The Medicare Cuts Will Significantly Impact Krona’s Revenues. The Following Figures Would Explain The Impact: Essays Example

Based on media reports of impending cutting of health care costs through reduction of allocated benefits, minimization of payment to health care providers, and tightening of eligibility, as per your request, I am hereby presenting a summary of capitation to be shared to the members of the board of directors.

Impact that the Medicaid cuts will have on Krona’s Revenue

Revenues from Medicaid 30% of Krona’s annual revenue
Last year’s revenue $20,000,000
Amount of revenue from Medicaid $6,000,000
Expected increase in revenue 10%
Expected revenue in dollar amount $22,000,000
Expected revenue from Medicaid $6,600,000
Effect of cut of fees paid to provider (3%) $198,000
Expected revenue after cut of fees $6,402,000
Possible Issues Surrounding Next Year’s Forecasting
next year’s forecasting. One of the perceived issues is a decline in accepting Medicaid patients
. In previous health care cost cuts, reports revealed that “9,500 doctors who had previously accepted Medicaid patients refused to do so” (Matthews, 2013, par. 5). Other potential impacts of Medicaid cuts include: benefit and eligibility cuts, enrollment and procedural barriers, increases in cost sharing and restrictions in prescription drugs, and downstream effects . The downstream effects are explicitly identified as follows: “increases in the number of Emergency Room visits for primary care needs or needs that became acute due to lack of access to primary care, increased preventable hospitalizations, reduced participation in Medicaid by other community providers, and diversion of scarce resources to make-up for losses from the Medicaid program” .

Provide an Explanation of Capitation

Capitation is defined as “a form of healthcare payment system. In a capitation model, a provider or hospital is paid by the insurer (or other payer) an amount per patient during a period of time” . In the current situation, the state cuts in Medicaid mean a minimization in the allocated amount paid to Krona. As such, the capitation would have the following effect:
Assuming that the number of Medicaid patients who benefitted from Krona’s health care services last year were 10,000, Medicaid’s payment per patient is equal to $600 per patient. With the Medicaid cut, the payment per patient (assuming a 10% increase in forecasted revenue) would only be $582. As such, significant adjustments should be made to address health care requirements, while sustaining the needed level and quality of health care.

Challenges, Benefits, and Risks in Utilizing Capitation

The challenges and risks in utilizing capitation were already noted from the expected impact of Medicaid cuts noted by Wilensky & McDermott (2005). The benefits would be designing effective and innovative strategies to accommodate the high quality of health care given a minimized reduction of fees to Krona. Likewise, Krona would have to streamline its operations and think of cost minimization strategies which would not adversely affect the quality in the delivery of health care.
The links to the cited references are indicated in the attached page. For your information and guidance.

References

Matthews, M. (2013). Doctors Face A 24% Pay Cut In Both Medicare And Medicaid Reimbursements. Retrieved January 10, 2015, from Forbes: http://www.forbes.com/sites/merrillmatthews/2013/12/02/doctors-facing-a-24-pay-cut-in-both-medicare-and-medicaid-reimbursements/
Torrey, T. (2014, April 28). Capitation - the Definition of Capitation. Retrieved January 11, 2015, from patients.about.com: http://patients.about.com/od/glossary/g/Capitation-The-Definition-Of-Capitation.htm
Wilensky, S., & McDermott, M. (2005, May). Unkindest Cuts: The Impact of State Medicaid Reductions on Health Centers and Their Patients. Retrieved January 11, 2015, from National Associtation of Community Health Care Centers, Inc.: https://www.nachc.com/client/documents/issues-advocacy/state-issues/add-medicaid-info/statepolicyreport5.pdf