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Hospitals Revenue Sources and Management
Revenue Sources
Health care organizations operate in an environment requiring an intricate system of financing. Hospitals generate revenue from both private and public sources thereby ensuring that health care services are being delivered to communities in an efficient manner. The majority of revenues for the provision of medical services comes from various government programs (Sullivan, 2015). The money that a hospital receives for the services it provides is called operating revenue. Other sources of hospital funding are research grants and donations. Medicare and Medicaid are government sponsored programs that allow the generation of hospital revenues that are being publically funded (Sullivan, 2015).
Medicare is being covered by the taxes that come from the federal government as well as employees and employers. Medicaid is entirely paid by taxes collected on the federal and state levels (Sullivan, 2015). Another source of operating revenue for health care organizations comes from private payers like health insurance paid by employers, individually purchased insurance and direct payments. The model of private health care coverage allows paying only a share of medical costs sharing them with other people who are not currently being beneficiaries of their plans (Sullivan, 2015).
The provision of health care has been governed by the revenue cycle that has been focused on the fee-for-service payment arrangements for many years (Sullivan, 2015). This model has allowed the reimbursement of health care practitioners for the services they provide for their patients. It has also made possible to control the amount of medical services and their absolute necessity. However, in response to the rising costs of health care, new revenue models have been developed (Sullivan, 2015).
The precipitous rise in health care delivery costs has led to the creation of value-based reimbursements systems (Sullivan, 2015). They allow a provision of health care services on a per-member-per-month basis. Other value-based reimbursement models are built around pay case rates that allow charging different prices for pre-specified conditions or treatments (Sullivan, 2015). It is necessary to realize that reliable sources of revenue allow health care organizations constantly increase the quality of their services. It is especially important in the case of reduction of the door-to-balloon (D2B) time in STEMI patients considering that it should be as short as possible (Peterson, Syndergaard, Bowler, & Doxey, 2012).
Rates
Health care providers negotiate payment rates with multiple parties simultaneously thereby significantly driving up administrative costs. According to a recent study, if a trend of ever-increasing health care spending is going to continue, it is projected to exceed the economic growth of the country and amount to a quarter of its gross domestic product (GDP) by 2037 (Emanuel et al., 2012). Health care spending on the federal level is estimated to reach 40 percent of the total federal budget by the same year (Emanuel et al., 2012). Taking into consideration that baby boomers are reaching an age that is associated with higher need in medical services, it is reasonable to assume that new Medicare beneficiaries will lead to the increase in federal health care spending (Emanuel et al., 2012).
Therefore, it is necessary to address the issue of excessive medical costs for both public and private payers as well as restructure current payment system that produces enormous administrative expenses because of its fragmentation (Emanuel et al., 2012). Furthermore, it leads to the providers of medical services concentrating the economic power that allows them to drive up health care costs. The fragmented nature of the existing system significantly complicates negotiation of payment rates by moving costs from public entities to private payers and shifting them from large to small insurance companies. Therefore, it can be argued that existing payment system has to be changed to more efficient one (Emanuel et al., 2012).
The self-regulating model can allow payers from the public and private sector negotiate their payment rates directly. Such a model could ensure that rates are binding on all payers and providers in a state (Emanuel et al., 2012, p. 950). This model would also make sure that growth of health care spending is corresponding with the wage growth. It could be achieved through the creation of an independent regulatory body that would consist of both payers and providers of health care services who would be responsible for establishing a spending target. According to Emanuel et al., this model of health care rates regulation could be implemented with the help of the federal government that could award financial incentives to states enacting it (Emanuel et al., 2012).
A recent study shows that median D2B time for patients reported by hospitals to the Centers for Medicare & Medicaid Services has reduced by 32 minutes over the period of 5 years (Krumholz et al., 2011, p. 1039). Hospital median D2B time has also declined by 33 minutes over the same period (Krumholz et al., 2011, p. 1039). Therefore, it can be argued that regardless of what approach is taken to the process of rates negotiation, it should not interfere with this downward trend.
Challenges
Managing and predicting revenues can be a challenging task for changing models of health care provision. According to the Moodys report the increase in operating revenue rates of the health care sector slowed to only 3.9 percent in 2013 (Holahan & McMorrow, 2012). The rise in expenses has not been matched by the growth of revenues for two years in a row thereby making this sector of the economy not profitable and difficult to predict. The changes associated with enactment of Affordable Care Act have made it increasingly hard for hospitals to forecast future revenues and set appropriate strategies (Holahan & McMorrow, 2012).
The same can be said about health care organizations not being able to predict whether states would enroll in Medicaid considering the low levels of participation in the program (Holahan & McMorrow, 2012). The changing models of revenue management and challenges associated with them have been discussed by numerous scholars at length. Gupta and Denton were concerned with the multiple functions of patents choice: provider, date and time (Ratcliffe, Gilland, & Marucheck, 2011). Gupta and Wang pointed to the fact that differentiated prices do not serve the function of controlling the access to the capacity of a health care organization (Ratcliffe et al., 2011).
Being able to forecast future revenues might be essential in the process of developing PCI programs. According to a recent study, only 25 percent of almost 5,000 hospitals in the country have those programs (Wang et al., 2011). The number of hospitals that are able to provide round-the-clock availability is even lower (Wang et al., 2011). Furthermore, information provided by the National Cardiovascular Data Registry reveals that only around seven percent of STEMI patients received treatment in less than 90 minutes (Wang et al., 2011).
References
Emanuel, E., Tanden, N., Altman, S., Armstrong, S., Berwick, D., Brantes, F.,&Spiro, J.D. (2012). A systemic approach to containing health care spending. New England Journal of Medicine, 367(10), 949-954.
Holahan, J., & McMorrow, S. (2012). Medicare and Medicaid spending trends and the deficit debate. New England Journal of Medicine, 367(5), 393-395.
Krumholz, H., Herrin, J., Miller, L., Drye, E., Ling, S., Han, L.,&Curtis, J. (2011). Improvements in door-to-balloon time in the United States, 2005 to 2010. Circulation, 124(9), 1038-1045.
Peterson, M., Syndergaard, T., Bowler, J., & Doxey, R. (2012). A systematic review of factors predicting door to balloon time in ST-segment elevation myocardial infarction treated with percutaneous intervention. International Journal of Cardiology, 157(1), 8-23.
Ratcliffe, A., Gilland, W., & Marucheck, A. (2011). Revenue management for outpatient appointments: joint capacity control and overbooking with class-dependent no-shows. Flexible Services and Manufacturing Journal, 24(4), 516-548.
Sullivan, M. (2015). Overhauling clinical documentation: the changing landscape of the health care revenue cycle. Journal of Health Care Compliance, 21(2), 29-64.
Wang, T., Peterson, E., Ou, F., Nallamothu, B., Rumsfeld, J., & Roe, M. (2011). Door-to-balloon times for patients with ST-segment elevation myocardial infarction requiring interhospital transfer for primary percutaneous coronary intervention: a report from the National Cardiovascular Data Registry. American Heart Journal, 161(1), 76-83.
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