3 areas to focus on to find more money for your healthcare mission
By Larry Armstrong | 3 minute read | March 24, 2020
Many healthcare organizations truly want to focus less on money and more on delivering excellent care for the people who depend on their services. Yet administrative costs, shifts in public funding and constantly evolving reimbursement models can get in the way of this goal. Organizations need better revenue cycle management (RCM) so they experience fewer short-term financial crises and have funds to support their long-term missions.
RCM is a complex and integrated process, so here are three potential areas to start with:
1. Reduce bad debt
With the proliferation of high-deductible health plans in the United States, Medicare cost reports have shown that the amount of bad debt for hospitals has increased to nearly USD $56.5 billion between 2015 and 2018.1 With patients shouldering more costs and increased public scrutiny of billing practices, healthcare organizations often hesitate when it comes to reducing their bad debt. Yet with thoughtful strategies and pro-active planning, organizations can find the right balance between helping financially strapped patients and paying their own bills.
2. Reduce denials
Healthcare organizations are writing off more denials. The mean write-off of denials has increased by 90% between 2011 and 2017 as it has gotten harder for denials to be successfully appealed.2 But that doesn’t mean there aren’t still good opportunities for organizations to prevent or reduce denials. Sometimes denials occur because of upfront process errors, such as documentation issues, coding mistakes or missing authorization numbers.3 Developing a plan to eliminate process errors at the source could reduce the amount of revenue organizations lose to denials.
3. Streamline accounts receivable management
In the United States, administrative costs can account for more than 25% of hospital expenditures.4 One study in North Carolina found that the estimated costs of billing and insurance-related activities could cost as little as USD $20 for a primary care visit and as high as $215 for an inpatient surgical procedure.5 While organizations could potentially save money in the short-term by outsourcing some of their billing work, there are often internal opportunities for them to streamline tasks associated with each service to reduce the administrative cost for each transaction.
Organizations looking to jumpstart their RCM improvement could also benefit tremendously from an outside perspective. Simpler® Consulting, an IBM company, has decades of experience helping healthcare organizations improve their RCM practices. One mid-sized health system they worked with improved their net revenue cash flow by USD $5.8 million in less than 24 months using the Simpler Business System®. The same organization achieved a 75% reduction in denial write-offs and a 15% reduction in accounts receivable days.
Ultimately, there will always be financial challenges in the healthcare industry, but having the right RCM processes in place as well as a system for continuous improvement could reduce the impact those challenges have on delivering quality care.
Find more money for your mission.
- Shoemaker, William. “Bad debt expense benchmarks: U.S. acute care hospitals show improvements since 2015.” Hfma.org. October 1, 2019. https://www.hfma.org/topics/hfm/2019/october/bad-debt-expense-benchmarks-us-acute-care-hospitals-show-improvements.html
- “The state of denial management part 2: How to build a comprehensive denials program.” Becker’s Hospital CFO Report. January 29, 2020. https://www.beckershospitalreview.com/finance/the-state-of-denial-management-part-2-how-to-build-a-comprehensive-denials-program.html
- Wilson, Denise and Tracey A. Tomak. “Getting to the root causes of denials.” Hfma.org November 15, 2019. https://www.hfma.org/topics/revenue-cycle/article/getting-to-the-root-causes-of-denials.html
- Himmelstein, David U. at al. “A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far.” Health Aff 33, no. 9 (2014): 1586-94. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2013.1327
- Tseng, Phillip et al. “Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System.” JAMA 319, no. 7 (2018): 691-697. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5839285/