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Hospitals lose $22M on average because of revenue cycle issues, report finds

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Dive Brief:

  • The average 350-bed hospital is missing out on up to $22 million in lost revenue because of focusing on cost and not enough on revenue cycle performance, according to a new Advisory Board report.
  • After being stagnant or steadily sliding since 2011, hospitals and health systems’ critical benchmarks need a “strategic overhaul.” 

  • Four forces are presenting “strategic challenges.” The forces include “consumerism driven by higher financial obligations, aggressive commercial denials and more complex payer contracts, physician engagement on documentation given demands on the acute care and medical group enterprises and poorly executed integrations that waste potential economies of scale,” said James Green, National Partner, Consulting at Advisory Board.

Dive Insight:

Advisory Board said hospitals’ overall average cost to collect worsened by 70 basis points of net patient revenue from 2011 to 2015. That equals millions of lost dollars for many hospitals.

Advisory Board found four issues that are challenging revenue cycle performance: commercial payers scrutinizing claims closer; patient obligations neutralizing benefits of coverage gains; MACRA adding new performance burdens to physicians and medical groups; and payer, patient and physician forces driving consolidation.

Regarding patient obligations, Advisory Board said bad debt has increased despite more insured Americans. One reason is higher deductibles. From 2008 to 2015, U.S. workers with deductibles more than $2,000 increased from 5% to 19%. In that time, patient obligations that are part of bad debt increased from .9% to 4.4%, according to Advisory Board.

What can hospitals do? To build more enduring relationships with patients and improve collections, hospitals and health systems should improve the patient financial experience with a foundation built on transparent search capabilities for price estimates, convenient access for scheduling and payment, a positive care encounter and each point of financial contact contributing to the construction of a durable relationship,” Advisory Board suggested.

Jim Lazarus, national partner of technology at Advisory Board, said hospitals and health systems can progress from median to top-quartile revenue cycle performance by improving key metrics. “By driving better adherence to best practices, providing a better patient financial experience and taking a more strategic approach toward legislated payment reform — institutions could make that quartile jump for each of those four metrics and improve by up to 6.4% of margin,” said Lazarus.

In addition to Advisory Board’s suggestions, Healthcare Dive recently provided four strategies to collect outstanding patient balances: Establish expectations with staff, get to know the patient at time of scheduling, offer payment options to fit the patient’s ability to pay and make payment convenient. Such strategies could help boost collections and feed into a stronger revenue cycle management strategy.

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