- “There is always room for improvement” should be healthcare revenue cycle management’s mantra. Declining claims reimbursement rates, the shift to value-based purchasing, and evolving health policies keep revenue cycle leaders constantly seeking new strategies for improving the financial health of their practice or hospital.
But simply cutting costs and improving efficiencies within a healthcare organization is easier said than done. Unlike other industries, healthcare consumers rely on providers to do whatever is possible to improve their health and organizations do not usually turn away patients in need.
Hospitals and practices also interact with several payers before receiving complete payment for services. The maze of payer rules for claims reimbursement and the popularity of high-deductible health plans has revenue cycle managers reaching out to several points-of-contact to obtain a piece of the payment.
New trends, such as value-based reimbursement and healthcare consumerism, also continue to change the way care is paid for and delivered. Organizations must respond to consumer and market demands to keep their doors open.
The challenges of the healthcare industry have always complicated revenue cycle management. However, practice and hospital leaders can implement these four strategies for lasting healthcare revenue cycle management excellence.
Break down front- and back-end revenue cycle management
READ MORE: What Is Healthcare Revenue Cycle Management?
Healthcare revenue cycle management is traditionally separated by front- and back-end functions. The front-end of the revenue cycle is patient-facing. Front-end staff collect information from patients, confirm insurance coverage and eligibility, and register new patients.
Back-end revenue cycle management includes claims management, denials management, medical billing, and final patient financial responsibility collection.
Front- and back-end revenue cycle management staff perform distinct tasks that, when combined, result in complete healthcare payments.
Practices and hospitals can optimize the healthcare revenue cycle by breaking down the silo between front- and back-end responsibilities. Ensuring a seamless journey through the revenue cycle is key to faster, more accurate reimbursement.
Improving front- and back-end revenue cycle management collaboration helped a 25-bed community hospital in Illinois increase point-of-service patient collections by 300 percent, explained Rebecca Wright, Vice President of Strategic Planning at Iroquois Memorial Hospital.
“The biggest thing I noticed was - and it’s not just here, it’s everywhere - the entire revenue cycle was a very segmented process,” she said. “People only were familiar with their role whether it was registration or scheduling or billing. They only understood what their role was.”
The segmentation resulted in knowledge gaps among revenue cycle staff. They did not fully understand how patient financial responsibility was calculated or what was actually needed to completely process a claim.
“In the past, it’s always been focused on back-end or business office and in collections, and we turned it on its head and looked at how we can push it more to the front-end,” she said. “Because we knew by pushing more of it to the front-end, we could reduce overall costs for our organization and make outcomes a little bit better.”
Shifting back-end functions to the front allowed staff to see where an account stood in the revenue cycle and anticipate possible payment challenges early in the process.
Use data to track and benchmark revenue cycle performance
“Ultimately, you can’t manage what you don’t measure,” Director and Healthcare Analyst at consulting firm AArete Chad Sandefur told RevCycleIntelligence.com.
Practice and hospital leaders should aim to implement a data-driven healthcare revenue cycle, he suggested. Data will tell revenue cycle leaders the financial health of an organization and if staff are efficiently performing the tasks needed for fast, accurate reimbursement.
Using financial and clinical data, organizations should develop and track key performance indicators (KPIs), advised Sandra Wolfskill, Director of Healthcare Finance Policy and Revenue Cycle MAP at the Healthcare Financial Management Association (HFMA).
“The value that key performance indicators bring to the table is the definition of standard and what you want from it is to be something that allows it to be comparable,” she said.
“The advantage of having strategic keys to look at is you can see very quickly if the trend line is going in the right direction,” she elaborated. “If so, life is good. If it is going in the wrong direction, how do I need to shift to try to have an impact within a 30, 60, or 90-day cycle? How do I need to manage my workforce and my resource availability?”
Provider organizations should track five healthcare revenue cycle KPIs to ensure excellence, Wolfskill recommended. The KPIs are net days in accounts receivable (A/R), cash collection as a percentage of net patient services revenue, claim denial rate, final denial write-off as a percentage of net patient service revenue, and cost to collect.
Revenue cycle managers should also present KPI and other data insights to providers and non-clinical staff to motivate them to improve spending and efficiency, advised Sally Mason Boemer, Senior Vice President of Finance at Massachusetts General Hospital.
