Healthcare Revenue Management and Forecasting | Free Essay Example

Healthcare Revenue Management and Forecasting

Words: 1116
Topic: Health & Medicine

Healthcare organizations (as any other organizations) have to manage their revenues to function properly. First, it is critical to take into account all types of revenue the healthcare facility under analysis receives. Langabeer and Helton (2015) state that there can be various sources of revenue when it comes to healthcare organizations. First, these organizations receive revenue from patients’ payments. Hospitals provide healthcare services that are the major source of revenue in the majority of cases. Apart from that, hospitals are often involved in research and training activity (Langabeer & Helton, 2015). For instance, a healthcare facility can provide training services to similar organizations. Research can also lead to some financial gains. Furthermore, a hospital can provide laboratory or laundry services to other healthcare organizations. Finally, many healthcare facilities receive funding or occasional donations from governmental and non-governmental organizations (charities) as well as for-profit organizations. Clearly, all these sources should be taken into account when managing and forecasting revenue.

It is necessary to note that negotiating rates is an indispensable part of revenue management. The more successful the process is, the larger revenues the hospital can obtain. As has been mentioned above, the major source of revenue is patients’ payment. It is necessary to note that patients and insurance companies tend to negotiate rates (Gowrisankaran, Nevo, & Town, 2015). They seek for discounts or additional services for a fixed price. They can also try to receive healthcare services during extended periods at lower prices. When negotiating rates, hospitals often take into account such aspects as the duration of the negotiation (one-time or a series of negotiations), the outcomes for the patient, as well as the costs associated with the services. As far as the duration of the negotiation process is concerned, it is critical to take this aspect into account as it may help develop proper relationships with patients or insurers. It can also help in predicting areas of patients’ concern. A one-time negotiation requires even more attention and precision as there will be no chance to add or change something once it is agreed during the meeting.

It is an effective strategy and a common trend to focus on patients’ outcomes when negotiating rates (Langabeer & Helton, 2015). Hospitals also try to look at a larger picture and take into account net changes when negotiating rates. For example, the decrease in some rates may be balanced by the increase in some other areas. Hospitals try to minimize costs through the use of advanced technologies, which enables them to reduce rates. It is necessary to note that some rates are non-negotiable as Medicare and Medicaid cannot be negotiated as the services, as well as prices, are prescribed.

It is clear that revenue management and forecasting are complex and need a lot of consideration. One of the most challenging aspects of these areas is associated with changing models of management and forecasting of revenue. Rouse and Serban (2014) note that the healthcare sector is undergoing significant changes that force healthcare organizations to change their revenue managing and forecasting models. There are numerous models of forecasting and management that fall into two major groups, quantitative and qualitative.

In quantitative models, such methods as linear trend analysis, Box-Jenkins, moving averages, and so on, are employed (Langabeer & Helton, 2015). Importantly, the information used includes the number of admissions (certain periods are taken into account), diagnoses, services provided, earnings, losses (if any), and so on. As for qualitative measures, interviews with various stakeholders (usually heads of departments) are held. Experience and opinions of many healthcare professionals may help in forecasting revenue. It is also noteworthy that revenue forecasting is often associated with the historical approach. Managers use the data of some past periods to predict the services to be provided, resources necessary for this provision, and so on.

Major challenges associated with the change of models include limited availability of data and resources, as well as employees’ training. For instance, when a hospitals’ management utilizes qualitative data, quantitative information is often stored with little or no proper analysis. Some time will be needed to obtain the necessary data and develop or even apply some analysis tools and techniques (Langabeer & Helton, 2015). Many hospitals still have paper records, which will require time and funds to change the way information is stored. Besides, employees can be unprepared to implement a different type of analysis due to the lack of necessary skills. Finally, the change of models is also associated with a certain investment. The healthcare facility may need to obtain additional software to manage data. Additional funds will be allocated to train employees or pay to other organizations specializing in revenue management and forecasting. Therefore, healthcare facilities should pay attention to these challenges when considering changing models of revenue management and forecasting.

I would like to note that this research provided valuable insights into my topic. I learned a lot about revenue management in the healthcare setting. Now, I understand that the provision of healthcare services is a complex issue that requires attention to clinical issues as well as some management aspects. I understand that prevention measures are associated with certain costs that have to be taken into account. When developing any strategy, the nursing professional should consider such elements as resources available, the size of the healthcare facility, financial and possible legal issues, and so on.

I am also sure that the provision of the services aimed at preventing pressure ulcer occurrence in patients can and should be a part of rate negotiations. The hospital focuses on the patient’s outcomes rather than the implementation of a set of clinical procedures. This aspect should be brought to the fore when negotiating rates with insurers or individuals. I also understand that the development of preventive measures should not be confined to clinical procedures only. To make sure that the strategy will be used in a healthcare facility, it can be effective to estimate its financial input.

When suggesting the use of a strategy, a nursing professional should mention the way the new approach will affect the hospital’s revenues. Therefore, the understanding of the basics of revenue management and forecasting can help me in developing the strategy and negotiating with the hospital’s management. I will be able to evaluate the financial benefit of my strategy, which will make my offer look relevant. It will help the hospital’s management make the right decision. Therefore, this research has helped me in acquiring valuable skills that will be essential for my professional development and growth. Of course, the research also helped me develop skills necessary to implement an effective study. The analysis and evaluation of resources as well as the analysis of data became a valuable experience.


Gowrisankaran, G., Nevo, A., & Town, R. (2015). Mergers when prices are negotiated: Evidence from the hospital industry. The American Economic Review, 105(1), 172-203.

Langabeer, J., & Helton, J. (2015). Health care operations management. Burlington, MA: Jones and Bartlett Publishers.

Rouse, W.B., & Serban, N. (2014). Understanding and managing the complexity of healthcare. Cambridge, MA: MIT Press.