How to Break Even on Medicare Reimbursements

Karen Minich-Pourshadi, for HealthLeaders Media , February 28, 2011

Zero isn’t the best number to see if you’re taking a class, but when it comes to Medicare, seeing zero in lieu of red in terms of reimbursement versus expense is welcome. Medicare is rarely where hospitals and health systems expect to make money, but is it possible to break even? Could you, unlikely though it may seem, make a margin? It is possible. Let’s look at a couple of stats:

Stat #1: In the HealthLeaders Media Industry Survey 2010, 90.4% of CFOs rated Medicare reimbursement as having primary importance to their revenue stream in the next three years. Flash forward one year, and with all the proposed changes in Medicare reimbursement, not surprisingly in the HealthLeaders Media Industry Survey 2011, 78% of CFOs reported that Medicare/Medicaid would have a negative or strongly negative impact on their organization.

Stat #2: Medicare typically only reimburses 85% to 90% of costs, and it usually takes cost shifting—getting vastly better reimbursement from commercial payers—for a hospital to stay in the black. The equation looks like this: Positive margins from private payer business minus (usually) negative margins of Medicare and Medicaid and the balance (if any) is profit. Finding the breakeven point in that formula can have a significant financial impact for any hospital or health system. Once you’re no longer using your private payer profits to climb out of a Medicare hole, you’ll start to see a difference in your bottom line.

How can you make this happen? Bob Gift, director at Chadds Ford, PA-based IMA Consulting, offers a couple of suggestions about how healthcare leaders can position themselves better to make breakeven happen:

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Comments are moderated. Please be patient.

3 comments on "How to Break Even on Medicare Reimbursements"

Tim McVey (3/1/2011 at 10:40 PM)
For those of us whose Medicare DRG Reimbursement includes a significant DSH add-on, we'll be challenged to break even in 2014 and beyond, after the Health Care Reform cut-backs to DSH reimbursement begin. Theoretically, the DSH reimbursement shortfalls should be offset by the revenues from the newly-insured, but in certain markets that won't always be true [INVALID] particularly in markets along the Border where undocumented individuals won't be eligible for the new low-cost insurance coverage.

Scott (2/28/2011 at 3:15 PM)
I saw the headline of this article and thought that there would be some unique insight or ideas mentioned. This article said nothing that wasn't already known. The end result is that I will never be able to reclaim the 5 minutes that I wasted in reading this!

John Stanton (2/28/2011 at 2:35 PM)
Part of the analysis process must involve the FTE's involved in the revenue collection cycle. As painful as it might be, adopting [INVALID]d technology can reduce staffing costs while improving the quality of daily posting files. If you currently employ data entry staff that key from paper EOB's or images, you are way behind the curve. Likewise, if you have one FTE sitting in front of 2 computer screens for data entry, you are wasting time and money. If you know you need to improve your revenue collection process, but don't want to go through the RFP process, email me at and we'll get you started in the right direction.




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