how does legal and regulatory issues shape and define good financial management of a health care organization. Solution Answer Legal and regulatory issues shape and define good financial management of a health care organization in following manner. Entry into the health services industry is heavily regulated by licensure, certificate of need, rate setting, and review programs. Certificate of need (CON) law is aimed to control increasing healthcare costs where States conduct healthcare planning. Health services providers required to obtain approval for new health care projects based on social needs that either relate to particular class of services or exceed a predefined cost threshold. It is aimed at control capital expenditures. Government has also promoted cost controls through competition in health care industry. Many states have enacted cost containment programs. The primary tool for cost containment programs is the rate review system. There are three types of systems (1) Detailed budget reviews with approval or setting of rates (2) Formula methods which use inflation formulas to set target rates (3) Negotiated rates with decision making between the health services provider and the rate setter. Some states using rate review systems have reduced the rate of increase in healthcare costs below the national average. Professional liability imposed by legal system on health services providers is aimed at reducing malpractice suits and costs related to it..

1. how does legal and regulatory issues shape and define good financial management of a health
care organization.
Solution
Answer
Legal and regulatory issues shape and define good financial management of a health care
organization in following manner.
Entry into the health services industry is heavily regulated by licensure, certificate of need, rate
setting, and review programs.
Certificate of need (CON) law is aimed to control increasing healthcare costs where States
conduct healthcare planning. Health services providers required to obtain approval for new
health care projects based on social needs that either relate to particular class of services or
exceed a predefined cost threshold. It is aimed at control capital expenditures. Government has
also promoted cost controls through competition in health care industry.
Many states have enacted cost containment programs. The primary tool for cost containment
programs is the rate review system. There are three types of systems
(1) Detailed budget reviews with approval or setting of rates
(2) Formula methods which use inflation formulas to set target rates
(3) Negotiated rates with decision making between the health services provider and the rate
setter.
Some states using rate review systems have reduced the rate of increase in healthcare costs
below the national average.
Professional liability imposed by legal system on health services providers is aimed at reducing
malpractice suits and costs related to it.