Understanding the factors impacting the cost of healthcare

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With total healthcare spending hitting $3 trillion in 2014 (a 5.3 percent increase), as millions of people gained health insurance coverage under the Affordable Care Act (ACA), it’s important to understand the difference between costs, charges and payments (Becker Hospital Review, 2016).


Becker’s Hospital Review notes that:

Hospital charges are essentially their list prices for medical services, which are different from hospitalization costs, or the actual amount of money insurers, patients or the government ends up paying hospitals in exchange for the services. The prices on a hospital’s charge description master (CDM) bear little relationship to the amount most patients are asked to pay. That’s because commercial insurers negotiate discounts with healthcare providers on behalf of their members, and Medicare and Medicaid set fixed payment rates for hospital services, which are often less than the actual cost of care. Additionally, most hospitals allow low-income patients who are uninsured to receive free care or care for a reduced charge.


The Peterson-Kaiser Health System Tracker found the 2014 spend on hospital care rose significantly from the previous year:

Private health insurers §  $362.1 billion (up 3.5 percent from 2013)
Medicare §  $250.3 billion (rose 2.9 percent from 2013)
Medicaid §  $158.4 billion (an increase of 7.6 percent from 2013)


While it is difficult to determine if the rising costs are a result of an increase in share of the insured population through the ACA marketplace plans or mere cost inflation – but one thing is certain – conventional budgeting and financial management systems are not, as a rule, equipped to incorporate key factors that influence healthcare costs into their budget development processes such as population health, demographics, workforce, competitive providers and insurers, patient care and safety, cost-shifting and transparency, to name just a few.


Questica Budget is a web-based budgeting tool that provides a controlled environment for budget input, review, approval, and maintenance. It offers one point of data entry and seamless integration with a hospital’s financial management system. While Questica Performance allows public health systems to establish and manage objectives, leveraging financial and statistical data from any number of sources. The budgeting software gives the healthcare system the ability to add data and make modifications, and then roll the information forward into future years without any further complications.


Unlike other budgeting software providers, Questica’s solutions were built solely for the public sector based on its understanding of the inherent needs of public sector organizations.


At a time when it is crucial for healthcare officials to be able to solve these budgeting challenges, find out how we can help you uncover new insights, find trends and make better budgeting decisions. Request a demo today.