Unlocking Hidden Revenue: Transforming RCM Challenges into Financial Wins

It’s difficult to believe that it’s been four years since the pandemic hit, and organizations are still struggling with historically low margins and high costs, especially related to labor. On top of it all, providers have been hit with increasingly complex payer contracts and federal regulations, making it difficult to fully recover. 

A 2023 report published by the American Medical Association reveals a grim picture of the financial pressures providers have faced since the pandemic. For example, labor expenses rose to $839 billion, accounting for 60% of hospital expenses, while the growth of inflation reached more than double the growth of IPPS at 12.4% and 5.2%, respectively. In addition, payer takebacks reached $1.6 billion per month, while prior authorization denials reached 110,000. 

Although inflation and staffing shortages have eased and operating margins continue to stabilize, recovery is slow. Kaufman Hall’s July 2024 National Hospital Flash Report shows operating margins at 3.8%, up from the prior month (3.3%) but down from January 2024 (5.0%). 

The bottom line is that healthcare is still in a precarious state of recovery. Fortunately, there are simple steps providers can implement to help optimize their revenue cycle and unlock much-needed revenue.

Leveraging data and analytics

Optimizing the revenue cycle requires providers to first identify their most impactful deficiencies. Data transparency and predictive analytics are vital to this process. When combined with business and artificial intelligence solutions, predictive analytics gives providers greater insight into revenue cycle performance and payer behavior. Having comprehensive insights enables better, more timely decision-making. 

Understanding payer reimbursement patterns around a variety of claim types allows providers to leverage their staff more strategically. For example, if specific payers don’t typically remit payment for care delivery until day 14 (regardless of the claim type or when it was submitted), there’s no reason a staff member should work an account until day 15 or 16. This type of insight helps providers utilize scarce staffing resources more effectively. 

Another example of leveraging data and analytics is identifying which payers deny the most claims and for what reason. In the case of medical necessity denials, understanding which payers are at the top of the denials list enables providers to implement additional efforts to put preventative measures in place and structure appeal content so it’s more effective and generating more yield. 

Enhancing cash collections with a strategic approach

The popularity of high-deductible health plans (HDHPs) has significantly increased patient financial responsibility and made it more difficult for patients to pay and providers to collect. Today, the average annual maximum out-of-pocket costs for a family is $16,100. The result is a staggering increase in medical debt. Today, 66% of Americans have “outstanding medical bills or medical debt,” of which half is in collections. 

One way to mitigate these challenges is by helping patients pay for the care they need. This begins by aligning front-end processes with back-end collection efforts, such as by offering patients estimates of their financial responsibility before they have their service. This should be approached with a mindset of education and helping patients understand what they owe, not just about collecting.

Another way to streamline collections is by making it easier for patients to pay. This means offering customized payment plans based on a patient’s propensity to pay while also giving them the ability to add additional medical bills over time. While many organizations offer payment plans, they usually don’t provide that option until the patient asks for it or after they fall into default. Being proactive shows patients that their providers care about them.  

Offering patients digital tools such as a patient payment portal, mobile payments, electronic statements, automated phone payments, and text payment reminders helps collections by making it easier for them to pay in a way that best suits their budget and lifestyle. To be successful, providers should give patients the ability to choose their favorite communications and payment options based on their preferences.

Uncovering untapped revenue

In addition to improving process efficiencies, leveraging data and analytics, and enhancing cash collection processes, providers should consider ways to capture revenue that has been missed. One of the best options is to review payer contracts and maximize existing agreements. 

The first step is setting up a good contract adjudication system and leveraging data and analytics to identify variances from expected trends. This can take months and a significant amount of data analysis. Many providers do not have the sophistication and tools needed to calculate accurate expected reimbursement and then also group like issues to pursue owed monies due. Setting up systems to capture and having a dedicated team to work identified variances and directly with the payers to resolve are the keys to success. 

Another area that holds significant opportunity for additional revenue is optimizing charge capture and coding. With today’s staffing shortages, many revenue cycle leaders find themselves with a less experienced team. Because our industry is so complex, it can take years for new staff to become proficient in coding and billing practices. Until that happens, mistakes are highly likely, which means providers can experience increased denials and write-offs, inaccurate or delayed reimbursement, and more work for an already overworked team. The most effective way to mitigate this challenge is through comprehensive training and certification connected to key performance indicators and incentives. 

Finally, providers can uncover revenue potential by focusing on underutilized recovery challenges like secondary billing. This requires extra training for staff and extra effort during coverage and eligibility verification. Leveraging automated billing technology can help streamline this process by identifying potential secondary insurance plans on the front end. Another critical factor in improving secondary billing is to double-check timely filing guidelines. Secondary claims submitted after the deadline will be denied, and timely filing deadlines are some of the most difficult to overturn.

Putting it all together

As our industry continues its path toward value-based care, evolving payer models, and increasingly stringent regulations, revenue cycle processes will become even more complex. Providers can prepare by continuously evaluating and optimizing their revenue cycle processes following the guidelines presented above. However, many providers simply don’t have the resources or bandwidth to effectively implement these strategies. For these organizations, partnering with revenue cycle experts can help.

Photo: sorbetto, Getty Images

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