Alternative revenue strategies for hospitals relying on Medicare and Medicaid

Revenue Healthcare

Revenue for Healthcare Facilities

The objective of this paper is a review of the trends, innovation and future of finances, revenue streams and investments in the healthcare industry. In doing so the author will propose several choices or alternative sources of revenues for hospitals treating an ever-increasing number of patients that rely on Medicare and Medicaid for insurance. At the time of this study, most hospitals fell short of revenue goals because Medicare and Medicaid doe not provide adequate compensation to meet the needs of our aging population (AHA, 2006).

One of the biggest sources of revenue for healthcare facilities is Medicare and Medicaid. Despite this many organizations are not able to survive on the payments provided by Medicare and Medicaid alone. The purpose of this paper then is to provide a detailed analysis of how hospitals can protect revenue streams as the number of patients with Medicare or Medicaid as primary insurance rises.

Overview Medicare & Medicaid

For many disabled, elderly and injured individuals, Medicare or Medicaid are the primary sources of health insurance. Medicaid helps people that are not able to pay for medical care by paying for many healthcare services. The amount reimbursed however, or paid to healthcare facilities often falls short of what most private insurers offer. Those that most often seek Medicaid assistance include individuals with larger than average medical bills, those with disabilities and those receiving income from social security (U.S. Dept. Of HHS, 2007a). Medicare provides healthcare assistance primarily to the elderly, but there are many restrictions on the healthcare services provided. For example, if a patient requires home nursing care, they can only be seen by a Medicare certified associated or at an approved facility that is not within their reach (U.S. Dept. Of HHS, 2007a).

Unfortunately, while these programs offer some assistance to patients, Medicare and Medicaid often fall far short of need when the time comes to pay for lengthy hospital stays. Legislation in recent years has proposed cutting the budget for Medicare and Medicaid in the past, something that would only increase the problem hospitals and other healthcare facilities have when collecting revenues for treatments offered to the Medicare and Medicaid population (AHA, 2006). Many hospitals and other facilities have gone as far as denying treatment because they cannot keep up with costs associated with caring for those without secondary insurance.

Background and Review of the Problem

It is critical that financial analysts realize the facts. The population is aging, with more and more people entering the age group of 80 and older (AHA, 2006). At such an advanced age, few people are still working at an establishment that provides comprehensive insurance, thus they rely on Medicare or Medicaid for many of their healthcare needs. The needs of an aging population are often more extensive than the needs of a younger, healthier population. The American Hospital Association (2006) has repeatedly expressed concerns about cuts to Medicare and Medicaid, noting it is critical healthcare facilities are able to "meet the needs" and "improve the quality standards" of care offered the population through various methods including more stable funding.

Tools Used in the Past to Generate Revenue

In the past hospitals and similar healthcare facilities used sources of revenue including "patient supply charges" to help increase profits (Hurwitz, 1993). These charges were those that healthcare facilities billed to patients and included billing for the use of supplies including those used in care and during surgery (Hurwitz, 1993). However, due to much protestation, this became a less stable form of revenues especially as initiatives were passed to control expenses and costs in hospitals (Hurwitz, 1993). Other methods used to try to control costs included establishing "set" payments, or a specific amount that would be paid for patient care contingent on their diagnosis; this amount would be paid regardless of the patient's length of stay, secondary diagnoses or other problems (Hurwitz, 1993). Unfortunately these attempts at bolstering revenues and controlling costs also failed, especially as healthcare facilities realized that patient care is something that cannot be standardized, and that each patient responds to care and treatment differently. For example, one patient may receive surgery and recover within 48 hours; another patient may receive the same surgery, but because of a pre-existing undiagnosed autoimmune problem, may require an extensive hospital stay to recover. For this reason hospitals and healthcare facilities are now looking at tools they can use to save money to create money.

Tools That May Save Money

One way to increase revenues is to reduce costs associated with doing business. Many companies are looking at the U.S. hospital market and other healthcare facilities, encouraging them to adopt more efficient processing policies. In doing so they may reduce their expenses, which would lessen the impact associated with declining revenues. SSI Group Inc. For example, suggests hospitals can help streamline admissions, registration and healthcare management processes through technology, which will allow organizations to gather information they need including referrals for patients without spending time and money on administrators to perform such services (SSI, 2007). But taking employees out of the picture to help reduce the costs associated with providing quality healthcare is not at ideal solution for many.

Outsourcing many job functions however, and automating processes that can be automated without compromising quality may indeed be the best way to help generate more revenues and save revenues in hospitals and other healthcare facilities. More and more private companies are finding ways they can help healthcare facilities maximize the reimbursement they will receive from Medicare and Medicaid, while training organizations to improve their cash collections processes and accounts receivable management (Katz, Sapper & Miller, 2006).

How to Protect Revenue Streams

The purpose of this research analysis was to discover tools healthcare organizations and practitioners can use to increase revenue streams while facing the rising costs of healthcare and an increasingly aged population relying on Medicare and Medicaid for healthcare coverage. Traditionally Medicare and Medicaid offer very little in the way of comprehensive medical services. This has inspired with healthcare community however to come to the realization that hierarchical care within healthcare facilities is no longer a viable means of providing care to patients in need. Cutbacks can be made but often they will result in substandard care for those that need care the most.

The researcher conducting this review proposes healthcare facilities adopt a horizontal approach to healthcare. Such an approach would as inferred by the literature, enable hospitals to work with communities, volunteers and junior level providers to provide comprehensive preventive and minimally invasive care for patients. Such care would involve training and educating junior medical professionals or nurses so they have the ability to treat patients more comprehensively using advanced diagnostic tools.

Technology has afforded healthcare facilities the ability to become more efficient. Despite this, hospitals and many other facilities continue to rely on less than optimal or efficient resources for carrying out day-to-day functions. It is the role of hospital administrators to recognize the need for their communities to spend more in the way of technology and training to produce greater revenues in the future. Outreach programs should focus on providing those with Medicaid and Medicare coverage ample access to community resources that will provide them with the preventive and palliative care they need as they age. Hospitals must also recognize the ability of information systems including those introduced by companies like the SSI Group, Inc., to minimize the amount of paperwork, billing and filing involved in patient care. By not relying as much on administrative tasks and by not producing as much paperwork, hospitals and other healthcare facilities become "thrifty." Less paperwork means less expense. Most patient information can be stored electronically in a safe and ethical manner. This will also prove more efficient and reduce costs as specialists working with a patient can share information with each other from one end of the world to another with little more than a computer between them.

Preventive care is also a first line resource for healthcare agencies interested in increasing revenue streams for healthcare facilities. More and more people are interested in preventing disease rather than treating disease (Mohan, 2002). The preventive and community-based healthcare model has long been cited as a tool for increasing and maintaining adequate streams of revenues for healthcare facilities. Larger entities including hospitals can cut back on costs by adopting less invasive procedures, procedures patients become eligible for because they are in better health when first admitted to the hospital. For hospitals to realize their goals of sustainable economic resources, they must first be willing to adopt a new mindset. They must be willing to view healthcare and patients in a continuum, one that includes efficiency of service and quality over quantity. Once healthcare entities start operating in this way, revenues will increase and the costs associated with healthcare decline. Medicare and Medicaid no longer serve as problematic factors when healthcare organizations learn to work in an efficient manner as in the one proposed in this paper.