Have you ever wondered where hospitals get their revenue from? Even more so non-profit hospitals and healthcare organization? Well, you are not lone. In this article, we will break down and discuss some common sources of hospital revenue in a healthcare organization and also some common ways that they can lose money and revenue.
Government aid is arguably one of the main sources of revenue in a healthcare organization and hospitals. The government of most countries provides aid and revenue to hospitals through subsidies and grants. The government also provides aid and funding directly from tax dollars and other wage deductions. There are other ways that governments (both federal and state) get and provide healthcare funding and it largely depends on the government and the political system it operates in. Sometimes, if there’s an increased need for revenue in the healthcare industry, the government funds this need by either borrowing or increasing taxes.
In as much as there are health insurance systems and payment structures put in place to help patients pay for care, there are a lot of patients who pay for their care directly and out of pocket. Many patients cover the cost of their care without the help of a third party such as insurance companies. When this happens, that payment becomes direct revenue for the healthcare organization. The amount of out-of-pocket and direct payment a healthcare organization gets also depends on their rates. Even though out of pocket payments is frowned upon by healthcare reform organizations, it still happens.
Sometimes healthcare organizations, medical facilities, and hospitals receive donations from both private individuals and corporations. Non-profit hospitals are largely the recipients of these kinds of donations. Usually, these kinds of private donations are sort after by the hospitals who employ lobbyists and marketers to help them seek donations from organizations and prominently rich individuals. Private donations as a source of revenue are largely unpredictable as it is usually a hit or miss. Hospitals should not rely on this as their only source of revenue.
Ways to Reduce and Prevent Loss of Hospital Revenue
Reduce Payment Denials
With the healthcare insurance climate, sometimes payment can be far between and sometimes do not even come through. This is because commercial insurance companies try to be stringent in paying out and seek to audit care given, recovery programs etc. This leaves the healthcare organizations financially exposed. Hospitals should put systems in place to ensure payer compliance. They should put systems in place to ensure that all the necessary requirements are made to ensure that all payments will be made. This includes making sure associated documentation is available and properly filled out. This will reduce the occurrences of denials and any exposure to financial loss that might occur. It also reduces the need for spending money trying to collect money owed or chase insurance companies down. In other words, handling documentation properly, doing due diligence at the front end etc reduces the risk of further processes on the backend that could lead to a loss of revenue in a healthcare organization or hospitals.
Enforce Point of Collection
This point can be quite controversial but it doesn’t have to be so always. Point of service collection means that hospitals demand the self-paying portion of a medical bill before they attend to a patient. This is because when this payment is left to after treatment and care has been delivered, studies have shown that there is a 40% chance that the self-pay portion of the bill will not be recovered. Because of this, some hospitals demand payment before treatment. This, of course, is controversial because it has the potential to clash with morality and the Hippocratic oath. Do you turn away a patient who would probably lose their lives without immediate treatment and care because they do not have their copay?
Though the goal of many healthcare organizations is not mainly to make a profit, they can increase their revenue and have a more robust revenue stream through physician referrals. Whether they like it or not, hospitals compete for patients and they try to do this in different ways. With physician referrals, they get private practices with smaller facilities or in other industries to refer patients to them. Physicians in urgent care centers, community clinics, and even dentists are asked to refer patients that need further care to bigger hospitals. Hospitals take it a step further by using tools such as frontend management software, scheduling tools, and data marts to integrate and align independent physicians to their healthcare organizations. Smart hospital executives and hospital teams in charge of getting referrals will provision these smaller practices and private physicians with tools to make it cheaper, easier, faster and more convenient to refer patients and order tests/procedures to their facilities making it as easy as possible to do business with their hospital