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Episode 5: Understanding Your Payor Mix: The Key To Adding New Services

The Private Medical Practice Academy

Episode 5: Understanding Your Payor Mix: The Key To Adding New Services

October 13, 2020

Episode 5: Understanding Your Payor Mix: The Key To Adding New Services

Are you thinking about starting a new practice or adding an ancillary service? Are you considering adding an additional business like an imaging center or ambulatory surgery center? Understanding your payor mix is fundamental to any financial projections for your new project. 

  • What does payor mix mean? The breakdown of all of the sources paying for your service. There are basically 3 categories: cash, insurance (out-of-network), and insurance (in network). Out of network insurance is essentially the same as cash since you can balance bill.
  • What is an example of a payor mix?
    • Medicare-25%
    • Commercial-55%
      • Blue Cross-28%
      • United-18%
      • Aetna-9%
    • Self-pay (Cash)-20%
  • Why is the payor mix important? If you accept insurance then you are likely to have different contracted amounts for the same code. Therefore, your overall reimbursement is going to be a blend of rates based on your payor mix. As you build out your financial projections for your business plan you will need to have this information.
  • How do I figure out the demographics? Here is a link that will give you a breakdown in your catch area.
  • Where can I find the Medicare fee schedule? Click here to access the Medicare fee schedule. Make sure to look for the rates for your specific geographic area. This fee schedule will give you a starting place for understanding rates.
  • What is an example of blended reimbursement? The blend of reimbursement as a function of your payor mix percentage. Use my calculator to determine this.
  • I have created a plug-and-play calculator for you to determine your payor mix and to determine your blended reimbursement rate. Click here to get your calculator.

The purpose of this episode is to show you how understanding your projected payor mix will help you assess opportunities. I will discuss strategies for changing your payor mix to maximize revenue in a future episode.

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