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'Strategic framework' necessary to boost hospital revenue cycle yield

Through focused attention to the revenue cycle, healthcare organizations can add 2 percent to 4 percent to their bottom lines, according to an expert in hospital business planning.

Jason Adams, vice president of revenue cycle for the MultiCare Health System in Tacoma, Wash., said many healthcare organizations mistakenly believe that "finance" and "revenue cycle" are identical.

"Many organizations think success is all about expense management, but we believe that finance is only one aspect of a healthy bottom line," Adams said Thursday during the Symposium on Healthcare Payment Solutions, being held in Las Vegas.

Adams said health systems must improve communication between leaders of finance and revenue cycle and make sure their missions are aligned if overall process improvement is to be achieved.

Before health systems can boost revenue cycle yield, they need to conduct a broad assessment of the state of their revenue cycle management (RCM) processes. Adams recommended that executives look closely at denials management, charge capture, strategic pricing, payment validation, cash collections at the point-of-service, technology optimization and vendor management.

"You have to understand your core competencies before you can optimize the revenue cycle and increase net yield back to the organization," he said.

Through a close analysis of RCM, many healthcare organizations find hidden weaknesses. For instance, Adams said health systems do not adequately leverage technology in areas such as pricing and payment validation. He also noted that failure to properly measure and analyze denials trends leads to avoidable write-offs.

"If you don't measure it, you won't be able to impact it," he said.

Adams placed particular emphasis on the importance of vendor management to a healthcare organization. He said many health systems fail to get the best possible prices because they don't review their contracts often enough.

"Do you know if you are getting the most appropriate rates based on market dynamics for a particular technology or service?" Adams asked. "Do you have favorable 'out clauses'?"

It's crucial for a health system to develop a "net back" calculation for each outsourcing vendor, Adams urged, and to measure and monitor the global cost to collect one dollar.

"Revenue cycle performance measurement goes far beyond gross or net AR days," he said. "To achieve sustained success you need to develop a strategic framework."