Sometimes healthcare revenue cycle leaders and CFOs need to improve revenue immediately. To reach their goals, they often drop staff or programs desperately needed in their communities.
Rather than resorting to cuts, however, budgeters can look at the other side of the balance sheet and explore how to improve revenue instead.
A Black Book survey of 1,302 healthcare financial professionals found that healthcare revenue recovery effected via automation increased net patient revenue by 6 percent and decreased the cost-to-collect by 27 percent. Similarly, providers implementing upfront collections programs find bad debt drops.
Still, addressing healthcare revenue cycle challenges can get complicated due to antiquated operations. While it lags travel, finance, and retail, it has begun modernizing. These changes are painful. Making revenue improvements isn’t a simple matter where certain levers are pulled to boost cash flow by meaningful amounts. Instead, healthcare must first look at its challenges and figure out where revenue can be unlocked from each.
7 challenges you can turn into healthcare revenue recovery
1. Complexity of Payer Contracts
Issue: Today’s complexity of payer contracts stems from regulatory changes, technological advancements, financial pressures, industry consolidation, and the shift toward consumer-driven healthcare. These factors require detailed and sophisticated contract terms to manage compliance, financial risk, data security, and patient care standards. Because provider groups and healthcare systems often have neither the trained staff nor the time to handle these issues, too many agree to payer changes and new contract fees and terms without modeling their impact on revenue.
Impact: Failure to properly manage contracts leads to underpayments and increased denials, draining revenue. Every year, healthcare organizations lose five percent of net patient revenue to denials, and one to three percent of revenue to payer underpayments; other studies put underpayment losses as high as 11%
Path to healthcare revenue recovery: Proactive contract management conducted either by in-house staff, a full- or part-time contract specialist or through third party contract management software all re-establishes control over contracts. Of course, this step requires investment. Still, a few months of work can lead to years of better revenues, higher margins and EBITDA.
Awareness of changes and renewal dates starts the contract management initiative. Reporting on underpayments and denials exposes which payers are honoring their documented fees and terms. Finally, rate modeling – where providers utilize software with predictive analytics to determine impact to revenue of a rate or term change – reveals whether a payer’s proposed changes are a net benefit or net detriment before changes are made. Rate modeling also empowers you to assess the impact on revenue of the rates and terms you would prefer. Insights from your models help your team avoid succumbing to payer requests for unfavorable contract changes.
Take a quick, self-guided tour through a powerful contract management and underpayments recovery tool:
2. Claims Denials
Issue: Despite the fact that, according to an HFMA study sponsored by Waystar, 63 percent of denials are recoverable, just two-thirds are ever reworked. Again, staffing and expertise shortage underlies this loss.
Impact: Denied claims require rework, which is time-consuming and costly, delaying revenue recovery. It costs an average of $118 per denied claim to appeal according to MGMA. Increasing scrutiny from commercial payers and the implementation of complex regulatory requirements have contributed to a rise in claim denials. Issues such as inaccurate patient registration, missing or invalid claim data, and authorization/precertification problems are common causes of denials.
Path to revenue recovery: Healthcare organizations can take a two-pronged approach to containing this revenue drain: denial prevention and denial management. In our denial prevention post, we cover how you can ensure healthcare claims are accepted on the first submission. First-time success requires accurately securing prior authorizations and submitting claims.
Unlike denial prevention – which aims to eliminate issues before they occur – denial management (covered here) focuses on addressing and appealing claims after they have been denied by payers. It involves examining denial triggers in single cases but also in aggregate. Then comes categorizing denials, adding supporting facts and documents, and tracking results. Healthcare organizations can carry out both denial management and denial prevention by using denial or contract management software, outsourced denial or contract management services, or an assigned internal team. These steps improve revenue.
3. Patient Payment Responsibility
Issue: With high-deductible health plans on the rise, patients are responsible for a larger portion of healthcare costs. Unfortunately, many patients are unwilling – or unable – to pay these higher amounts. A Kodiak study reported in Becker’s Hospital CFO Report found that collections fell from 54.8 percent in 2021 to 47.8% in 2023. Providers collected $500.5 million for services rendered in 2022 and 2023 – less than half owed.
Further, fifty-three percent of total bad debt write-offs in 2023 came from patients with some form of insurance, including commercial plans, managed care plans and Medicare, a fact that reflects the rise in co-pays and deductibles. Overall, self-pay patients caused the highest percentage of bad debt write-offs.
An MGMA Stat poll asked healthcare organizations how their collections — as measured in days in A/R — have changed recently. The majority (56 percent) said days in A/R have increased. Healthcare organizations can collect more revenue.
