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CHAPTER 3

PAYING FOR HEALTH SERVICES

T H E M E S E T-U P

R EVENUE S OURCES

Big Sky Dermatology Specialists is a small group practice in Jackson, Wyoming. The city is located in the scenic Jackson Hole valley and is a major gateway to the Grand Teton and Yellowstone National Parks. In addition, it is home to the world’s largest ball of barbed wire. (It’s amazing what you learn when studying healthcare finance!) Jen Latimer, a recent graduate of Idaho State University’s healthcare administration program, was just hired to be Big Sky’s practice manager. One of her first tasks was to review the group’s payer mix. After all, revenues are the first step (of many) needed to ensure the financial success of any business. (Payer mix is a listing of the individuals and organizations that pay for a provider’s services, along with each payer’s percentage of revenues.) To better understand Big Sky’s revenues, Jen focused on two questions. First, who are the payers? In other words, where does Big Sky’s revenue come from? Second, what methods do the payers use to determine the payment amount? By gaining an appreciation of the group’s rev-

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Chapter 3: Paying for Health Services

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enues, Jen believed she could better judge the financial riskiness of the practice. Furthermore, she would then be able to identify the steps that might be taken to increase the practice’s revenues and reduce the riskiness associated with those revenues. By the end of the chapter, you will have a better understanding of healthcare provider revenue sources and how the specific payment method influences provider behavior. Specifically, you, like Jen, will know more about how these issues affect Big Sky.

LEARNING OBJECTIVES

After studying this chapter, you will be able to ® List the key features...