Healthcare Revenue Systems

Healthcare Revenue Systems

Healthcare Revenue Systems

  • Read Chapters 1, 2, and 3 from the course textbook, Essentials of Health Care Finance.

As Cleverley and Cleverley (2018) suggest,

Until the early 1980s, cost reimbursement by Medicare was the predominant form of payment for most hospitals and other institutional providers. In addition to Medicare, most state Medicaid plans and a large number of Blue Cross plans paid hospitals on the basis of “reasonable” historical cost. Today, the major payers have abandoned historical cost reimbursement and substituted other payment systems. (p.36)

A healthcare organization’s revenue cycle depends on its ability to provide services to patients. Along with this, it is equally important that healthcare providers accurately charge for services rendered.

In other words, capturing what, when, where, how, why, and who received the service produces the revenue. In your initial post,

  • Define the two key elements in historical cost reimbursement (reasonable cost and apportionment); additionally, provide two applicable examples.
  • Discuss the relationship between charge capture, charge entry, and charge master.
  • Compare and contrast the five major payment units (historical cost reimbursement, specific services, fee schedules, capitated rates, and bundled services).

Guidelines:

  • Your initial post must be a minimum of 500 words.
  • Cite sources, if necessary, using APA style.
  • Refer to APA StyleLinks to an external site. for citing within your paper and formatting your references list.
  • Use your textbook or other sources as needed.

Healthcare Revenue Systems

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APA

Healthcare Revenue Systems

Initial Post Example (500+ words)

Historical Cost Reimbursement: Key Elements
Historical cost reimbursement was the predominant payment method for hospitals prior to the 1980s. Two key elements define this system:

  1. Reasonable Cost – This refers to the cost of providing services that is deemed fair and justifiable based on the hospital’s historical expenditures. Essentially, hospitals could charge payers, such as Medicare, for the actual costs incurred in delivering patient care, provided these costs were necessary and documented.

  2. Apportionment – Apportionment involves allocating costs across different services or departments to determine how much each service “costs” the organization. By distributing overhead and indirect costs proportionally, hospitals could ensure that charges reflected actual resource use.

Examples:

  • A hospital calculates that the cost of an inpatient surgery includes direct costs like surgical supplies and staff salaries and allocates a proportionate share of the facility’s administrative overhead. Medicare reimburses the hospital based on this documented reasonable cost.

  • In a radiology department, equipment depreciation and technician salaries are apportioned across all imaging services, ensuring each service is charged according to its share of total costs.

Charge Capture, Charge Entry, and Charge Master
Charge capture, charge entry, and the charge master are integral to a healthcare organization’s revenue cycle:

  • Charge Capture is the process of

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