Impact: Salucro’s inaugural Healthcare Provider Fintech Insights Report reveals that revenue cycle leaders’ biggest concern is timely patient collections. With 48 percent of respondents putting it as their top challenge, they relegated typical issues denial management (36 percent) and the staffing shortage to second and third place. Patient debt poses a significant risk to provider revenue. The likelihood of collecting balances decreases as they age. Once a bill remains in accounts receivable for over 120 days, the average collection rate drops to just 10 cents per dollar.
Previously, when patients accounted for only 10 percent of provider revenue, many providers did not feel compelled to request payment upfront as it did not significantly affect their revenue. However, in today's healthcare landscape, the rise in high deductible healthcare plans and the number of self-pay patients means that patients now supply more than 30 percent of provider income, which can critically impact the financial stability of a practice, group, or healthcare system. This shift has led to increasing accounts receivable and bad debt, leaving healthcare organizations struggling to secure sufficient revenue.
Many barriers impede upfront collections, including provider reluctance to act as a bill collector, fear of patient push-back, skepticism about upfront payment estimate accuracy or lack of a pre-service estimate system, and lack of staff training in (or familiarity with) upfront collections.
Path to revenue recovery: Providers can make upfront collections a normal part of patient care when they:
- train staff
- educate patients
- put systems and even software in place to achieve pre-service estimate accuracy
Achieving effective upfront collections is a multifaceted process. It involves educating staff and physicians on the critical role this practice plays in both the financial health of the organization and in enhancing patient transparency and satisfaction. This requires fostering a cultural shift within the organization, where collecting payments is integrated into the overall healthcare delivery process. Better upfront collections improves revenue.
Take a quick tour of how you can simplify upfront collections when you automate eligibility verification and estimate generation here:
4. Technology Integration
Issue: Implementing and integrating advanced RCM technology systems (EHRs, billing systems, revenue cycle modules, etc.) can eat up the revenue cycle team’s time and budget.
While progress is occurring, it’s often incremental. Healthcare systems and providers often deal with disparate and legacy systems that lack interoperability, a fact that hampers data exchange. However, initiatives like the 21st Century Cures Act, which mandates the use of standardized application programming interfaces (APIs) to facilitate smoother data sharing across different systems, is helping.
Healthcare organizations often have data stored in disparate systems, including electronic health records (EHRs), billing systems, and various specialized applications. Integrating these data sources to provide a unified view is complex and resource-intensive. Data silos prevent seamless data sharing and complicate the creation of comprehensive patient profiles.
Software companies are playing a crucial role in addressing integration challenges. Firms like Epic Systems, Cerner, and Allscripts are leading the way by creating interoperable EHR systems that can integrate with various third-party applications and services. Additionally, reputable revenue cycle management companies offer robust revenue cycle management platforms that consolidate different functions into a unified system, reducing administrative burden and improving data accuracy. These private sector efforts, combined with regulatory mandates, are gradually fostering a more integrated and efficient healthcare technology ecosystem
Impact: Disparate systems that fail to communicate effectively cause duplication of data entry, increased administrative workload, and errors in patient records. These inefficiencies slow down billing and claims management, resulting in delayed reimbursements and higher denial rates. The lack of seamless data flow also hampers clinical decision-making, as healthcare providers struggle to access comprehensive patient information, potentially compromising patient care quality and outcomes.
Financially, the impact of poor integration is substantial. Healthcare organizations face increased operational costs due to the need for additional staff to manage and reconcile disparate systems. These costs are compounded by the high expenses associated with fixing errors, reworking denied claims, and handling compliance issues arising from inaccurate or incomplete data. Overall, inadequate software integration undermines the efficiency, financial health, and reputation of healthcare providers.
Path to revenue recovery: Healthcare technology leaders writing in HFMA urge CFOs, MSOs, and revenue cycle executives to adopt a strategic technology plan that emphasizes interoperability. They recommend conducting thorough assessments of current IT capabilities, identifying pain points, and aligning technology investments with organizational strategy. This involves close collaboration between IT and business leaders to define desired future states and address integration gaps.
To ensure peak interoperability when evaluating revenue cycle management (RCM) and other software companies, providers should:
- Assess Compatibility: Verify that the software supports standardized data exchange protocols such as HL7, FHIR, and DICOM. This ensures seamless integration with existing systems.
- Vendor Collaboration: Engage with vendors that demonstrate a commitment to interoperability, including those participating in initiatives like CommonWell or Carequality.
- Customization and Flexibility: Choose solutions that offer flexible APIs and can be customized to meet specific integration needs.
