In an analysis of 850 client hospitals’ payment transactions, accounting and consulting firm Crowe Horwath’s Crowe Report found “an alarming disparity of performance across five major national commercial managed care payers in key performance indicators (KPIs) for the revenue cycle such as accounts receivable (AR) and denials.” This article concludes with some solid suggestions to mitigate the effects of an increasingly challenging operating environment.

 Findings confirm that hospital financial executives are facing increasingly challenging revenue cycle management and worsening payment:

  • Some health insurers are making it more difficult for hospitals and health systems to collect revenue—52.2 days for the lowest AR and 67.7 days for the highest.
  • Initial denial rates among those five national payers varied from 7.5 percent to 11.1 percent of net patient service revenue (NPSR); one of every 10 dollars of revenue is at risk for nonpayment.
  • Uncollectible claims ranged from 0.8 percent to 2.4 percent of NPSR.
  • The payer with the highest denial rate used the request for additional medical information description more than three times as often as the payer with the lowest rate.

The disparity in denial activity – with similar claims denied dissimilarly – puts hospitals at a disadvantage. A disconnect between hospital managed care contracting and revenue and billing cycle departments over what is actually collectible exacerbates the problem.

Darker Days Ahead

In a 2018 “Healthcare Outlook,” Navigant predicted an uptick in uncompensated care after years of decline as a result of potential cuts to the Affordable Care Act (ACA), growing reliance on high deductible insurance plans, and a rise in uninsured populations. A November Moody’s Investors Service report found that bad debt increased in 2017 after a decline from 2014-16 and predicted that bad debt will grow 6-7 percent in 2018, partly attributable to rising copayments and increased patient reliance on high deductible health plans.

It’s no wonder that a Navigant/HFMA survey of 125 hospital and health system CFOs found that 90 percent are concerned about consumer self-pay and less than half have established revenue integrity programs. Navigant Managing Director Jake Morris’ advice to hospitals:

  • Tighten revenue cycle functions.
  • Implement strategies for rating credit quality to target collection efforts where they’re likely to yield results.
  • Develop manageable payment plans for households with less income.

Clear Clouds of Uncertainty

Here are some suggestions for hospitals plagued by denials, especially in areas of eligibility, medical necessity (particularly for outpatients), level of care assignment, and notifications.

  • Use software that reveals eligibility and co-payments to help staff educate patients about charges for services and what they will be billed.
  • Establish policies and procedures around Emergency Department leveling.
  • Focus on point-of-service collections and clearly communicating out-of-pocket costs to combat health insurance illiteracy.
  • Work closely with payers to reduce denial rates to avoid:
  • Unhappy patients getting caught in the middle, receiving unexpected bills
  • Dissatisfied health plan members
  • Combine business office and medical records department to create an RCM team.
  • Incentivize staff for each upfront payment collected.

There will always be challenges associated with revenue cycle management. However, finding solutions that will help your team work quickly and efficiently is the key to weathering the storm.