Tuesday, October 6, 2009

Understanding Healthcare Profitability

Having a consulting company called, "Business of Birth International, Inc" can be an interesting experience. I often get calls from well-meaning birth advocates that go something like this: "How can you have a company called Business of Birth? How can providers care about profitability? Don't they know it's all about moms and babies? You should be ashamed of yourself!!!" Healthcare is a business. It is a huge business. It is one sixth of the United States gross domestic product. A hospital has to raise tens of millions of dollars (or more) for the building, for the renovations, and then for the equipment. Then they must pay a plethora of staffers from nurses to clerks to lawyers to housekeeping people. This does not include physicians who may or may not be paid by the hospital. There are four main methods of receiving revenue to keep the hospital open. Medicare/Mediad, private insurance and self pay. The fourth is; BEGGING the government, individuals or foundations for gifts and grants. The job of the hospital is for revenues to exceed expenses. If they do, then they are considered "profitable!" Physicians offices and midwives operate the same way. If, at the end of the day. they have brought in more revenue than they have expended than they are considered profitable. If they are profitable, they stay in business. If they are not profitable (outlays exceeds income) than they have to consider shutting the doors. It does not matter whether it's cardiology, pulmonology, orthopedics, a maternity, the rules are the same. They have to run in the black or they will not stay open. In order for moms and babies to have the most choices possible, it is imperative that birth care providers and facilities are operated profitably. In a future posting,. I will explain why a practice that is not profitable, may not be safe. Alan

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