Introduction to Healthcare Finance equips healthcare leaders with fundamental finance tools and concepts necessary for effective collaboration with experts and managing organizations. In this course, you’ll explore healthcare pricing, investment valuation, and pharmaceutical research and development costing. You will consider the motivation, consequences, and valuation techniques essential to helping you make strategic decisions and engage in effective bargaining in healthcare mergers and acquisitions. Get an inside look at the variations and complexities of healthcare pricing, trade-offs between financial risk and performance incentives, and the bargaining processes vital to pricing strategies and organizational viability. Financial valuation techniques, such as net present value and internal rate of return, are explored alongside financial risk considerations and opportunity costs.
Overview
Syllabus
- An Introduction to Healthcare Pricing
- We introduce healthcare pricing this week. This is one of the most complex and important topics in healthcare. This week has four objectives. First, we introduce the variation and complexity of healthcare data. Second, we explore the bargaining process that drives pricing strategy and organization’s viability. Finally, we will discuss the role of government policies for healthcare pricing . Examples will focus on relationships between insurance and provider organizations, but the same concepts appear throughout the healthcare industry.
- Modeling Time, Risk, and Return to Value Investments
- This week we will introduce financial valuation techniques. We will begin by describing the roles of financial risk and the opportunity cost of time. These concepts are essential for valuing investments. We will focus on two specific techniques, net present value and the internal rate of return. These techniques are fundamental to corporate finance. With slight modifications, they can be used to solve a massive number of healthcare problems.
- Measuring The Cost of Pharmaceutical Research & Development (R&D)
- The cost of pharmaceutical Research & Development (R&D) is, arguably, the most controversial topic in healthcare finance and economics. We focus our discussion on DiMasi and colleagues’ 2016 study of pharmaceutical R&D costs. This is, essentially, an application of our discounted cash flow techniques. In addition to applying financial techniques, this example illustrates common challenges of deciding which cash flows are relevant and what is the right cost of capital.
- Financial Models of Mergers and Acquisitions (M&A)
- This week examines healthcare mergers and acquisitions. This is especially important given the massive and ongoing consolidation in the U.S. healthcare market. We will discuss merger motivations and their consequences for the cost and quality of healthcare. We will also examine valuation techniques for mergers. The process is, at one level, a straightforward financial model solved with discounted cash flow techniques. But we also demonstrate how these models serve as tools for strategic decision making and bargaining.
Taught by
Jeffrey McCullough
