Week 6: The Time Value of Money, International and Future Financial Trends
The same prudence, which in private life would forbid our paying our own money for unexplained projects, forbids it in the dispensation of the public moneys.
—T homas Jefferson
There is wisdom in the old adage that “a bird in the hand is worth two in the bush.” The value of what you have now is generally greater than what it will be in the future. Time is a major factor in understanding current and future worth of money. Getting paid for a good or service today is worth more than a promise of being paid in the future. Why is it so important to clear your accounts receivable as quickly as possible? Every day a claim remains uncollected you are losing money. Ever increasing costs continue to put pressure on the consumer.
Understanding how the other countries address cost, quality, and access to care provides health care managers in the United States with models they can use to benchmark their own performance. As health care reform continues to change how health care is paid for in the U.S., managers will have to learn to read the signs, make predictions, and prepare for any number of various economic, political, and financial implications of change. Pay-for-performance, patient-centered care, and medical home models are all relatively new constructs within the health care industry. These must also be considered as they represent the latest trends in health care delivery markets.
- Differentiate between net present value and internal rate of return for capital investments
- Compare and contrast different types of national health care systems
- Identify global issues related to health care economics, finance, and budgeting
- Identify future trends in health care economics
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Introduction to Health Care Economics & Financial Management
- Chapter 14, “International Health Economics Issues”Globalization is an external factor that can influence health care economics and finance. This chapter highlights the shared concerns of quality—access and cost control that impact providers and consumers around the world.
- Chapter 15, “Future Trends and Keeping Updated”Information about heath care economics and finance changes quickly, especially as policy and politics rapidly change. This chapter discusses possible future directions and trends in health care as they are related to economics and finance and suggest ways for health care professionals to keep up to date on related trends. While focusing on policies relevant to health care professionals in the U.S., key concepts may be applied to other industrialized and developing nations.
Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports
- Chapter 16, “Mission, Vision, Goals, Strategies, Actions and Tactics”Developing a sound financial strategy is a process. It begins by first asking questions, then testing some assumptions and gathering information. Managers then examine strengths and weaknesses and ultimately looking at customers and the overall economic environment. Strategic planning helps produce fundamental decisions and actions that shape and guide health care settings toward achieving their mission and vision goals.
- Chapter 17, “Risk and Uncertainty”A crystal ball that could predict the future would be nice. However, that technology has not been perfected at this time. There are always risks and uncertainty when planning for expenses. This chapter draws your attention to the concepts of risk, uncertainty, and threats commonly encountered in business.
- Chapter 20, “The Time Value of Money”In this chapter, the authors clarify the value of today’s dollar in the future. They discuss issues of inflation, risk, and opportunity cost.
- Chapter 21, “Net Present Value (NPV)”Capital budgeting for new projects or technologies in health care may be part of the health care manager’s role. This chapter describes the net present value analysis.
Wegner, S. E., Humble, C. G., & Antonelli, R. C. (2009). Looming financial issues for medical homes in healthcare reform.
Pediatric Annals, 38(9), 524–528. Retrieved from the Walden Library databases.
This article highlights the three current payment methods utilized in the U.S. health care system: fee-for-service, capitation, and pay-for-performance. The future of medical home reimbursement for pediatric issues is also addressed.
Gruber, J. (2010). The cost implications of health care reform.
The New England Journal of Medicine, 362(22), 2050–2051. Retrieved from the Walden Library databases.
A report from the Congressional Budget Office and Centers for Medicare and Medicaid Services shows that the Affordable Care Act (ACA) of 2010 will substantially reduce the federal deficit while only slightly increasing national medical spending. This article highlights the economic impact of this law on the U.S. economy.
Document: Week 6 Topical Study Guide (Word document)
Laureate Education, Inc. (Executive producer). (2011).
Good Samaritan Hospital organizational chart—Week 6: Future trends and challenges in health care finance and economics. Baltimore, MD: Author.
In this final week of class, the Good Samaritan Hospital—I nteractive Organizational Chart showcases Vice President of Human Resources Laura O’Donnell discussing personnel costs, Vice President of Finance Deana Stout sharing insight on caring for uninsured patients and Vice President of Operations T.J. Senker discussing the challenge of improving outcomes while controlling costs.
Good Samaritan Hospital organizational chart—Week 6: Future trends and challenges in health care finance and economics Description and Video Transcripts (zip file)
Investopedia. (n.d.). Understanding the time value of money [Online video]. Retrieved April 4, 2011, from
Investopedia explains the concept that money available at the present time is worth more than the same amount in the future because of the potential earning capacity. Watch the video and review the content to better understand the time value of money.
Investopedia. (n.d.). Cooking the books [Online video]. Retrieved April 4, 2011, from
This short video explains the signs of earnings manipulation. You need to know the different ways companies can inflate their figures.
The Henry J. Kaiser Family Foundation. (2010). Economics and global health: The basics tutorial. Retrieved from
In this narrated slide tutorial, Kevin Chan, MD, provides an overview of some of the basic concepts of health economics in the context of global health. He explains the significant relationship between health and the economy, the way health is different from other economic goods and services, different systems of financing health care, and future challenges in financing.
This tutorial was prepared in collaboration with the Global Health Education Consortium (GHEC).
Discussion: Paying for Health Care, Today and Tomorrow
The globalization of markets is a powerful force in industry, health care included. The availability of goods and services, along with political, social, and geographic pressures, influences the nature of health care, not just in a region but across borders and around the world. It is the butterfly effect in action. The way health care is provided—to whom it is available and what its costs and price are—is reshaping the industry on a global scale. To understand the forces and drivers we can not only be concerned with the micro level of analysis. Focusing on our clinic, town, county, and state will only lead to disaster if we do not also keep our eyes open to the macro view.
The H1N1 swine flu virus or obesity are examples of global health phenomena garnering attention in the media. Someone with a virus in Africa or Asia can board an airplane and be almost anywhere in the world in less than 12 hours. So what happens globally might actually be felt locally. Economics, technology, and access are all shaping how human disease and wellness are experienced on a global level. Globalization affects health and health affects globalization. Although these influences are neither good nor bad we must be aware of them and do our best to understand how they drive our decisions related to health care spending.
To prepare for this Discussion, complete the readings in your Learning Resources. Locate and critique a website that focuses on health care in a country outside of the United States. Locate at least one article in the Walden University Library to include in your resources and support your discussion.
By Day 4
Post a comprehensive response to the following:
- Based on your experience as a provider and consumer of health care goods and services, how does the health care quality, access, and cost in the U.S. compare to the other country you researched online?
- What are some of the future issues and concerns related to health care financing in the U.S. compared to the other country?
- Be sure to support your work with specific citations from this week’s Learning Resources and/or additional scholarly sources as appropriate. Your citations must be in APA format. Refer to the Essential Guide to APA Style for Walden Students to ensure your in-text citations and reference list are correct.