Inflation in the Healthcare System

Inflation in the HealthcareSystem

Inflationin the Healthcare System

The operating margin is avital financial ratio that any healthcare administrator shouldconsider creating a trend for it (Callahan, 2008). This rationaleindicates the institution’s profitability from its operations,which include the decisions related to investment and depreciation.Monitoring the operating margin may help the healthcare administratorto gain insight on vital financial issues such as depreciationexpense and interest gained by the organization. This helps indeciding which policies to adopt in making the organization moreprofitable or which costs to avert in evading bankruptcy.

In the United State ofAmerica, inflation in the healthcare sector is currently increasingat the rate of 7% per annum, which may cause bankruptcy in the systemwithin nine years if the rates remain the same. In addition tobankruptcy, this inflation may also increase the annual healthcarecosts to around 4 trillion dollars as opposed to the current 2.1trillion dollars per annum.

This increase in levels ofinflation is driven by increase in the use of expensive technology inthe healthcare system among other factors such as inefficiency andwaste control costs. However, use of this technology cannot beeliminated, as it is relevant to the service delivery of the system(Callahan, 2008). Therefore, the government and other stakeholdersneed to find another solution.

Universal care may be asolution for reducing the rate of inflation. This system has workedin European countries such as Britain. It involves the governmentcontrolling hospital expenditures, price control for drugs andservices among other strategies (Callahan 2008). In adopting theUniversal healthcare system, the British maintain the rising inannual costs within the range of 3-4% and a quality healthcareservice for all.

Reference

Callahan,D. (2008). health care costs and medical technology. From Birth toDeath and Bench to Clinic: The Hastings Center Bioethics BriefingBook for Journalists, Policymakers, and Campaigns. Garrison, NY: TheHastings Center, 79-82.