Hospital margins have been hit hard over the last few years, with 75% reporting “adverse revenue cycle impact.”¹ Although patient volumes and other financial metrics have started to recover, hospitals still face “skyrocketing expenses and depressed margins” that offset many of those gains.² Add to that an increase in self-pay, uninsured, bad debt, and uncompensated care, along with continued labor challenges, and the situation has become dire for many organizations.³

According to the June 2022 National Hospital Flash Report, hospital margins are “cumulatively negative” as hospitals continue performing “below pre-pandemic levels.”⁴

The road to post-pandemic financial recovery depends upon a sound revenue cycle. Hospitals cannot afford outdated manual processes and workflow inefficiencies that lead to denied claims and delayed reimbursement. There are four key areas in particular where hospital revenue cycle leaders can address these issues with a more strategic approach.

Focus on clean claims

Nowhere is GIGO (garbage in, garbage out) truer than in claims processing workflows. Ensuring claims are correct and complete upon first submission is critical to the health of cash flow and the bottom line.

Top issues that lead to claim rejections and denials include missing or invalid claims date, prior authorization and precertification issues, and inaccurate eligibility or registration information.⁵ These three issues alone are responsible for more than half of all denials, and all are caused by inefficient workflows.

There are several things providers can do to improve clean claim rates and reduce denials. The first is to leverage claim scrubbing tools that identify and flag potential issues before a claim reaches the payer’s adjudication system, which allows staff the ability to fix the issue before the claim has a chance to be rejected.

Prioritizing payer updates is also important. It can be challenging for staff to stay on top of continuous changes in payer requirements. Not doing so, however, can lead to denials such as unmet prior authorization or documentation requirements, missed timely filing deadlines, and more.

Another way to reduce rejected and denied claims is to make sure coding staff receives ongoing education on complete and accurate coding. They also need to be aware of how the quality of their work impacts the quality of the hospital’s bottom line. Using incentives for error-free work can help. It might also help reduce turnover.

According to industry experts, providers should strive for clean claims rate of above 90%.⁶

A note about encounter data: To advance healthcare’s transition to a value-based payment model and achieve optimal fiscal health, hospitals need to ensure that encounter data is accurate. Errors in encounter data, besides impacting reimbursement, also leads to denied claims, delayed payments, and increased stress on already overworked staff. The data should be tracked at the individual physician level and scorecards issued to promote accountability.

Take a more strategic approach to denial management

Payers are denying more claims than ever, about one in every 10 claims submitted.⁷ The cost to health systems can be as high as 2% of net revenue. Three reasons for the increase, according to Modern Healthcare, are that payers are using more sophisticated algorithms to perform automated reviews, they’re using more complex criteria for claims submission and medical necessity, and they’re including more variables in their contracts such as medical necessity criteria and technical specifications.⁸

Providers should take a three-pronged approach to denial management: Prevention, recovery, and escalation. Prevention requires that providers understand why claims have been denied—including at the payer level. Leveraging this information, providers gain actionable insights to inform changes in how claims are formulated on the front end, thus preventing future denials.

A solid recovery process facilitates faster, more accurate reimbursement. Technology that leverages machine learning and advanced trending methodologies can automate the appeals process. This is especially useful for bulk denials from a single payer. Automating this process helps reduce payment delays, improve appeals success, and enable staff to focus on more strategic tasks like escalation.

The third prong, escalation, is where the human engine kicks into high gear. This process requires not just an escalation workflow, but the expertise of your most experienced, highly qualified revenue cycle experts who have an in-depth understanding of the entire claims management process.

Apply analytics to improve focus

Achieving optimal revenue cycle outcomes requires a focus on industry best practices and a commitment to continuous improvement. Providers need to leverage end-to-end revenue cycle analytics with standardized reporting that allows them to do comparison analyses with peer organizations.

Providers should take a technology-forward approach by leveraging artificial intelligence and predictive analytics to identify problematic trends in both payer behavior and internal revenue cycle processes. Measuring quality at every step and sub-process level helps improve the entire claim journey and, in turn, has a positive impact on your hospital’s financial performance.

[CALLOUT] Predictive analytics, combined with business and artificial intelligence, enables providers to deploy scarce resources more effectively.

Consider outsourcing

As hospitals face ongoing staffing challenges, outsourcing all or a portion of the revenue cycle can help. Outsourcers often have a broader pool of highly qualified revenue cycle experts that hospitals cannot find in their local communities—especially now. Instead of dealing with recruiting, onboarding, and training inexperienced revenue cycle staff, outsourcing enables revenue cycle leaders to focus on more systemic initiatives and process improvements.

The best outsourcers will be those that have extensive expertise in front-end, mid-cycle, and back-end revenue cycle functions. They should be flexible so as to meet the hospital’s unique requirements while also having the ability to quickly scale to accommodate fluctuation in needs.

A survey by Kauffman Hall found that 92% of healthcare leaders have had difficulty attracting and retaining support staff, with nearly as many saying they’ve had to increase base salaries to be more competitive.⁹ Outsourcing can help mitigate these difficulties while at the same time reducing costs and optimizing revenue cycle performance.

References

1. https://www.kaufmanhall.com/insights/research-report/2021-state-healthcare-performance-improvement-report-covid-creates
2. https://www.beckershospitalreview.com/finance/may-hospital-revenue-boost-not-enough-to-offset-expenses-kaufman-hall-says.html
3. https://www.kaufmanhall.com/insights/research-report/2021-state-healthcare-performance-improvement-report-covid-creates
4. https://www.kaufmanhall.com/sites/default/files/2022-06/KH-NHFR-2022-06.pdf
5. http://cthima.org/wp-content/uploads/2018/12/CTHIMA-Payer-Denial-Trends-Rocky-Hill-Dist-12.13.2018.pdf
6. https://revcycleintelligence.com/news/clean-claim-write-off-metrics-key-to-diagnostic-provider-success
7. https://www.modernhealthcare.com/revenue-cycle/why-your-denials-are-skyrocketing-and-3-ways-hospitals-can-respond
8. https://www.modernhealthcare.com/revenue-cycle/why-your-denials-are-skyrocketing-and-3-ways-hospitals-can-respond
9. https://www.fiercehealthcare.com/hospitals/kaufman-hall-covid-19-will-force-permanent-changes-to-hospital-staff-supply-systems