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Average hospital revenue cycles losing roughly $22 million to missed revenue capture thanks to cost focus

Market forces driving negative trends include consumerism, denials and complex contracts, documentation demands and bad integrations, board says.

Beth Jones Sanborn, Managing Editor

Even though hospitals have benefitted from a cost focus over the past few years in terms of having healthy margins despite cuts to reimbursement, revenue cycle performance has lagged across key areas and it now costs more just to achieve flat performance says the Advisory Board. This cost focus has cost hospitals, the Board says, with their analysis showing the average 350-bed hospital misses $22 million in revenue capture opportunities.

They also found that "median performing organizations" are in a rut when it comes to net days in accounts receivable, and the overall cost to collect has gotten worse by 70 basis points of net patient revenue from 2011 to 2015.

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.

[Also: Improving patients' access to care tops evolving list of C-suite concerns, Advisory Board survey shows]

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.

[Also: Advisory Board exploring merger with Evolent Health weeks after fending off takeover]

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.

[Also: Texas Health Resources utilizes work-from-home model to increase revenue cycle productivity]

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.

"This integration should include a value-added shared services organization that provides a common business intelligence platform across entities and service lines systemwide, the ability to generate a single patient bill for all physician and hospital services, and the use of integrated coders to drive further understanding and coding accuracy."

Twitter: @BethJSanborn

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