Academic Master

Business and Finance, Human Resource And Management

Explain the Flow of Funds within an Organization including Private Pay and Third Party Reimbursement

The 21st century healthcare sector is characterized with a number of health reforms that are meant to ensure that every person has access to good health and at a cheaper cost. This has led to development of insurance companies or third party payers that have replaced the private pay almost completely as it is considered expensive than the third party reimbursements. But the third party payment has also come with other challenges like increased fraud and inefficiencies. This paper will explain the two modes of payment that is the private pay and the third party pay, how to prevent the increased fraud due to the third party reimbursement. In addition to that, the paper will discuss the challenges the consumer face in private insurant and finally how the healthcare facilities can empower their consumers or patients so as to achieve the desired outcomes.

Funds flow is the net of all cash outflows and inflows within an organization. This cash movements are recorded in the funds flow accounts statement of various financial assets. This measurements are done monthly or in a quarterly basis. The funds flow statement of an organization reports the changes in an entity’s net working capital between the beginning and end of fiscal period. The net working capital is the organization’s current assets minus its current liabilities. A flow focuses on the cash movements only reflecting on the net movements after examining the net inflows and outflows of cash in the organization (Patel et al, 2014). This monetary movement can include payment to investors and payments made by the organization when buying goods and services. For our case the money spent to buy the hospital supplies and pay the hospital bills.

In the hospital set up, the funds inflows come from the private pay and the third party reimbursement. Private pay means the case when a patient chooses to pay the medical bills by him or herself rather than using a health insurance cover. This form of payment is the most accepted as it brings in direct cash to the hospital. Third party reimbursement is the case when the hospital bills and costs are covered by a third party mostly a health insurance where the patient is covered. Examples of health insurance companies include the Blue shield or the Medicaid. Third part reimbursements can be in full or in part depending on the subscriber’s contributions to his or her cover (Casto and Forrestal, 2013).

How can you prevent abuses and inefficiencies in third party payments?

Third party payments by insurance companies are filled with inappropriate payments and inefficiencies due to errors abuse and fraud. The health systems have and are trying to develop strategies to stop the high scale of fraud and inefficiencies witnessed when it comes to third party payments. There are a number of verified methods that can be used to stop the developing of the frauds and inefficiencies experienced in the third party payments. Among them is the knowledge discovery from database an approach that combines the statistical methods and automated methods to extract a subscriber’s information for further assessment. This concept is referred to data mining (Byrd, Powell, and Smith, 2013). This helps insurance companies ascertain if the payment they are making is a deception or the truth.

Another approach that can be used to curb inefficiencies and abuse is the stepwise approach that prevents wastage of resources. This will not only solve the root causes of how claims become problematic but also improve the cost management and also increase efficiency in delivering care and the third party payment programs. The coordination between the healthcare providers and the payer will be tightened thus limiting any chance of fraud or inefficiencies (Joudaki et al, 2016).

Briefly define the flow of funds in the Care Organization.

Funds flow in medicine continuum refers to the remuneration to reflect the value agreed value of a transaction. This term can be used to refer to any arrangements between partnering organizations (Cleverley, 2017). This arrangements include an accountable care model in which cost and quality incentives are shared among hospitals and physicians, allocation of bundled payments and many more arrangements that have monetary value in them. As the number of partnerships increase, a need for an agreed upon approach to promote funds flow is developed (Ginter, Duncan, and Swayne, 2018). This approach helps define and organize individual agreements between parties. Therefore, an effective funds flow framework addresses not only the partner organization challenges but also potential changes within the organization. This frameworks are unique to every organization and partnerships that apply them.

Challenges faced by consumers who are enrolled in private insurance

Consumers enrolled in private insurance face various challenges. Most private payers face losses of finance on the health insurance exchanges. These exchanges that came into being after the passage of the Affordable Care Act have failed to serve as an effective marketplace for private insurance payers. The ACA policies affect how payers act (Rosenbaum and Sommers, 2013). The policies governing the commercial exchange for commercial payers call for costly care from providers hence resulting in high financial losses for consumers.

Most consumers with private insurance coverage have little knowledge about what they bought. Coverage and denial procedures and policies benefit approximately 10% of their policyholders who have complicated medical needs. This coverage only favors the seniors and those requiring complex medical care (Pashchenko, and Porapakkarm, 2013). This has made most consumers to lose trust in their health insurer because the private coverage plan fails to satisfy their expectations.

