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Beyond Patient Collections: Other Cash Inflows for Rural Hospitals

February 5, 2024    •    5 min read
Other Cash Inflows

For rural hospitals, patient account collections are a critical source of revenue, but they are not the only source. Diversifying cash inflows is essential for financial stability and effective cash forecasting. This article explores various other cash inflow items that rural hospitals can leverage, including periodic government program payments, grants, cost report settlements, and revenue from non-patient activities like cafeteria and gift shop sales, rental payments, and more. Understanding and integrating these additional sources can significantly enhance your hospital’s financial health.

Government Program Payments

Disproportionate Share Hospital (DSH) Payments

Disproportionate Share Hospital (DSH) payments are federal funds provided to hospitals that serve a large number of low-income patients. These payments help offset the costs associated with treating uninsured and underinsured patients. DSH payments are vital for many rural hospitals as they can represent a significant portion of annual revenue. Understanding the eligibility criteria and the application process is crucial for maximizing these funds.


Grants are another important source of revenue for rural hospitals. There are various types of grants available, including federal, state, and private grants. Some common grant programs include:

Health Resources and Services Administration (HRSA) Grants: These grants support rural health care services, infrastructure improvements, and workforce development.

State-Specific Grants: Many states offer grants to support rural hospitals, particularly those in underserved areas.

Private Foundation Grants: Numerous private foundations provide funding for rural health initiatives.

Applying for grants requires careful planning and a thorough understanding of the grant requirements. Successfully securing grant funding can provide substantial financial support for specific projects and operational needs.

Cost Report Settlements

Cost report settlements are adjustments made to previous reimbursement rates based on the actual costs incurred by the hospital. These settlements can result in additional payments to the hospital, often received annually or semi-annually. The timing and amount of these settlements can be unpredictable, but they are an important component of a hospital’s overall revenue.

To optimize cost report settlements, it is essential to maintain accurate and detailed financial records. Regularly reviewing and updating cost reports ensures that the hospital can maximize potential settlements and anticipate future payments.

Revenue from Non-Patient Activities

Cafeteria and Gift Shop Sales

Hospital-operated services like cafeterias and gift shops can generate significant revenue. While these sources may not be as substantial as patient services, they contribute to the overall financial health of the hospital. Effective management and marketing of these services can enhance their profitability.

Rental Payments

Hospitals often have the opportunity to lease unused space or equipment to other healthcare providers or organizations. Rental payments from these leases provide a steady stream of income that can help offset operational costs. Examples include leasing office space to physicians, renting out conference rooms, or leasing medical equipment to other facilities.

Miscellaneous Services

Other services, such as parking fees, wellness programs, and health screenings, can also generate revenue. These ancillary services not only provide financial benefits but also enhance the hospital’s community engagement and service offerings.

Integrating Other Cash Inflows into Cash Forecasts

Data Collection

To accurately forecast cash inflows, it is essential to gather comprehensive data on all revenue sources. This includes historical data on government program payments, grants, cost report settlements, and non-patient activities. Ensuring that data is accurate and up-to-date is critical for reliable forecasting.

Forecast Model

Building a forecast model that includes these additional sources of income involves defining assumptions and parameters for each revenue stream. The model should account for the timing and variability of each inflow. For example:

DSH Payments: Typically received annually or semi-annually, depending on the state and federal schedules.

Grants: Often tied to specific projects with defined timelines.

Cost Report Settlements: Based on historical reimbursement adjustments and cost report reviews.

Non-Patient Revenue: Monthly or quarterly revenue from cafeterias, gift shops, rentals, and other services.

Example Forecast

An illustrative example can clarify how to incorporate various cash inflows into a cash forecast. Suppose a rural hospital has the following monthly cash inflows:

Patient Collections: \$1,000,000

DSH Payments: \$200,000 (received semi-annually)

Grants: \$100,000 (project-specific, received quarterly)

Cost Report Settlements: \$150,000 (received annually)

Non-Patient Revenue: \$50,000

The cash forecast for a typical month would include these sources, with the larger, less frequent payments spread out over the relevant periods. For example:

January: Patient Collections: \$1,000,000, Non-Patient Revenue: \$50,000, Total: \$1,050,000

June: Patient Collections: \$1,000,000, Non-Patient Revenue: \$50,000, DSH Payments: \$100,000 (half-year), Total: \$1,150,000

Monitoring and Adjusting Cash Forecasts

Regular Updates

Regularly updating your cash forecast with actual inflows is essential to maintain its accuracy. This involves monthly or quarterly reviews, where actual receipts are compared against forecasted amounts, and adjustments are made as necessary. Regular updates ensure that your forecast reflects current financial conditions and provides a reliable basis for decision-making.

Performance Review

Assessing the accuracy of your forecasts against actual inflows is crucial for continuous improvement. Performance metrics can highlight areas where your forecasting process is strong and where improvements are needed. By analyzing discrepancies, you can refine your assumptions and models to enhance future forecasts.

Scenario Analysis

Running different scenarios allows you to understand the potential impact of variable inflows. For instance, you can model best-case, worst-case, and most-likely scenarios for each revenue source. This helps in preparing for uncertainties and developing contingency plans to mitigate financial risks.


Diversifying cash inflows is essential for the financial stability of rural hospitals. Hospitals can better manage their cash flow and allocate resources more effectively by understanding and accurately forecasting additional revenue sources beyond patient collections. Regular monitoring, scenario analysis, and continuous refinement of forecast models are key to maintaining a reliable and comprehensive financial plan.

Gregory Brickner

Results Fanatic®


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