Back To Basics: Revenue Cycle Fundamentals to Capture Revenue
As U.S. workers continue to be unemployed during the pandemic, health systems will experience a shift in payer mix for the patients they serve. The majority consumers will be able to obtain coverage through a family member’s coverage, Medicaid, ACA or other sources. The long-term impact on hospitals and health systems is significant – they will continue to see more uncompensated care, more self-pay patients and more people enrolled in government insurance programs like Medicare and Medicaid. To survive, providers need to retool their cost structures, understand the financial implications of this reimbursement shift and receive accurate payment for all services.
The gap between providers’ expected and actual revenue will be dramatic as patients lose their private health benefits and become uninsured or enroll in public health insurance programs.
Medicare and Medicaid have historically lower reimbursement rates. Now it’s more important than ever for providers to know and account for the difference between the rates commercial health plans and public health insurance programs pay as those rates can vary dramatically. A recent analysis from the KFF reveals just how big a gap there can be and reinforces that hospitals, health systems and medical practices must have sound revenue cycle and reimbursement fundamentals during the COVID-19 pandemic and beyond. Six Kaiser researchers compared the private-payer and Medicare reimbursement rates for 10 different inpatient hospital services from 2014 through 2017. Three of the ten services were respiratory-related services typically provided to patients suffering from COVID-19. The other seven were for treatments and procedures such as angioplasties and hip and knee replacements.
The researchers found two items of particular note for provider finance and revenue cycle leaders:
Average private insurance payments for the ten services were 1.56 to 2.54 times higher than the rates paid by Medicare, depending on the service. For example, commercial carriers paid out an average of $30,099 for a hip or knee replacement procedure in 2017 compared with $14,747 paid out by Medicare.
Average private insurance rates for the services rose faster over the four-year study period than the rates paid by Medicare. For example, the average commercial health plan payment for uterine surgery rose 21.1 percent from 2014 to 2017 compared with just 2.9 percent for the average Medicare payment for uterine surgery.
“Proposals to create a public option or allow people to enroll in Medicare earlier could constrain payment rates and make health coverage more affordable, but also decrease revenues for health care providers,” the researchers said.
The long-term impact on hospitals and health systems is significant – they will continue to see more uncompensated care, more self-pay patients and more people enrolled in government insurance programs like Medicare and Medicaid.
To successfully mitigate the impact, providers will need to excel at each step in their revenue cycle operations. In the front end, for example, hospitals and health systems will need comprehensive eligibility and enrollment services. Enrolling eligible newly uninsured patients in Affordable Care Act (ACA) plans, Medicaid, Medicare or other health insurance programs will help lower a provider’s uncompensated-care and self-pay exposure. Beyond helping patients find coverage, the ability to help patients access financial assistance programs will also be crucial in dealing with patients’ loss of ESI. Superior mid-cycle competencies of coding and charge capture will help provide more accurate reimbursement for the services provided.
On the back end, providers will need effective claims management, billing and collection skills to capture their reimbursement from commercial health plans and from patients with out-of-pocket financial responsibilities.
The COVID-19 pandemic is having a direct effect on providers’ payer mix and, as the new Kaiser analysis shows, that effect can bring with it a significant financial impact. The time to anticipate and prepare for that impact is now.
TAKEAWAY
The gap between providers’ expected and actual revenue will be dramatic as patients lose their private health benefits and become uninsured or enroll in public health insurance programs. Hospitals and health systems must sharpen their reimbursement and revenue cycle skills to accurately predict the size of that gap and take the necessary steps to close that gap as much as possible. To help you get started and create an action plan to recover revenue now and develop an ongoing long-term strategy, now is the time to consider bringing on a strategic partner. When selecting a strategic partner, ensure they understand the margin pressures the healthcare industry is facing and that they have the technology and expertise to help your health system face the immediate challenges and prepare for the future.
