WASHINGTON, June 27, 2017 /PRNewswire/ -- Hospitals and
health systems have seen healthy margins the past few years despite
reimbursement cuts because they focused on the cost side.
Over that time, revenue cycle performance has lagged across a few
key performance areas and the cost to achieve even flat performance
has risen. Because of the focus on cost over revenue cycle
performance, the average 350-bed hospital has an overlooked
opportunity of up to $22 million in
revenue capture, Advisory Board analysis shows.
Improving revenue cycle performance to decrease missed revenue
opportunity means responding to four market forces.
"From top-performing revenue cycle organizations to the bottom
quartile, critical benchmarks have been either stagnant or steadily
sliding since 2011 and need a strategic overhaul," said
James Green, National Partner,
Consulting at Advisory Board. "Even if payments from
government payers—Medicare, Medicaid, and insurance
exchanges—remain constant in 2017, four other forces present
strategic challenges to defending margins. These are increased
patient 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."
As an example of worsening trends, proprietary Advisory Board
benchmarks show that median performing organizations have stagnated
on net days in accounts receivable—and the overall average cost to
collect worsened by 70 basis points of net patient revenue from
2011 to 2015, amounting to millions of dollars for many
hospitals.
"Many hospitals and health systems have an opportunity to rise
from median to top-quartile revenue cycle performance across four
key metrics," said Jim Lazarus,
National Partner, Technology at Advisory Board, referring to denial
write offs, bad debt, cost to collect, and contract yield.
"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."
Advisory Board analysis of the four forces challenging revenue
cycle performance also shows the following:
Commercial Payers are scrutinizing more claims than ever:
Increased denials mean commercial contracts no longer provide the
growing margins that used to offset lower Medicare and Medicaid
reimbursement for many hospitals. Hospitals are losing, on average,
five percentage points of their margin to underpayments, denials,
and suboptimal contract negotiations, Advisory Board analysis
indicates.
Patient obligations are neutralizing benefits of coverage
gains: While insurance coverage has increased, so has bad debt.
From 2008 to 2015, U.S. workers with deductibles greater than
$2,000 grew from 5.0% to 19.0%,
Kaiser Family Foundation surveys showed, and this trend shows no
sign of slowing down. Over that time, the portion of patient
obligations being written off as bad debt rose from 0.9% to 4.4%,
according to Advisory Board analysis. 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.
MACRA is adding new performance burdens to physicians and
medical groups: The Medicare and Chip Reauthorization Act
(MACRA) includes significant financial penalties not only for poor
quality and cost performance, but also for insufficient reporting.
This increased complexity and financial risk is expected to drive
even more physicians to leave solo or small group practices for
hospital employment. MACRA also increased the need for precise risk
adjustment documentation, which is required for an accurate
Medicare Risk Adjustment Factor score that determines financial
targets for bonuses and penalties for health care providers. As
hospital-sponsored physician employment has increased, so has the
need for resources to quickly meet documentation performance
standards to minimize revenue at risk.
Payer, Patient, and Physician forces are driving
consolidation: Too many hospitals stop the integration of newly
joined revenue cycle organizations at the creation of a joint
centralized business office and do not seek further economies of
scale. More holistic integration should transform the revenue cycle
from a cost center to a value generator. This integration should
include a value-added shared services organization that provides a
common business intelligence platform across entities and service
lines systemwide, the ability to generate a single patient bill for
all physician and hospital services, and the use of integrated
coders to drive further understanding and coding accuracy.
"Hospitals and health systems can look to a well-established
library of best practices to address these four forces. Success is
attainable if hospitals and health systems can improve their
visibility into performance data, overcome inefficient resource
allocation, and discard the too-common 'permanent emergency'
mindset that leads to tactical, unproductive approaches to
strategic problems," said Christopher
Kerns, Executive Director, Research at Advisory
Board.
About Advisory Board
Advisory Board is a best
practices firm that uses a combination of research, technology, and
consulting to improve the performance of 4,400+ health care
organizations. As the health care business of The Advisory Board
Company (NASDAQ: ABCO), Advisory Board forges and finds the best
new ideas and proven practices from its network of thousands of
leaders, then customizes and hardwires them into every level of
member organizations, creating enduring value. For more
information, visit www.advisory.com.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/average-hospital-revenue-cycle-leaves-22-million-on-the-table-300480502.html
SOURCE The Advisory Board Company