Medicare Biggest Source of Revenue for Hospitals

Medicare may be US hospitals’ greatest source of revenue, but managed care was the biggest debtor in the first quarter of 2011. The two payers are typically neck and neck as a percentage of hospitals’ outstanding accounts receivable (A/R), but that was not the case at the start of this year, according to the Hospital Accounts Receivable Analysis (HARA) Report on First Quarter 2011.


Looking at these statistics by hospital bed size, the Medicare–managed care split fluctuated in the first quarter. Very small and large hospitals reported an increase in Medicare as a source of revenue, according to the survey. Hospitals with fewer than 100 beds also reported a first quarter increase in managed care revenue. At the same time, hospitals with 400 to 699 beds reported a decline in managed care revenue.

Facilities with 200 to 399 beds reported the highest percentage of managed care revenue in the first quarter, at 42.40 percent of total gross revenue. These same facilities reported a decline in Medicare revenue from 45.66 percent of fourth quarter gross revenue to 39.97 percent in the first quarter.

US hospitals reported 4.50 percent of total gross revenue was self-pay revenue, down from the prior quarter, according to the HARA survey. Similarly, self-pay as a percentage of total A/R also declined in first quarter 2011 to 14.35 percent.

With managed care revenue on the rise, managed care A/R also climbed. Hospitals reported 30.07 percent of total A/R was due from managed care sources, the highest quarterly percentage of managed care A/R since the fourth quarter of 2008.

CBOs Report Similar Findings

Looking at central business office (CBO) statistics in the same HARA survey, managed care was the top debtor in the first quarter of 2011, representing 34.15 percent of A/R. And, as is usually the case, Medicare represented the next largest piece of the payer pie at 26.91 percent of A/R.

Unlike the figures for hospitals this quarter, self-pay grew for CBOs as a portion of the payer mix in the first quarter. Patients were the third largest debtors, representing 19.27 percent of outstanding A/R owed to CBOs. As patients increasingly choose high-deductible health plans because of escalating premiums, they are paying more out-of-pocket, which increases self-pay totals.

Medicaid, commercial insurance carriers, and “other” payers such as workers’ compensation were the smallest contributors. They represented 12.86, 3.20, and 3.58 percent of A/R, respectively.

CBO Revenue

As for outstanding gross revenue, managed care and Medicare represented an almost identical percentage for CBOs in the first quarter. Managed care was on top, but only by 0.02 percentage points. Managed care represented 38.78 percent of outstanding gross revenue in the first quarter, while Medicare was 38.76 percent.

Medicaid accounted for the next slice of the payer pie at 11.94 percent of gross revenue. And, while self-pay was nearly 20 percent of the A/R, it represents only 6.42 percent of gross revenue for CBOs. Nonetheless, self-pay is a bigger portion of the mix than commercial carriers or other payers. These two were 1.81 percent and 2.30 percent, respectively.

[This story appeared in slightly different form in the September 2011 issue of Receivables Report.]