Chapter 2: The Financial Environment

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Chapter 2: The Financial Environment by Mind Map: Chapter 2: The Financial Environment

1. Business organization

1.1. Proprietorship

1.2. Partnership

1.3. Corporation

1.4. Limited partnerships

1.4.1. Limited Liability Partnership (LLP)

1.4.2. Limited Liability Company (LLC)

1.4.3. Professional Corporation (PC) or Professional Association (PA)

1.5. Alternative forms of ownership

1.5.1. Publicly held copmanies

1.5.2. Privately held (closely held) companies

1.6. Not-for-profit Corporations

1.6.1. any corporation, community chest, fund, or foundation that is organized and operated exclusively for religious, charitable, scientific, public safety, literary, or educational purposes

1.6.2. the promotion of health is commonly considered a charitable activity, a corporation that provides healthcare services can qualify for tax-exempt status, provided that it meets other requirements

1.6.3. What happens if the corporation has residual earning?

1.6.4. Governed by a board of trustees

1.6.5. Exempt from tax (both property and income taxes)

1.6.6. Individual contributions to not-for-profit can be deducted from taxable income

1.6.7. Hospitals Congressional push to require hospitals to provide minimum levels of care to the indigent to retain tax-exempt status Giving discounts to unisured patients fo limited means Establishing a common definition of community benefits which encompass the full range of services provided tot he population served Improving transparency, or the ability of outsiders to understand a buisness's governance structure and policies, including executive compenstation Ex. Texas: Four Tests Ohio: Payments in Lieu of Taxes (PILOTS)

2. Taxes

2.1. Taxes reduce usable cash flow

2.2. AT=BT-(T x BT), = BT x (1-T)

2.3. Corporate taxes are paid on earnings before dividends are distributed, so corporate income is subject to double taxation, once at the corporate level and gain when stockholders receive dividends or when they make a profit upon sale of the stock


3.1. A large proportion of the health services industry receives it revenues not from patients, but from insurers known collectively as third-party payers.

3.2. I wonder if Medicare/Medicaid account for increased medical costs?

3.3. TRICARE is like an HMO

4. Third-Party Payers (Insurers)

4.1. Private insurance

4.1.1. Blue Cross/ Blue Shield

4.1.2. Commercial insurers Issued by life insurance companies and companies formed exclusively to write health insurance Ex. Aetna UnitedHealth Group Humana Can be organized as either stock or mutual companies

4.1.3. Self-insurers

4.2. Public programs

4.2.1. Ex. VA DoD TRICARE Medicare Part A Part B Part C (Medicare Advantage Plans) Part D Medicaid

5. Managed Care Plans

5.1. Integrated delivery systems (IDS)

5.2. Health maintenance organization (HMO)

5.2.1. Gatekeeper physicians

5.2.2. Utilization reviews

5.2.3. Discounted rate schedules

5.2.4. Payment methods transfer some risk to the provider

5.3. Preferred Provider Organization (PPO)

5.3.1. Can use any provider or provider panel physicians

5.3.2. Less likely to provide preventive services

5.4. Exclusive Provider Organizations (EPO)

5.5. Point of Service (POS)

6. Reimbursement Methods

6.1. Fee-for-Service

6.1.1. Cost-based reimbursement

6.1.2. Charge-based reimbursement

6.1.3. Prospective payment per procedure perdiagnosis per day (per diem) bundled (global) pricing

6.2. Capitation