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Payer Mix


Payer mix is something that is always on the radar for administrators and those in healthcare finance. It refers to the percentage of hospital revenue coming from private insurance companies versus government insurance programs versus self-paying patients. The ideal scenario is more commercial and less uninsured (bad debt/write off). Generally, a commercial plan pays an average of 264% of the Medicare allowable for the same CPT®

 

With Price Transparency, we see why this is important for a service line and the overall financial health of the institution. With increasing costs, knowing operating margin forecasts is becoming more critical.

 

There are direct correlations with geography and this mix, where rural serves a higher Medicare and Medicaid population, often over 55% of revenue. In addition, their negotiated contracts are often less than urban areas.

 

Based on trends and numbers we are going to continue to see Medicare Advantage plan enrollment numbers increase (over 25 million now) as an overall percentage of the insured. This is fueled by the decrease in premiums and new/expanding benefits (such as over 60 plans that offer Hospice coverage.) The Congressional Budget Office (CBO) projects that Medicare Advantage enrollees will comprise as much as 51% of all Medicare beneficiaries by 2030.

 

There will also be an increase in Medicaid, since we have seen an increase in expansion from COVID in the short term. From 2018 to 2027, Medicaid expenditures are projected to increase at an average annual rate of 5.3 percent and to reach $1,007.9 billion by 2027. Medicaid expenditures are projected to increase from 3.1 percent of GDP in 2017 to 3.3 percent of GDP in 2027.

 

These shifting patterns are changing the approach, strategies, and relationships with providers, payers, vendors, and patients. Careful consideration regarding purchasing, mergers and acquisitions, investments will increase.

 

What impact will Price Transparency have on the Payer Mix

 

  1. Expect payers to become more aware of how they compare to other payers based on the data
  2. The overall percentage gaps will decrease or normalize as more data is published
  3. Rural providers will (need to) leverage the data for rate negotiation increase
  4. Hospitals can use the data to look at Healthcare Coverage Plans for employees and save
  5. A decrease in pricing will not happen right away and patients won’t be price shopping right away…but
  6. Investments in tools and expertise of the data and strategy will and are increasing…don’t wait

 

EvaluPrice Was created to provide relational and structure data for strategy development.  jordanj@oncospark.com