What Are the Primary Sources of Operating Revenue in the Health Care Industry?

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As President Barack Obama stresses health care reform, one issue that arises as of 2010 is how health care facilities will gain the revenue they need to operate. The United States, unlike most other industrialized nations, does not have national health care and therefore funds medical assistance in multiple ways.

Government Aid

The government provides some revenue for the health care industry through subsidies and grants. The government also provides the revenue for health care programs like Medicare and Medicaid. American citizens usually provide this aid indirectly through taxes or other wage deductions, but the government also borrows some funds as part of its annual budget. Both the federal and state governments generate health care revenue this way. Legislators are debating whether raising taxes is an efficient solution to getting health care to everyone, since higher taxes decrease how much Americans have to spend on other essentials.

Out of Pocket Direct Payments

Health care patients generate the majority of revenue for the industry, according to the HealthPAC Online website. Patients put money into health care when they pay out of pocket for medical services -- that is, when they cover the cost of their care without the help of a third party. The amount of revenue that a facility gets from patient payments depends on the rates the facility sets. Much of the health care reform movement has focused on trying to reduce the percentage of health care revenue that comes from patient's pockets.

Premiums

Insurance companies that provide health care insurance operate on the principle that you'll be well more than you'll be sick and that they'll earn far more in premiums than they end up paying out. The money insurance companies pay to health care providers thus comes largely from the premiums that all policy holders give the companies.

Private Donations

Sometimes medical facilities receive donations from corporations or individuals. These individuals and corporations either believe strongly in the services the facility provides or they are seeking a tax deduction for their contribution. Typically, getting this type of funding does not happen by chance. Instead, hospital administrators usually lobby for it within the community. This is a very unstable and unpredictable source of revenue, as health care providers cannot guarantee that the same amount of donations will come in from year to year. However, administrators can make some predictions about donations based on previous records.

References

About the Author

Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website, Takingdictation.com, which functions globally and welcomes new clients.

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