When Hospitals Leak Money

Posted on October 20, 2017 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

A couple of weeks ago I was skimming healthcare business headlines and stumbled across this guaranteed showstopper: You’re probably leaving $22 million on the table. That headline is from a column by Jim Lazarus, who works in the Advisory Board’s Revenue Cycle Solutions division. In his column, he named four ways in which hospitals could recapture some of this lost revenue.

In the article, Lazarus notes that hospitals aren’t following best practices in four key areas, namely denial write-offs, bad debt, cost to collect and contract yield.  Unsurprisingly, Advisory Board benchmarks also demonstrate that median performing organizations are having trouble reducing net days in accounts receivable. The Advisory Board has also found that the overall average cost to collect has worsened by 70 points of net patient revenue from 2011 to 2015.

To turn the stats around, he suggests, hospitals should focus on four critical issues in revenue cycle management. They include:

  • Preventing denials rather than responding to them. “Hospitals are losing, on average, five percentage points of their margin to underpayments, denials and suboptimal contract negotiations,” Lazarus writes.
  • Collecting more from patients by improving their financial experience. According to Lazarus, between 2008 and 2015 the portion of patient obligations being written off as bad debt has climbed from 0.9% to 4.4%. To boost patient collections, hospitals must offer price estimates, convenient payment methods and a positive care encounter, he says.
  • Being sure not to take a hit on MACRA compliance. See that doctors, including those coming on board as employed physicians, get up to speed on documentation performance standards as quickly as possible.
  • Building the value of merged RCM departments. If multiple RCM organizations are being integrated as part of consolidation, look at ways to improve the value they deliver collectively. One approach is to create a shared services organization providing a common business intelligence platform across entities and service lines systemwide.

If you’re an IT leader reading this, it’s probably pretty clear that you have a substantial role in meeting these goals.

For example, if your hospital wants to lower its rate of claims denials, having the right applications in place to assist is critical. Do your coding and billing managers have the visibility they need into these processes? Does senior management?

Also, if the hospital wants to improve patient payment experiences, it takes far more than offering a credit card processing interface to make things work. You’ll want to create a payment system which includes multiple consumer touch points and financing options, which is integrated with other data to offer sophisticated analyses of patient payment patterns.

Of course, the ideas shared by Lazarus are just the beginning. While all organizations leave some money on the table, they have their own quirks as to why this happens. The important thing is to identify them. Regardless, whether you are in RCM, operations or IT, it never hurts to assume you’re losing money and work backward from there.