Health Care Costs


            The financial viability of hospitals is one of the most discussed current issues regarding health care. It simply refers to the ability of a healthcare institution to generate and maintain inflow of revenue that exceeds its expenses. Some hospitals might be financially stable at the moment, but the big question is whether they would be able to sustain their financial operations in the near future. The fundamental goal of each hospital not only in the United States but all over the world is to provide patients with the best medical care and service continuously. It implies that hospitals must check on their bottom lines (Young, 2012). If financial viability becomes a problem for healthcare organizations, then the quality of medical care could begin to deteriorate.

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            The paper aims to look at answering two major questions which would form the statement problem for this particular research. The research question will include:

  1.  What are some of the issues that are driving the high health care costs?
  2.  How do healthcare institutions guarantee their financial viability?

            With this in mind, a good researcher is one who can formulate hypotheses for the named research questions, and determine at the end of the study whether the assumptions are correct or not. Some of the suggestions one could think of include: 

  1. The use of technology has propagated the high health care costs.
  2. Identifying the improvement opportunities can help in financial viability in healthcare.

Causes of High Healthcare Costs

            Today the United States spends much on health care costs than any other country with the cost amounting to 18% of its GDP. In fact, these costs at times do rise above the rate of inflation making it a serious issue of concern. One of the main reasons for this high costs is that most hospitals reward the medical providers for doing a lot of work rather than being paid for their efficiency (Morone & Ehlke, 2014). The insurers do know the kinds of operations that the personnel in most hospitals do on a daily basis, thus, overpay them for carrying out repetitive tests and overtreatment.

            Another factor that contributes to the rising healthcare costs is the increase in illness in populations. The number of people diagnosed with chronic conditions continues to rise, thus, driving up the costs. Reports have also shown that about two-thirds of adults are suffering from these chronic illnesses that in turn have inflated medical spending. 

            The rise of these high health care costs can also be attributed to the use of new drugs, technologies, and procedures that are more expensive than the standard treatment methods. Many patients demand these new equipment and procedures not knowing that they are the cause of the high rising costs (Young, 2012). It is safe to say that the use of modern technology is the biggest contributor to these high costs.


            According to the healthcare economists, about 40-50% increase in the annual healthcare costs can be traced to the adoption of new technologies. In some instances, the researchers also quoted the intensified use of the old ones. It means that controlling the use of technology could be the biggest factor in lowering the costs. However, the issue of ethics seems to be a conflicting element. Many people seem to highly value the use of technology because they consider it a modern component of medicine (Monegain, 2012). Patients are not the only ones expecting it because doctors have also been trained on how to use the new equipment. Furthermore, the companies that make the robots and other medical equipment are hoping to make revenues from these tools. Finally, the media love to write about these new trends. It means that economic and social incentives developed around the use of technology are so compelling to diffuse (Kabene, 2010). The use of technology, primarily the robotics has become a fundamental feature of modern medicine as well the industrial sector.

            In 2016, millions of patients all over the world were able to make their first video consults. Medical practitioners were also able to prescribe to them health apps. Using their smartphones, patients also managed to use them as their diagnostic tools (Monegain, 2012). These new experiences have not only made the dream of care more real but have also helped in changing consumer expectations, hence, fuelling innovation.

            Changes have not occurred in the equipment used alone because patients seem to favor new drugs too. In 2014, the FDA approval of new medicine reached an all-time with the body naming 41 new agents. About 25% of these pharmaceuticals were termed as breakthrough therapies because clinical evidence had suggested that the products in these drugs could improve more than one clinically meaningful endpoint (Kabene, 2010). By the end of 2015, the approval of the novel new drugs had risen to 67% showing how quick people are buying into new medicine and technologies.

            The use of technology has not been limited to the usual healthcare practices. Behavioral healthcare providers have also adopted a technology that can aid in the direct conduction of virtual visits with patients. In 2014, the United States conducted 325,000 behavioral telehealth visits to over 100,000 veterans through video conferencing. Even though the use of this technology helped in reducing psychiatric admissions by a high percentage, the costs involved are extremely high for both the patients and caregivers.