“A lot of my time and efforts are making sure that people understand that environmental context,” she said. “It's very hard to motivate people to focus on reducing costs if they're not confident that you're collecting every dollar that you're owed for the work you are doing.”
“As you're trying to change quickly, you need data to craft your story and tell it to your workforce and bring them along with you on that journey.”
Collect patient financial responsibility upfront
As high-deductible health plans dominate the insurance market, providers are relying more on patients to foot the bill for healthcare services. Nearly three-quarters of providers reported a significant increase in patient financial responsibility in 2015, an InstaMed survey found.
Despite shouldering more healthcare costs, about 68 percent of patients with medical bills of $500 or less did not fully pay in 2016, TransUnion recently reported. And the percentage of patients failing to fully pay their medical bills was on the rise, with 53 percent in 2015 and 49 percent in 2014 reporting that they did not completely pay their medical bills.
Late and underpaid patient financial responsibility slows healthcare revenue cycles. Not only do organizations run the risk of never receiving full payment for services, but staff deploy additional resources on contacting and collecting from patients.
Revenue cycle managers can optimize patient collections by implementing point-of-service or pre-service payment options.
Healthcare organizations should start by offering patients financial estimates before or at the point-of-service. Over one-half of acute care hospitals do not have the capabilities to provide price information to patients, a 2016 Pioneer Institute study uncovered.
Yet, about 46 percent of younger patients claim they would be able to pay more patient financial responsibility at the point-of-service if they received a cost estimate, according to a recent Transunion survey.
Hospitals and practices can prepare for cost estimates by implementing software tools, explained Sean Lundy, CMPE, of the Hand & Wrist Center in Houston.
“Since obtaining current allowable amounts directly from payers can be challenging, to say the least, providers should use software tools that assess historical data and estimate allowable expenses for specific payers and procedures,” he wrote.
Organizations should also implement credit-card-on-file services to boost point-of-service collections. Only 20 percent of providers offer a credit-card-on-file option despite it being the most preferred collection method of patients, reported Navicure.
One of those provider organizations found that a credit-card-on-file strategy reduced A/R days by 28 percent in six months. Orthopaedics & Rheumatology of the North Shore, a four-physician specialty practice in Illinois, also saw accounts aging 91 to 120 days for patient balances drop by 72 percent.
Automate prior authorizations and eligibility
Payers are increasing prior authorization and coverage eligibility requirements in an effort to reduce unnecessary costs. About 86 percent of medical practice leaders reported increased prior authorization requirements in 2017, MGMA recently reported.
The rise in requirements spells trouble for the revenue cycles of both practices and hospitals.
“Health plan demands for prior approval for physician-ordered medical tests, clinical procedures, medications, and medical devices ceaselessly question the judgement of physicians, resulting in less time to treat patients and needlessly driving up administrative costs for medical groups,” stated Halee Fischer-Wright, MD, MMM, FAAP, CMPE, MGMA President and CEO.
Administrative costs can especially grow if organizations still use manual processes to check prior authorizations and eligibility. Manual prior authorizations cost providers an average of $7.50 per transaction, while electronic prior authorizations only cost $1.89 per transaction, the 2016 CAQH Index showed.
Practices and hospitals can also save an average of $3.60 per eligibility and benefits verification by switching to an automated process.
Despite potential savings, electronic claims management adoption is slow, with just 1 to 8 percent of health plans in 2015 implementing electronic options.
Automating prior authorization and eligibility processes can also help organizations optimize healthcare revenue cycles and clinical processes. Nearly 90 percent of providers stated that prior authorizations sometimes, often, or always delay care, an American Medical Association survey showed.
Providers and revenue cycle managers can ensure a seamless healthcare journey by switching to automated processes. Staff can reduce the time it takes for them to fulfill prior authorization and eligibility requirements and focus their time on high-priority tasks, such as patient collections.
From innovative care interventions and health IT to new payment structures and policies, healthcare is constantly changing. Revenue cycle leaders should ensure their organization has a strong financial foundation to weather changes and new methods of delivering care.
Joining front- and back-end functions, using data, collecting patient payments upfront, and automating claims management tasks will help practices and hospitals create a strong healthcare revenue cycle that responds to an evolving industry.