Healthcare organizations earn revenue through different means. Examples include; payment from provision of medical and non-medical services, donations and grants from persons, organizations and the government, and also from various forms of investments. Different factors affect the revenues generated from payments of medicinal and non-medicinal services. They include; the nature of medical services provided to patients, volume of outpatient procedures and the costs of such services. The main sources of revenue are as follows:
- Medicare
Medicare is a wellness program whose management lies with the Centers or Medicare and Medicaid Services. The program majorly avails healthcare services to individuals with ages of 65 and above. It also provides services to disabled individuals under 65 years of age and also those with permanent kidney failures. The main disadvantage of this form of revenue to healthcare organizations is that it does not cover all the medical healthcare costs of most long-term services offered.
Managed Medicare
Managed Medicare is a program that involves contracts between CMC and private companies to offer Medicare benefits to subscribers. The advantage of this type of revenue source is the use of structured plans that creates different enrollments hence several types of revenue sources. The advantage is that this is an easy source of revenue for healthcare organizations. The disadvantage is that the declining trend in reimbursing rates of Medicare has the consequence of substantial financial affliction on healthcare organizations.
- Medicaid
Medicaid is a form of revenue source programs financed by the state. The advantage of this source of revenue is that healthcare organizations with high numbers of Medicaid patients collect high revenues. The collection process of such revenues is also fast. The disadvantage is that healthcare organizations encounter grim financial pressures due to uncompensated care, bad debts, and payment cuts.
- Managed Medicaid
With this program, the government contracts with different companies to enable registration of patients, administration of care services and arbitration of claims. The disadvantage of this type of revenue source to healthcare institutions is that the government dictates the terms and conditions including financial responsibilities. The economy is also likely to lead to a decrease of related premium payments consequently reducing the revenue. The bright side, however, is that the government restrictions cause more people to subscribe for such services creating a stable form of revenue for the healthcare organizations.
- Managed care and other insurers
Such form of revenue involves the healthcare organization offering discounts to consumer groups of healthcare services. The healthcare organization receives reimbursements from managed care companies and insurers. There’s usually a contract term defined for such arrangements with some contracts extending for up to three years. The main advantage of this source of revenue is that there is usually an increase of revenues received from payments by managed care companies. However, there is some form of uncertainty of such revenues continuing in the future.
- Uninsured
This form of revenue relates to patients with no insurance who gain admission through emergency rooms. Every healthcare organization must properly screen patients admitted through emergency rooms so as to stabilize their conditions or effect transfers to relevant healthcare providers. Such an obligation is enforceable regardless of the patient’s ability to afford the services. The advantage is that reimbursements of the costs are available as per the law. The disadvantage with this source of revenue is that, with the law containing provisions for decreased number of uninsured individuals, financial revenue associated with such sources is minimal.
Healthcare costs
- Fixed costs: these costs remain the same irrespective of increases or decreases in volume. Examples include cost of purchasing equipment and rent.
- Variable costs: these are costs that rise or decline with increase or decrease in volume. Examples include cost of drugs and cost of fuel.
- Semi-Variable costs: these are costs that are part fixed and part variable. They also increase of decrease with changes in volume albeit at a slower rate. Examples include cost of remunerating employees on short-term contracts.
References
Annex 6b. (n.d.). Retrieved November 8, 2014, from http://www.who.int/hac/techguidance/tools/disrupted_sectors/module_06/en/index10.html
Baker, J., & Baker, R. (n.d.). Health care finance: Basic tools for nonfinancial managers (Fourth ed.).
E10vk. (n.d.). Retrieved November 8, 2014, from http://www.sec.gov/Archives/edgar/data/860730/000095012311015233/g25905e10vk.htm