- Data Governance: Implement strong data governance practices to manage data integrity and security across integrated systems.
5. Revenue cycle staff training and retention
Issue: A study cited by Becker's Hospital Review reveals that 63 percent of healthcare organizations are grappling with revenue-cycle staffing shortages.
Impact: A shortage of revenue cycle staff leads to delays in billing and claims processing, which increases accounts receivable and impacts cash flow. As mentioned above, the average cost to rework a denied claim can reach $118 each, and 50-65% of denials are never worked on due to lack of staff.
Path to revenue recovery: Automation is increasingly seen as a solution to the widespread RCM staffing shortages in healthcare organizations due to its ability to streamline operations and reduce the workload on staff. By automating repetitive tasks such as billing, claims processing, and data entry, healthcare providers can improve efficiency and accuracy, allowing staff to focus on more complex and patient-centered tasks.
Despite its relative newness, healthcare leaders are recognizing automation’s benefits.
When Deloitte surveyed 479 executives about the impact of automation, they reported an average cost reduction of 32%. Similarly, a Black Book survey of 1,302 healthcare financial professionals found that deploying revenue cycle automation software decreased the cost-to-collect by 27 percent and increased net patient revenue by 6 percent.
In the 2022 National Association of Healthcare Revenue Integrity’s State of the Revenue Integrity Industry Survey, 85 percent of respondents noted a positive impact on revenue from automating revenue cycle processes over the past year.
These statistics highlight that many healthcare organizations are adopting revenue cycle automation to enhance operational efficiencies.
Key Benefits of Automation
- Efficiency and Accuracy
- Automation can significantly reduce the time required to process claims and manage billing. According to the CAQH Index linked above, automating administrative transactions could save the healthcare industry over $13.3 billion annually.
- Reduction in Administrative Burden
- Automating routine administrative tasks helps reduce burnout and job dissatisfaction among healthcare staff. The American Medical Association highlights that automation can reduce billing errors and more.
- Financial Impact
- Automating revenue cycle management processes can improve cash flow and financial stability.
6. Data Analytics
Issue: Data analytics poses significant challenges for healthcare providers due to several factors related to data management, technological infrastructure, and regulatory compliance. Today, it takes data analytics to uncover sources of revenue depletion.
Many healthcare providers still operate on outdated legacy technology systems that are not compatible with modern data analytics tools. Upgrading or replacing these systems can be costly and disruptive to operations. Modern Healthcare reports that integrating new technologies with existing legacy systems is one of the most significant barriers to effective data analytics in healthcare.
Implementing advanced data analytics solutions requires significant investment in both technology and skilled personnel. Many healthcare organizations, especially smaller ones, may lack the financial resources and expertise needed to develop and maintain robust data analytics infrastructures.
Impact: Ensuring the accuracy, completeness, and consistency of data is a major challenge. Inaccurate or incomplete data can lead to erroneous conclusions and affect decision-making processes. Without proper data management, organizations may miss out on opportunities to enhance revenue recovery.
As mission-driven nonprofit and global advisory Healthcare Information and Management Systems Society (HIMSS) explains, maintaining high data quality is essential for reliable analytics.
Path to revenue recovery: Healthcare providers can ensure they have modern data analytics that unlocks revenue with:
- Leverage Cloud-Based Solutions: Utilizing cloud-based data analytics platforms can significantly reduce the cost associated with hardware, maintenance, and IT infrastructure. Providers can benefit from scalable and flexible solutions that allow them to pay for what they use. According to Forbes, cloud-based analytics services like Google Cloud, AWS, and Microsoft Azure offer robust analytics capabilities at a fraction of the cost of traditional on-premises solutions
- Partner with Technology Vendors: Establishing partnerships with technology vendors who specialize in healthcare analytics can provide access to advanced tools and expertise without burdensome upfront investment. Vendors often offer subscription-based models, which can be more cost-effective. Partnering with vendors for managed services can also help in maintaining and updating the analytics platforms efficiently.
- Invest in Training and Development: The Healthcare Information and Management Systems Society (HIMSS) emphasizes the importance of continuous education and certification programs for healthcare IT staff. Investing in the training and development of existing staff can help healthcare providers maximize the use of their analytics tools. By enhancing the skills of their workforce, providers can ensure better utilization of data analytics capabilities, leading to improved decision-making and operational efficiencies.
- Implement Data Governance: Establishing strong data governance practices ensures data quality and integrity, which are critical for effective analytics. By standardizing data collection and management processes, healthcare providers can reduce errors and redundancies, leading to more accurate insights and cost savings. The American Health Information Management Association (AHIMA) provides guidelines on implementing effective data governance strategies.
