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Brad Skelton, maxRTE Regional Manager

Wasteful processes that contribute to rising costs further darken the picture for hospitals already pressured by challenging patient volumes with high insurance deductibles. Re-evaluating financial strategies for ways to cut waste and streamline processes helps offset compressed margins and reduced reimbursement rates. 

To ease their bottom lines in the face of these harsh realities, health system executives must cut waste in their organizations in an effective, efficient manner. Where can they look?

Labor may seem like a reasonable target since it is responsible for 50% of hospitals’ total operating costs, according to a 2017 Deloitte survey. However, having faced nurse and physician shortages, reducing labor is not a viable cost-cutting strategy since it risks quality care and positive outcomes.

Therefore, leaders must proactively seek other areas to eliminate wasteful processes. One of the most important areas is financial. 


Rethinking revenue cycle management 

Magnolia Regional Health Center (MRHC), a multispecialty hospital in Corinth, Mississippi, began using Lean principles to drive out inefficiencies in revenue cycle management (RCM) in 2016. According to Donne Henry, MRHC vice president of revenue cycle, the move has delivered meaningful savings without reducing fulltime employees. 

MRHC has brought in some automated services offered by third-party vendors, but the majority of the organization’s operations are still run in-house. The greatest gain, according to Henry, was the reduction in accounts receivable days from 58 to 46. “Our collections got better, our cash on hand got better, and our coding got better,” she says. Other gains include:

  •     Cash-on-hand grew from 85 to 99 days by the end of 2019
  •     Total profit margin percentage jump from -7.8% to 3.4% in 2018 
  •     Debt service coverage increased from 1.2% to 2.1% in 2018 
  •     Debt-to-capitalization ratio rose from 114.1% to 127.7% in 2018.


Pay at or before check-in

A large portion of waste, Henry realized, could be eliminated at registration areas with more “patient-centric” processes. Having one person responsible for MRHC’s manual patient insurance verification process caused massive inefficiencies in the organization’s system.

Henry knew that in order to collect payments prior to arrival, or on arrival for those who prefer to pay in person, eliminating wait time would be essential. Therefore, the goal was to get patients to the test area and bypass the wait to complete paperwork and demographics.

MRHC classifies patients into three preregistration categories that front desk clerks verify at registration: patients who paid within payment plans, those who pay upon arrival, and those who are unable to pay. Patients who are unable to pay meet with clerks to obtain financial assistance applications.

To further preregistration and securing payment prior to an appointment, MRHC offered patients discounts ranging from 25% to 50% for preregistration. Together, these efforts drove the following improvements:

  •     Up-front collections increased from $1 million in 2017 to $1.2 million in 2018
  •     Wait times dropped from nine minutes in 2017 with nine full-time clerks working on this task, to four minutes in 2019 with five full-time clerks. 

Ready to take a look at streamlining your financial strategies? 

  •     Consider the 80/20 rule: Identify the 20% of problems that cause 80% of issues, and focus on the 20% of activities that would account for 80% of returns. 
  •     Automate manual processes that are taking a bite out of productivity and getting in the way of pre-registration and collecting payment on or before arrival.

Test our insurance eligibility/benefits verification software risk free. Learn more. Schedule a demo.

maxRTE has been helping healthcare providers shorten the revenue cycle for more than 20 years. With maxRTE, just one click validates plan-specific benefit data such as patient coverage effective dates, co-pays and deductible information. Visit maxrte.com for your free web demo.