Financial Pitfalls in the Medical Sector

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The medical field is associated with saving lives however money is involved and because money is involved there are certain issues that arise. One these issues is giving too much unnecessary care which cost a lot of money.

Too Much Unnecessary Care

Overuse and unnecessary care accounts for anywhere from one-third to one-half of all health care costs, which equal hundreds of billions of dollars, in addition to the half-a-trillion per year experts attribute to lost productivity and disability.

Early elective deliveries are unnecessary, according to advice by the American College of Obstetricians and Gynecologists, that has been repeated for more than 30 years (that’s not a typo – 30 years), a point reinforced today at a press conference. This is a message carried by several other highly respected organizations like Childbirth Connection, the March of Dimes and the Association of Women’s Health, Obstetric & Neonatal Nurses (AWHONN). All national health plans concur. Nonetheless, we saw a dramatic escalation in the rates of these deliveries from the 1990s to the first decade of the new century.

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There is a lot of fraud when it comes to health insurance. The main culprits of this vice are health workers who lack integrity and honesty. You are billed for services that were never offered or someone uses your personal details for their own gain.

In 2011, $2.27 trillion was spent on health care and more than four billion health insurance claims were processed in the United States. It is an undisputed reality that some of these health insurance claims are fraudulent. Although they constitute only a small fraction, those fraudulent claims carry a very high price tag.

The majority of health care fraud is committed by a very small minority of dishonest health care providers. Sadly, the actions of these deceitful few ultimately serve to sully the reputation of perhaps the most trusted and respected members of our society-our physicians.

Billing for services that were never rendered-either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.

Billing for more expensive services or procedures than were actually provided or performed, commonly known as “upcoding”-i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying “inflation” of the patient’s diagnosis code to a more serious condition consistent with the false procedure code).

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The only way that these financial challenges will be overcome is through being proactive. Health institutions should anticipate such fraudulent activities and come up with respective strategies.

Healthcare organizations can take a number of steps to help them plan for an uncertain future:

Develop cost-structure scenarios – Organizations can assess ACA’s impact with economic modeling techniques that use current Medicare reimbursement rates as the “best case” and then work downward. This will give managers a sense for the potential financial realities ahead.

Analyze capital spending – Continuing to build campus-centric facilities simply may no longer be viable. Hospitals and other healthcare organizations must instead look for capital investments that will reduce the expense of delivering care.


Re-examine the local continuum of care – Unaffiliated community hospitals often face more difficulties because they cannot enjoy the economies of scale of larger, inter-related institutions. These independent organizations, therefore, must re-examine their role within the broader community. Is it appropriate for them to continue trying to deliver a full spectrum of services? Does the business model need retooling? These questions apply equally to large hospital networks. It may prove beneficial for some partner institutions to centralize certain services in one location or to eliminate others.

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