Over the years, the PATIENT FRIENDLY BILLING® project has developed numerous reports, resources, and tools to aid hospitals in streamlining their billing and collection functions. Most recently, the project began devoting its energies to studying optimal revenue cycle practices.

In 2009, the Patient Friendly Billing project, with assistance from Noblis, a Virginia-based not-for-profit strategic advisory firm, used these insights as a foundation for researching common characteristics and strategies employed by those hospitals with high-performance revenue cycles.

Interestingly, researchers found that strategies to support revenue cycle high performance vary greatly by organization. Some high performers believe strongly in centralized registration while others do not. Some place great priority on address verification and Medicaid eligibility while others focus elsewhere. Differences can even be seen among the metrics that organizations use to track performance and identify opportunities for improvement.

Still, researchers did note several commonalities:

  • High performers have an organizational culture that elevates the importance of the revenue cycle.
  • High performers master areas important to their particular circumstances. They don't necessarily focus on the same revenue cycle areas as others for improvement, but they target those elements most crucial to their success. Simply put: They are good at what they need to be good at.
  • High performers accelerate improvements. High performers aren't just good at setting goals; they are good at how they take action and execute strategies to achieve these goals.

Perhaps most significant, researchers discovered that it's possible to achieve high performance regardless of particular financial means or patient mix. Although high performance was seen slightly more often at system-based hospitals, numerous standalone facilities were high performers as well. Excellence was seen in settings urban and rural, large and small.

Given such widespread relevance, the Patient Friendly Billing project encourages revenue cycle leaders to use results of its research on high performance as a means for engaging the entire C-suite around their organization's particular revenue cycle needs. Such engagement is necessary to ensure that revenue cycle leadership and staff have the right infrastructure, skills, and tools to support patient-centric and value-driving processes.

Whether the objective is to focus priorities, set appropriate hiring criteria, or shape procedural direction, the role of buy-in at the executive level cannot be overlooked. Organizational alignment is critical for ensuring that a high-performance revenue cycle is not only a top priority but also ingrained in daily practice. The reward of these efforts is increased resources available to support and strengthen all areas within the organization.

About the Survey and Selection Process

The selection process included three screening processes and culminated in site visits with 14 high-performing revenue cycle hospitals, followed by a survey to compare and contrast findings with common industry practices.

First Screen

Relying on 2006-07 data from the American Hospital Directory researchers used measures of the revenue cycle, financial performance, and patient satisfaction to identify a group of potentially high-performing hospitals from a national pool of more than 5,000 nongovernment, short-term acute hospitals. Hospitals were first screened by days in accounts receivable. Those scoring in the 90th percentile or better were then segmented for further consideration. These hospitals were then measured on three additional metrics: patient willingness to recommend the organization, return on assets, and operating margin. Those making it into the next round of screening needed to score above median in all three of these metrics.

Second Screen

The hospitals then received a score based on their percentile ranking within each metric. Each hospital's total points were then summed and the 150 hospitals with the highest total scores were identified as potentially high-performing hospitals. Analysis was completed to ensure that the hospitals identified as "high performing" included a reasonable cross-section of hospitals in terms of bed-size, geography, tax status, system-affiliation versus independence, and teaching status.

Third Screen

With the objective of identifying highest revenue cycle performers within this pool, researchers sent an electronic survey seeking data on performance level to approximately 150 hospitals. Beyond basic elements such as the hospital's payer mix and revenue cycle information systems used, the survey requested calculations specific to the following revenue cycle metrics:

  • Discharged Not Final Billed (DNFB) defined as (Gross Patient Revenue)/(Total Gross Patient Revenue/365 Days)
  • Net Days in Accounts Receivable defined as (Total Net Accounts Receivable[A/R])/(Total Net Patient Revenue/365 Days)
  • Accounts Receivable Over One Year as a Percentage of Billed Accounts Receivable defined as (Total Net Accounts Receivable > 365 Days/Total Net A/R)
  • Bad Debt Expense as a Percentage of Net Patient Service Revenue defined as (Total Bad Debt Expense/Net Patient Service Revenue)
  • Cash Collection as a Percentage of Net Revenue defined as (Total Cash Collected/Net Patient Revenue)

The hospitals then received a score based on their percentile ranking within each metric. Adjustments were made to the scores for net days in accounts receivable and bad debt expense as a percentage of net patient service revenue, correlated with Medicare and self-pay volumes, so hospitals were not rewarded or penalized for payer mix. Each hospital's total points were then summed. The 14 hospitals that researchers visited were selected based on their ability to represent a cross-section of the nation's hospitals in terms of bed size, geography, system, or independent status, and teaching affiliation.

On-site visits included interviews with leadership and staff in relation to such practical concerns as process flow, revenue cycle organizational structure, communication practices, and technology deployment.