By Eric Bricker, M.D.
‘Payer Mix’ is the proportion of patients w/ each category of health insurance.
The categories of health insurance are:
1. Medicare
2. Commercial (i.e. Employer-Sponsored Insurance)
3. Medicaid
4. ACA Plans
5. Self Pay
Generally, a hospital system’s revenue is 40% Medicare, 40% Commercial Insurance, 10% Medicaid, 5% ACA and 5% Self Pay.
These payers do not all pay the same.
- Commercial insurance pays 254% of Traditional Medicare.
- Medicare Advantage Pays 90% of Traditional Medicare and
- Medicaid only pays about 70% of Traditional Medicare.
A Payer Mix for a hospital system is ‘Good’ the more revenue the comes from Commercial Insurance. A Payer Mix is ‘Bad’ the LESS revenue comes from Commercial Insurance.
Hospital systems close hospitals in poorer and older communities with mostly Medicare and Medicaid insurance. Then these same hospital systems will expand in younger, employed communities with commercial insurance… all in the name of improving their ‘Payer Mix.’
This strategy has worked so well for the largest for-profit hospital system in the US–Hospital Corporation of America (HCA)–that their quarterly earnings have grown greater than 20% and their stock has out-performed Apple, Google and Amazon since the Pandemic.
