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Health Care System: Cost Control Policy

The desire of public services and heads of healthcare institutions to control costs is a natural desire since the ability to track spending allows efficiently allocating resources and assessing development prospects. That is why it is essential to find a suitable strategy that can help to make the process of controlling spending easier. One of such policies is a special Michigan program aimed at calculating those financial resources that are spent in the process of providing medical services. The evaluation of one of these clinics’ work, which adheres to the program terms, will help to calculate the effectiveness of this policy and draw useful conclusions with a view to the possible use of the strategy in other healthcare institutions.

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Details of the Policy

The main essence of the Michigan policy is that traditional payments for standard medical services are taken into account, but the heads of departments also consider additional incentive costs in order to encourage doctors. According to Lemak et al. (2015), this method of promotion is called a special fee for the value of employees who contribute to the development of a specific medical clinic and thereby bring in profit.

Therefore, the calculation of expenses for the awarding of particularly important specialists makes it possible to envisage the quality of the services provided and, at the same time, helps to reduce the costs of unplanned increases in salaries. Employees’ dissatisfaction is excluded, and the management does not need to reckon with possible losses.

The policy was put in place in 2008, and since then, as Lemak et al. (2015) remark, a number of physicians have become the members of the program. The strategy was developed for Michigan’s healthcare system and did not spread across the country. The central object that the policy addresses is talented and qualified doctors. Accounting for the costs spent on payment of bonuses, as the leaders of local clinics themselves note, allows them to plan the budget and not to worry that any unpleasant and unexpected expenses will be required. In case of non-compliance with the requirements of the strategy, the organization will have to face unforeseen costs caused by insufficiently effective work of the personnel.

With regard to the impact at the level of units, the productivity of employees may decrease because of the improper allocation of budget funds. In case of non-observance of the policy provisions at the individual level, the management of the clinics will most likely encounter the discontent of subordinates and their reluctance to fulfill immediate duties. Therefore, the conditions for the distribution of funds play a rather important role both for leaders and employees.

Impact on Fiscal Aspects

Due to the fact that all financial procedures are subject to tax reporting, the management does not face the need to explain the incomes of doctors. According to Song et al. (2014), many medical specialists quite often become members of various accounting unions with a view to controlling their wages and at the same time organizations’ costs. Nevertheless, the provisions of the policy prescribe all the payments in accordance with the tax laws, and there are no problems with this aspect.

Impact on the Quality of Patient Care

Since one of the goals of the Michigan strategy is to increase doctors’ motivation, the quality of patient care has clearly improved due to the policy. The staff has begun to feel the interest of the leadership in the quality provision of medical services. Relevant remuneration is a rather effective tool for encouraging medical workers, which, in its turn, has a positive effect on the quality of treatment.

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The motives of leadership are quite understandable: the better the care is, the more grateful patients and, accordingly, the praise from the top management are (Bradley et al., 2016). If it is about what was the original goal, cost reduction is possible a key position since a competent allocation of expenses has always been considered an indicator of any organization’s success. However, improving the quality of care has become a natural result of the policy emergence and has helped to significantly increase the interest of physicians in high labor productivity.

Unintended Consequences

In addition to a direct influence on the work of medical clinics, the policy of Michigan can also have a secondary impact, for instance, on the organizational culture, thereby encouraging employees to efficiently perform their duties. From the point of view of the secondary effect on separate units, the strategy can unite the team and improve the microclimate in the collective. The impact on employees is certainly positive since all the workers are sufficiently motivated.

The effect on patients is obvious; however, in addition to improving the quality of treatment, the consequences of attracting more people to certain clinics may manifest. The policy hardly needs any revision; nevertheless, additional motivation of junior medical personnel could also have a significant contribution to improving care.

Alternatives to the Policy

Perhaps the chosen policy is not the best but an alternative way to solve the problem of cost control. As an additional option, a special accounting system could be introduced. Despite the fact that such a method is unlikely to increase the motivation of employees, the management will be able to know exactly where and for what purpose certain funds were spent. It will help to draw appropriate conclusions and correctly plan the budget.


Thus, evaluating the effectiveness of a particular healthcare policy helps to understand how the management, staff, and patients assess it. Certain consequences for different spheres can be observed, including secondary ones. An alternative for such a strategy is statistical analysis of expenditures.


Bradley, E. H., Canavan, M., Rogan, E., Talbert-Slagle, K., Ndumele, C., Taylor, L., & Curry, L. A. (2016). Variation in health outcomes: The role of spending on social services, public health, and health care, 2000-09. Health Affairs, 35(5), 760-768.

Lemak, C. H., Nahra, T. A., Cohen, G. R., Erb, N. D., Paustian, M. L., Share, D., & Hirth, R. A. (2015). Michigan’s fee-for-value physician incentive program reduces spending and improves quality in primary care. Health Affairs, 34(4), 645-652.

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Song, Z., Rose, S., Safran, D. G., Landon, B. E., Day, M. P., & Chernew, M. E. (2014). Changes in health care spending and quality 4 years into global payment. New England Journal of Medicine, 371(18), 1704-1714.

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