- Consider Grants and Funding: Seeking grants and funding opportunities from government programs and private organizations can help offset the costs of implementing modern data analytics solutions. Programs like the Health Resources and Services Administration (HRSA) offer grants aimed at improving healthcare delivery through technology.
By combining these strategies, healthcare providers find the revenue that’s been escaping them.
7. Data Security
Issue: After the recent Change Healthcare, Tricare, UCLA, and more data breaches, protecting patient data from breaches and cyberattacks is both a top priority but also a significant challenge for healthcare organizations. As healthcare organizations adopt more advanced data analytics tools, they must also enhance their cybersecurity measures to protect sensitive information, which can be both technically challenging and costly.
Impact: Data breaches and cyberattacks in the healthcare sector can have severe financial, organizational, and reputational impacts. The recent data breach at Change Healthcare is estimated to cost between $1.35 billion and $1.6 billion for the year 2024. This includes $872 million spent in the first quarter alone, covering direct-response costs such as restoring the clearinghouse platform and managing business disruptions.
Data breach costs include legal fees and the expenses associated with notifying affected individuals, conducting investigations, and implementing enhanced security measures. Healthcare providers enduring data breaches also face reduced revenue due to lost patient trust and potential lawsuits from those whose data was compromised.
Organizationally, data breaches disrupt normal operations, diverting resources and attention away from patient care to address the breach's fallout. This diversion can lead to operational inefficiencies, decreased employee morale, and increased workloads as staff work to mitigate the breach's effects. Reputationally, breaches erode public trust, as patients may lose confidence in the provider's ability to safeguard their personal information. This loss of trust can result in decreased patient retention and new patient acquisition, further impacting the organization's financial health and market position. In the long term, the damage to a provider's reputation can take years to repair, underscoring the critical importance of robust data protection measures.
Path to revenue recovery: Forward-thinking healthcare providers are adopting a multi-faceted approach to preventing data breaches, combining internal efforts, external partnerships, and the use of specialized consultants.
Internal security measures:
- Enhanced cybersecurity protocols: Many providers are investing in advanced cybersecurity technologies such as encryption, multi-factor authentication, and continuous network monitoring. They implement stringent access controls and regularly update software to patch vulnerabilities.
- Employee training: Providers emphasize regular training programs to educate staff on recognizing phishing attempts and adhering to best practices in data handling and cybersecurity hygiene.
Outsourcing and managed services:
- Managed Security Service Providers (MSSPs): To address the complexity and resource demands of cybersecurity, many providers outsource their security operations to MSSPs. These organizations offer 24/7 monitoring, threat detection, and incident response services.
- Cloud services: Transitioning to cloud services provided by reputable vendors helps leverage robust security infrastructure and compliance capabilities.
Consultants and advisory services:
- Cybersecurity consultants: Providers bring in specialized consultants to conduct security assessments, develop comprehensive security strategies, and guide the implementation of best practices. Consultants also assist in compliance with regulations like HIPAA.
- Penetration testing and audits: Engaging third-party firms for regular penetration testing and security audits helps in identifying and mitigating potential vulnerabilities before they can be exploited.
Collaborations and information sharing:
- Industry collaboration: Participating in information sharing and analysis centers (ISACs) allows providers to stay informed about the latest threats and share insights with peers. This collective defense strategy enhances the overall security posture of the healthcare sector.
Regulatory compliance:
- Compliance programs: Providers invest in compliance programs to meet regulatory requirements, which often include rigorous data protection standards. Adhering to frameworks such as NIST and ISO 27001 ensures a structured approach to managing and securing patient data.
By combining these approaches, healthcare providers aim to create a resilient defense against the ever-widening threat of cyber threats.
It takes proactive contract management and underpayment detection to optimize revenue
You can find where your organization is surrendering revenue to payers and patients when you use contract management and modeling as well as healthcare payer analytics. Healthcare contract management and modeling tools empower you to capture that two to five percent that can make a million-dollar difference in your revenue. Without consultants involved, you can improve revenue affordably.
MD Clarity's RevFind enables practices, physician groups, and MSOs to gain crucial insights from payer data and contracts by digitizing and centralizing all agreements. This system scrutinizes each payment against the contract's specified terms, flagging discrepancies for staff to resolve with payers and rectify improper reimbursements. Additionally, it benchmarks your reimbursements against national standards, including Medicare. RevFind offers valuable insights for proactive negotiations and highlights costly trends for substantial revenue recovery. By identifying systemic root causes, it aids in preventing future underpayments.
Schedule a demo to see how RevFind sweeps in the net revenue you’ve already earned.