Kent RitterIn the age of tightening payment, hospital and health system revenue cycles are facing unprecedented pressure to enhance their yield while reducing costs and maintaining high levels of care quality and patient satisfaction. Improving performance in several areas of opportunity can, on average, realize a 1 to 4 percent increase in net revenue. Some of these opportunities—along with the industrywide pressures and internal issues that present roadblocks to performance—are identified below.

Coordinating Internally to Maximize Yield

Yield (i.e., cash collected/expected net revenue) is not just a financial metric; it also should be at the top of a revenue cycle key performance indicator list. Because there are both internal and external levers that move yield, it is important for revenue cycle, managed care, and finance to work together to understand the complete picture. This coordination plays a pivotal role in three key areas. 

Denials and avoidable write-offs. Misunderstandings about medical necessity, late charges, and missing authorizations are just a few of the causes of denials and write-offs, and problems are often compounded by miscommunication across departments. Many providers lack the appropriate governance structure, reporting, and communication channels to assess and prevent the complex sources of these revenue threats. 

Underpayments from payers. Denials and underpayments are distinct problems, because the former means not receiving payment and the latter means receiving an amount that is lower than expected. Both problems stem from the same structural problems. Along with creating cross-departmental groups to identify patterns of denials and underpayment and then equipping the groups with the right data, providers should implement technical solutions based on contract modeling to identify and resolve these issues. Furthermore, direct, data-driven negotiations with payers are critical to resolving denial and underpayment trends.

Bad debt from patients with insurance. Historically, uninsured patients were the largest source, and thus the focus, of bad debt reduction initiatives. Through the Affordable Care Act (ACA), the number of patients with insurance has increased. But with average deductibles hovering around $1,300, the amount patients owe has tended to increase as well, making even insured patients candidates for strategic financial clearance efforts.

Engaging Patients Prior to Service

Two related changes in the marketplace are driving this area of opportunity.

First, the cost of care is shifting to patients, forcing them to be more circumspect and careful consumers—researching providers’ ratings on quality and comparison-shopping on price, for example. Providers should be prepared to meet these shrewder patients halfway via patient portals, multiple paths for contact, patient liability estimates, preservice financial clearance, and point-of-service collections. One hospital excelled in this area by establishing a comprehensive preservice center charged with holding financial conversations prior to service and securing the patient’s realistic path to payment.

Second, changes in the underinsured patient population since implementation of the ACA have altered the forms of care that are accessible. Many patients now have subsidized care, which gives them access to care they may not actually be able to afford without help. Hospitals need to develop or refine their processes for identifying and financially clearing not only the uninsured but also the growing underinsured population prior to their service. It falls to the provider to clearly inform patients of their out-of-pocket costs and to help them develop workable payment arrangements for the care they need.

Charge Capture and Revenue Reconciliation

It’s simple—if you don’t capture the gross charge, there’s no chance you're getting paid for associated services. Often, hospitals miss payment opportunities because they don’t have clear revenue goals or the mechanisms to track performance. Next-generation electronic health records have changed the game for gross revenue accountability. For the first time, hospitals have a platform for clinical departments to understand and own their charges and revenue. But revenue cycle and finance leaders have to engage clinical leadership to adopt the culture change required to maximize revenue capture.

Lack of Accountability

A lack of accountability creates a host of other issues that affect revenue. Reporting of clear, transparent performance metrics is critical in establishing accountability, but deficiencies in such reporting can compound the issue. Gaps in reporting, for instance, produce an incomplete picture of performance. And indiscriminate data dumping obscures the true issue and creates an inconsistent focus for operational change—denials management will be ineffective, for example, if the revenue cycle department sends out a spreadsheet of all the denials for the month without knowing whether someone in operations can interpret it. Many issues within the revenue cycle could be solved with clearer communication and designations of accountability.

Increased Costs From Technology

Vendors and bolt-on solutions are ubiquitous in healthcare settings. But too few organizations recognize that buying the software is only the first step, not the whole solution. Providers must dedicate significant time to testing, optimizing, and continuous performance monitoring to get the most from software products. If new solutions are not fully integrated into the revenue cycle workflow, they add only cost and complexity.

It should be noted that many of these opportunities exist independent of a provider’s health information system (HIS). A next-generation HIS has the tools to address these issues, but providers need the structure, governance, context, and strategy to put those tools to work.

Consideration of these issues is only the first step to revenue cycle improvement in a healthcare organization, but by taking a proactive, coordinated approach, hospitals and health systems can transform these areas of opportunity into top revenue performance and meaningful organizational change.


Kent Ritter is director with, McKinnis Consulting Services, a consulting practice within Navigant Consulting, Inc.

Publication Date: Thursday, October 06, 2016