Average Hospital Leaving $22 Million On The Table

A recent study by a financial analysis team at the Advisory Board concluded that the average 350-bed hospital misses $22 million in lost revenue capture opportunities per year.  With hospital margins often hovering near breakeven, that is $22 million in lost dollars that are sorely needed to shore up the bottom line.

The reason hospitals are missing so much in revenue may have a lot to do with focus.  With only so much administrative bandwidth to go around, hospitals have traditionally focused on reducing costs rather than improving their revenue in order to boost margins. The Advisory Board study focused on 4 primary drivers of the missed revenue. As this article by Beth Jones Sanborn of Healthcare Finance News explains:

“Four market forces are driving these negative trends: increased patient consumerism driven by higher financial obligations, aggressive commercial denials and more complex payer contracts, physician engagement on documentation, and poorly executed integrations that waste potential economies of scale, the Board said.

When the Board took a deeper dive into these forces, they discovered several issues. First, commercial payers’ scrutiny of claims has significantly increased. Hospitals are losing an average of five percentage points of their margins to underpayments, denials, and contract negotiations.

Next, increasing patient obligations are squashing coverage gains, because as coverage has increased, so too has bad debt. The Board cited data from the Kaiser Family Foundation showing that from 2008 to 2015, U.S. workers with deductibles greater than $2,000 grew from 5.0% to 19.0%. During that same period, patient obligations being written off as bad debt swelled from 0.9% to 4.4%, the Advisory Board analysis said.

“…hospitals and health systems should improve the patient financial experience with a foundation built on transparent search capabilities for price estimates, convenient access for scheduling and payment, a positive care encounter, and each point of financial contact contributing to the construction of a durable relationship,” the Board said.

MACRA has also added to the already onerous burdens placed on doctors when it comes to performance and reporting. Not to mention, the increased financial risk and the law’s complexity may well drive more solo and small practice doctors to join hospitals.

“As hospital-sponsored physician employment has increased, so has the need for resources to quickly meet documentation performance standards to minimize revenue at risk,” Advisory Board said.

Finally, the Board’s analysis said too many hospitals build centralized revenue cycle operations but don’t make any improvements beyond that, focusing on their own internal unit instead of looking at how to branch out into other focus areas within the hospital to help make improvements.”

Read the entire article here: Average hospital revenue cycles losing roughly $22 million to missed revenue capture thanks to cost focus

As hospitals look to tighten their revenue capture processes to recoup those lost dollars, a lot of the equation will come down to process, documentation and technology.  Without all 3 of those running in lockstep, the average hospital will have a hard time closing that $22 million gap.  If you decide that documentation is an area you would like to focus on, consider tools like iRISupply that focus on improving documentation of medical devices in the procedural areas, where the average hospital makes and spends over half of its dollars. Improvements like this can drive real cash back to your hospital and get your revenue cycle back to optimal levels.