MICROECONOMICS APPLIED RESEARCH
MICROECONOMICS AND LONG-TERM HEALTHCARE
Cochise Community College Campus
Cochise Community College
Microeconomics and Long-term Healthcare
It was not long ago that our country was going through some very difficult economic times. Job losses were on the rise, there were many issues leading to an increase in foreclosures, and many financial institutions needed to be bailed out. Many people, however, held the misconception that the health care industry was immune to the economic problems that faced our society. Many thought that those working in the health care industry had no need ...view middle of the document...
Due to the influx of our aging community, many feel that nursing homes are thriving and making a large amount of money. However, this is not the case. Most nursing home's margins are often not very far from zero, being at times slightly above or slightly below. They are also facing a $16 billion cut in direct support from Medicare over the next 10 years, as well as Medicaid cuts in many states (Mullman, 2009).
To assist their situation, many nursing home facilities have tried to maximize their profit margins. There is nothing wrong with this because health care is a business but, they must not forget their main goal of caring for those that are unable to care for themselves. The problem for these facilities, however, begins when management losses sight of their main goal and starts to evaluate their entire business on the basis of the economics of the facility. It is when they attempt to maximize their profit margin at the expense of resident care that their problem begins. Unfortunately, and all too often, health care management, including long-term care managers and administrators, fail to understand that conducting business of long-term health care is not the same as conducting other forms of business. For these administrators, the lives of dependent individuals are reliant on the decisions they make (Garavaglia, 2009).
Many forms of reimbursement have not kept up with the rate of inflation in the medical industry. To make up for this, administrators have been known to control their economic environment by targeting the workforce of the nursing care facility. Consequently, health care organizations have introduced many tools, such as metric systems that inform management staff how many workers are needed for a given number of residents. Also common is the use of metrics of hours per patient day. Although, using measurements to help control excess is important, the administrator has to be aware that these numbers are not etched in stone and that in addition to staff-patient/resident ratios; one has to also calculate many of those intangibles that often do not lend themselves to quantitative analysis. For example, the acuity of an environment, based on wounds, bariatric issues, or the number of acute illnesses that are currently exacerbating chronic conditions, have to be considered and factored in to the control area. These are not always easy to capture through a measurement device.
As stated previously, those in health care are not disconnected from the larger economic problems, such as...