Revenue represents amounts earned by an organization that is actual or expected cash inflows due to the organization’s major business. In the case of healthcare, revenue is mostly earned by rendering services to patients.
Sources of Health Care Revenue
Healthcare revenue comes from governmental sources and private payers. The sources of healthcare revenue are generally termed, payers. Payers mix the proportion of revenues realized from the different types of payers is a measure that is often included in the profile of a healthcare organization.
The Medicare program: The social security act is commonly known as Medicare. It is entitled to the aged and disabled. The program was intended to complement other benefits such as retirement, survivors, and disability insurance benefits.
The Medicaid program: A legislation established a federal and state matching entitlement program in 1965. The program was intended to provide medical assistance to eligible needy individuals and families.
Other programs: Such as numerous other sources of federal, state, and local revenues for health care organizations.
Commercial insurers: Simply pay for the eligible health services used by those individuals who pay premiums for health care insurance.
Private pay: The payment by patients themselves or by the families of patients.
Grouping Revenue for Planning and Control
Grouping revenue by different classifications is an effective method for managers to use the information to plan and to control.
Revenue Centers: A revenue center classification is one form of a responsibility center. In a responsibility center, the manager is responsible, as the name implies, for a particular set of activities.
Care settings: It recognizes the different sites at which services are delivered. The most basic grouping by care settings is inpatient versus outpatient services.
Service Lines:Is a grouping of similar services. A number of hospitals have adopted the major diagnostic categories (MDCs) as service lines. One advantage of MDCs is that they are a universal designation in the United States. A continuing care retirement community (CCRC) can use its various levels of care as a starting point. Thus, the CCRC usually has four service lines listed in the descending order of residents’ acuity: skilled nursing facility, nursing facility, assisted living, and independent living.
Other Designations: other classification may meet the needs of particular organization, such as classifying its services in a disease management approach.