Outline some considerations that an organization must address when negotiating a risk contract.
Some considerations that must be taken into account during any part of the negotiation process include: the overall impact that this will have on revenues, possible effects that this can have on the business model, the downside of entering these kinds of agreements and the overall benefits that can be realized for both organizations. These different elements are important, because they are showing how there are possible benefits and drawbacks from these kinds of contracts. As a result, an approach must be taken that will reduce the risks, while at the same time creating win-win situations for all parties. ("Celebrating a Decade of Making Communities Healthier," 2009)
Describe ways to reduce the financial risks involved in a risk contracting
Two possible ways that will reduce the underlying hazards for risk contracting is to: ensure that no agreement will result in financial losses and having provisions that allow for renegotiations. As far as ensuring that no contract is resulting in financial losses, this means making certain that the long-term benefits will: help to increase the bottom line of the company. Having provisions that allow for renegotiation will help to prevent Life Point from: entering agreements that could result in losses. As this will help executives to renegotiate the terms of the agreement (if this kind of situations takes place). These different elements are important, because they are showing how using them, in conjunction with one another can help to reduce the overall amounts of...
("Celebrating a Decade of Making Communities Healthier," 2009)
Clearly, the strategy that has been utilized by Life Point Hospitals (focusing on growing their revenues from risk contracting) has proven to be effective at helping the company increase their overall revenues. While at the same time, this strategy has exposed them to possible losses from these agreements. As they are based upon: the government and insurance companies splitting the risks with the hospital. However, due to the fact that health care costs have been increasing, means that this model can be brought into question. Reason why, is because if this trends continues in the future, these organizations will try to pass more of the costs on to: the hospital or the patient. Once this takes place, it means that the possibility of losses increases dramatically from these programs. As a result, management must embrace a strategy that will mitigate this impact as much as possible.
Bibliography
Celebrating a Decade of Making Communities Healthier. (2009). Life Point Hospitals. Retrieved from: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDEwMDQ1fENoaWxkSUQ9NDIwMDI1fFR5cGU9MQ==&t=1
http://www.physiciansnews.com/law/806saxton.html
Life Point Hospitals. (2011). Yahoo Finance. Retrieved from: http://finance.yahoo.com/q?s=lpnt&ql=1
Draper, D. (2002). Risk Contracting. Academy for Health Services Research 19 (5)
Khan, a. (2010). Health Care Costs Keep Rising. ABC News. Retrieved from: http://abcnews.go.com/Politics/HealthCare/health-care-costs-biggest-drivers/story?id=10044091
