Blog

Updated August 2019

According to a survey released by the Medical Group Management Association (MGMA), operating expenses for medical practices increased at nearly the same rate as revenue between 2015 and 2016. Practices with increased revenue primarily attribute this growth to a greater number of non-physician providers (NPP) and key support staff.

The MGMA study states that medical practices with a higher NPP-to-physician ratio earn more in net revenue than those with lower ratios while also reporting greater productivity. The study compared more than 2,900 provider organizations and over 40 practice types.

Another key point from the survey stated that primary care practices with lower percentages of government payor mixes, like Medicaid and Medicare, were more likely to have both higher operating costs and greater revenue. On average, practices with a payor mix of less than 30 percent yielded more than $159,000 more in revenue per physician than those with a mix of 50 percent or more. That number jumps to $221,000 for hospital-owned practices.

In addition, a recent study by Navigant found that 47 percent of U.S. hospitals saw lower operating margins after the expansion of Affordable Care Act coverage.

Payor mix refers to the percentage of hospital revenue coming from private insurance companies versus government insurance programs versus self-paying patients. Payor mix is an important metric to track because self-paying patients and private insurance companies compensate hospitals at a higher rate than government programs like Medicare. Government programs often pay hospitals less than the actual cost of patient treatment, causing hospitals to lose revenue.

Practices that serve primarily Medicare and Medicaid beneficiaries, such as safety-net hospitals, rely far more heavily on reimbursement levels than hospitals with a lower percentage of Medicare and Medicaid patients. Hospitals with greater numbers of Medicaid and Medicare beneficiaries can struggle to draw patients with private insurance to their practices to balance the scales.

Below are the top hospitals with the highest and lowest payor mixes for Medicaid and Medicare, as well as net patient revenue.

Top 10 Hospitals with Highest Medicare Payor Mix in 2017

Fig 1 Data from Definitive Healthcare using most recent CMS data. Only hospitals with 50 or more beds and 50 or more Medicare discharges were included to decrease variability.

Top 10 Hospitals with Lowest Medicare Payor Mix in 2017

Fig 2 Data from Definitive Healthcare using most recent CMS data. Only hospitals with 50 or more beds and 50 or more Medicare discharges were included to decrease variability.

Top 10 Hospitals with Highest Medicaid Payor Mix in 2017

Fig 3 Data from Definitive Healthcare using most recent CMS data. Only hospitals with 50 or more beds and 50 or more Medicare discharges were included to decrease variability.

Top 10 Hospitals with Lowest Medicaid Payor Mix in 2017

Fig 4 Data from Definitive Healthcare using most recent CMS data. Only hospitals with 50 or more beds and 50 or more Medicare discharges were included to decrease variability.

Learn more

Looking for other ways you can leverage payor mix and other hospital financial data? Request a free trial to access Definitive Healthcare's comprehensive platform of hospitals & IDNs. With Definitive Healthcare, you can:

• Analyze the financial strength of hospitals and health systems
• Compare facilities by payor mix, CMS penalties or rewards, and bad debt
• Identify ideal targets in your region