Economic Relationship Between Payer Mix and Changing Demographics
Health economics is an applied science that evaluates and makes health care more affordable and equitable. The economy forms interactions between health coverage and costs that affect healthcare organizations’ operations. In our rehabilitation center, demographic changes have caused a shift in our cash flows, making it imperative to study economic interaction (Mardani et al., 2019). The reduction in our primary market, the elderly persons, has reduced our cash flow, negatively impacting our profit margins.
The remedy to the current cost crisis is a new way to accurately estimate and compare costs with expected results. Our costs are 43% of income, and the tax rate is 20.7%, leaving the net profit percentage at 36.3%. The dwindling profit margin (previous year 38.9%) means our financial viability is reducing. With global economic shrinkage, profitability will be reduced further. Therefore, radical measures to improve productivity and run lean must be employed.
Proposed Solutions to Address Demographic Shifts
The Six Sigma approach will help the organization cut costs by a projected 5% p.a. to procure more competitive returns. This will enable us to maintain a competitive edge by enhancing customer satisfaction through streamlining procedures (Niñerola et al., 2020). This increase in efficiency leads to more efficient working hours due to less downtime and turnaround times, improving productivity per dollar. Diversification of the target market is meant to capture the growing pediatric sector (22.7%), which has grown by over 6% in the last decade (Sisko et al., 2019). This will necessitate aggressive marketing and the introduction of new services, such as physical therapy.
Relevant Economic Theories in Service Provision
The economic theory utilized is supply and demand, as it applies to us in that the demographic shift has caused a decrease in demand. The supply is in excess, and to counter this without losing competitiveness, we need to diversify our supply side to increase demand, leading to stability (Mardani et al., 2019). In conclusion, implementing these strategies will improve our profitability and market viability through adaptation to the changes. Responding to these shifts through lean and efficiency improvement offers short-term and long-term growth prospects.
References
Niñerola, A., Sánchez-Rebull, M. V., & Hernández-Lara, A. B. (2020). Quality improvement in healthcare: Six Sigma systematic review. Health Policy, 124(4), 438-445.
Mardani, A., Hooker, R. E., Ozkul, S., Yifan, S., Nilashi, M., Sabzi, H. Z., & Fei, G. C. (2019). Application of decision making and fuzzy sets theory to evaluate the healthcare and medical problems: a review of three decades of research with recent developments. Expert Systems with Applications, 137, 202-231.
Sisko, A. M., Keehan, S. P., Poisal, J. A., Cuckler, G. A., Smith, S. D., Madison, A. J.,… & Hardesty, J. C. (2019). National health expenditure projections, 2018–27: economic and demographic trends drive spending and enrollment growth. Health Affairs, 38(3), 491-501.