            In the future, it is believed that clinicians will start to operate in new “bedless” health institutions and virtual hospitals. Such a strategy would enable them to oversee scores of patients from all over the world. Through the alternative payment procedures, technological advances, as well as powerful modern database tools, experts believe that the use of technology will continue to change (Kabene, 2010). While this might be beneficial for hospitals and patients concerning health outcomes, the costs could prove a stumbling block.

Reducing the High Healthcare Costs

            Reducing the high health care costs is a critical component in medical care because not everyone can pay the high premium costs required by the insurance companies. It is hard to avoid the use of technology despite the effects it has had on healthcare costs. However, this does not mean that the challenge can lack a reliable solution. One of the models that can be adopted is the one used in the Japanese hospitals. Japan healthcare system shares certain features with that of the United States, though its expenditure is way lower. It adopts a fee-for-service model that offers unrestricted access to specialists and hospitals. The access also allows for an ample supply of MRI and CT scanners. It is worth noting that restricting access can help in lowering costs, but this could create other problems altogether (Dlugacz, 2012). The problem can be sorted setting health care prices to control spending with the allocated budgets by the government.

            One way of reducing these prices is changing the way patients negotiate prices with the healthcare providers. Given that it occurs between the two parties, the system has created complexities leading to varying prices for the same products and services. The Affordable Care Act, for instance, can help in developing a model that offers both affordable and high-quality care to everyone. Achieving this requires the stakeholders to use all the equipment the law provides (Cleverley & Cameron, 2007). It includes using modern methods of organizing, delivering, and paying for health care that will reduce the increasing costs of healthcare and at the same time improving quality.

Financial Sustainability in Healthcare

            As they move into the future, hospitals must determine the way that will make them sustainable with these rising costs of health care. Sustainability will ensure that hospitals can operate in a particular way to meet certain standards. One efficient means of ensuring this sustainability is using data in the identification of the improvement opportunities when it comes to labor and hospital stays. In the past, hospitals used to these assessments manually, an aspect that  led to many loss of capital due to various discrepancies. The use of computerized systems has helped in removing these inconsistencies in the hospital books. The use of such data has also helped institutions in determining where the real opportunities. Healthcare organizations today are employing wise CFOs who have enabled them to identify these growth opportunities. It means that hospitals must determine the means of operating more efficiently from both financial and clinical standpoints (Herman, 2012). By doing this, it will ensure that the hospital does not sacrifice one opportunity for another. When health institutions do this, sustainability will occur naturally.


Balgrosky, J. A. (2014). Essentials of Health Information Systems and Technology. Burlington, MA: Jones & Bartlett Publishers.

Cleverley, W. O., & Cameron, A. E. (2007). Essentials of Health Care Finance. Burlington, MA: Jones & Bartlett Learning.

Dlugacz, Y. D. (2012). Measuring Health Care: Using Quality Data for Operational, Financial, and Clinical Improvement. Hoboken: John Wiley & Sons.

Herman, B. (2012, December 7). How to Create Sustainable Hospital Financial Improvement: 3 Steps. Retrieved from Hospital Review:

Kabene, S. M. (2010). Healthcare and the Effect of Technology: Developments, Challenges and Advancements: Developments, Challenges and Advancements. Hershey, PA: IGI Global.

Monegain, B. (2012, May 3). Technology helps drive high cost of U.S. healthcare. Retrieved from Healthcare IT News:

Morone, J. A., & Ehlke, D. (2014). Health Politics and Policy. Boston, MA: Cengage Learning.

Richins, S. M. (2015). Emerging Technologies in Healthcare. Boca Raton: CRC Press.

Wolper, L. F. (2004). Health Care Administration: Planning, Implementing, and Managing Organized Delivery Systems. Burlington, MA: Jones & Bartlett Learning.

Young, R. (2012). American Healthcare: How the Healthcare Industry’s Scare Tactics Have Screwed Up Our Economy – and Our Future. New York: BookBaby.

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