incurred from the uninsured individuals. Also, Proper negotiation of the price for contracted services and delivery of products play a greater role in ensuring the organization remains profitable in the market. The negotiation process helps the organization to establish the correct player with the right plan for the organization. Moreover, the contraction for services helps in minimizing wastage by the subcontracting company thus enhancing retaining of profit.


Porter, M. E. (2009). A strategy for health care reform-toward a value-based system. N Engl J Med, 361(2), 109-112.

Robinson, H. S., & Scott, J. (2009). Service delivery and performance monitoring in PFI/PPP projects. Construction management and economics, 27(2), 181-197.

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