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Notes - Chapter 4
Overview
Understand how receiving revenue for services is a revenue stream
Recognize contractual allowances and discounts and their impact on revenue
Understand the differences in sources of healthcare revenue
See how to group revenue for planning and control
Revenues (Inflows)
Revenue represents amounts earned by an organization. It is the expected cash inflows an organization can expect from providing service to patients and residents. Revenue flows into an organization and this is referred to as the Revenue Stream.
Generally defined as the value of services rendered expressed at the facility’s full established rates.
Revenue can be received before or after the service is provided. The most common method is payment received after the service has been delivered. There are two different types of payment after services are delivered, fee for service and discounted fee for service.
Fee for Service – this is the true traditional method of receiving revenue. The provider of services is paid based on the services provided.
Discounted Fee for Service – in this case, a contracted discount is agreed upon.
Traditional payment methods have begun to give way to payments made prior to service delivered. This method, Predetermined per person payment, is when payment is received prior to the service being performed. The rate is an agreed upon rate between the service provider and the health plan. The plan pays the provider based on the number of people in the plan times an agreed upon rate. The rates are based on the populations being served. In other words, if the plan is geared towards a geriatric population, services that the population would be required would be included in the rate paid to the provider. It’s the providers responsibility to provide those services within the agreed upon rates.
Contractual Allowances and Other Deductions from Revenue
Contractual Allowances are the difference between the full established rate and the agreed upon contractual rate that will be paid. If a hospital has a full established rate of $100 for a particular procedure but it has negotiated a lower rate with a managed care plan of $90 per procedure, the difference is the contractual allowance.
Sources of HealthCare Revenue
Governmental Sources
Medicare Program
Title XVIII of the Social Security Act
Established in 1965
Intended to complement other benefits such as disability
Currently has four parts:
Part A, hospital insurance, funded by payroll tax, covers inpatient hospital stays
Part B, supplementary medical insurance is voluntary, funded by insurance premiums withheld from Social Security payments and supplemented by federal general revenue funds
Medicare Claims for A and B are processed by fiscal agents who act on behalf of the federal government
Part C is Medicare Advantage, consists of managed care plans, private fee for service plans and must mirror coverage of traditional Medicare plan
Part D, prescription drug benefit effective as of 1/1/2006. Voluntary program that requires payment of a separate premium and contains cost sharing provisions.
Medicaid Program
Title XIX of the Social Security Act
Medicaid legislation established federal and state matching entitlement program in 1965
Intended to provide medical assistance to eligible needy individuals and families
Program is state specific, state has the power to set eligibility, service restrictions and payment rates.
Allocation of funding is 50% federal, 25% state and 25% local.
Program is the largest US Government program providing funds for medical and health related services for the poor.
Other Programs
Managed Care Sources
Began to appear in healthcare models in the 1970’s. Definition is a means of providing healthcare services within a network of healthcare providers. The responsibility to manage and provide high quality and cost-effective health care is delegated to this defined network of providers. All healthcare services are
Types of Plans
HMO – members prepay a fixed monthly amount and in return receive comprehensive health services. Must use the providers that are in the network. If not, member must pay all or a large part of the cost.
PPO – preferred provider organization consists of a group of providers, called a panel. The Panel is an approved group of providers, including physicians and hospitals. If a member does not use the providers in the panel, they must pay a higher deductible or coinsurance.
Service Lines
Hospitals
Long term Care (Nursing Homes)
Home Care
Physician Groups