Methods to use in consumer empowerment.

Patient engagement and consumer empowerment are key elements in healthcare markets that are seeking to produce better and quality outcomes. But most healthcare facilities have been struggling to find the best ways to engage and empower their patients. Most of them achieve engagement but they cannot achieve the desired outcomes if the engagement does not lead to positive behavior in patients and consumers. To achieve this outcomes, the healthcare have to:

  • Help consumers become more literate in the healthcare sector. They can do this through websites, blogs, wikis and many more platforms that can reach their consumers. This will help inform the consumers about their own health. Use of internet and the development of such apps as the health can also help educate the public about their health and the steps they can take to maintain their health (McGuckin, and Govednik, 2013).
  • Help the patients comprehend and retain the advice that they learn from the doctor’s or clinician’s office. Most people forget the information they learn when they go to hospital immediately they feel better. According to research, patients only retain 20 percent of what they are told by a doctor and that value reduces in older people and the sicker ones (McGuckin, and Govednik, 2013). To help such patients remember the post discharge instructions, healthcare facilities should come up with easy-to-use and easy-to-understand applications that could help the caregivers and also the patients understand and actively manage the patients thus improving on the outcomes.
  • Help consumers learn on how to formulate and frame questions during sessions and medical checkups (Hibbard and Greene, 2013). This will help in eliminating the cursory yes or no answers doctors receive from patients just because they don’t understand what they were asked. If providers develop an open ended questions that don’t require the yes/No answers, they might be able identify and address gaps in consumer understanding of diagnosis and treatment.
  • Finally, the healthcare facilities should design solutions with the consumer in mind. A good solution should give consumers more control over the management regarding their health. It should also be simple and easy to navigate (Hibbard and Greene, 2013). The solution must be readily and regular accessible and finally it should provide reliable actionable and accurate information.

In conclusion, it is evident that the 21st century is characterized with an increased rate of third party reimbursements. This is due to the healthcare acts that are meant to ensure that every citizen is covered and thus able to access quality health care at any time. But this come with my challenges like the increased fraud and inefficiencies in payment. But the application of data mining and stepwise approach can help in curbing the inefficiencies and fraud seen in the healthcare sector due to third party reimbursements. Finally, consumer empowerment is the key to the success of any organization. Therefore healthcare facilities have to ensure that their patients are empowered so as to achieve the desire outcomes.


Byrd, J., Powell, P., & Smith, D. (2013). Health care fraud: An introduction to a major cost issue.

Casto, A. B., & Forrestal, E. (2013). Principles of healthcare reimbursement. American Health Information Management Association.

Cleverley, W. O. (2017). Essentials of health care finance. Jones & Bartlett Learning.

Ginter, P. M., Duncan, J., & Swayne, L. E. (2018). The Strategic Management of Healthcare Organizations. John Wiley & Sons.

Hibbard, J. H., & Greene, J. (2013). What the evidence shows about patient activation: better health outcomes and care experiences; fewer data on costs. Health affairs32(2), 207-214.

Joudaki, H., Rashidian, A., Minaei-Bidgoli, B., Mahmoodi, M., Geraili, B., Nasiri, M., & Arab, M. (2016). Improving fraud and abuse detection in general physician claims: a data mining study. International journal of health policy and management5(3), 165.

McGuckin, M., & Govednik, J. (2013). Patient empowerment and hand hygiene, 1997–2012. Journal of Hospital Infection84(3), 191-199.

Pashchenko, S., & Porapakkarm, P. (2013). Quantitative analysis of health insurance reform: Separating regulation from redistribution. Review of Economic Dynamics16(3), 383-404.

Patel, N. J., Deshmukh, A., Pant, S., Singh, V., Patel, N., Arora, S. & Parikh, V. (2014). Trends of hospitalization for atrial fibrillation in the United States, 2000 through 2010: implications for healthcare planning. Circulation, CIRCULATIONAHA-114.

Rosenbaum, S., & Sommers, B. D. (2013). Using Medicaid to buy private health insurance—the great new experiment?. New England Journal of Medicine369(1), 7-9.



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