Managing rate adjustments by health care providers

Abstract

Health care managers must be prepared to assess the impact of changes in the environment that differ from the planning scenario used in developing the budget. Even though rate adjustments cannot now be made at frequent intervals for a variety of reasons like administrative actions, board policies and legal prohibitions, the effective administrator will be aware of the impact of infrequent adjustments. What we imply in this paper is that administrators must be able to assess the impact of cost and volume changes on the rate structure more frequently than once a year if timely decisions on rate adjustments are to be made. The model developed here offers a tool to aid decision makers in this task.