WASHINGTON, Nov. 14, 2017 /PRNewswire/ -- Hospitals and
health systems have been improving important portions of their
revenue cycle performance over the past two years but face rising
risks from increased denial writeoffs, bad debt, and inefficiencies
revealed by their persistently high costs to collect, according to
Advisory Board's latest Revenue Cycle Survey.
Notably, a median 350-bed hospital would have lost $3.5 million to increased denial writeoffs from
health care payers over the past four years, the benchmarks show.
"Across the revenue cycle as a whole, the benchmarks are
encouraging and yet show the risks of complacency," said
Jim Lazarus, National Partner,
Technology at Advisory Board. "Hospitals are facing a combination
of reimbursement pressure and a recent acceleration in costs that
has outpaced revenue growth, so institutions need to ensure they
are receiving payment commensurate with the services they
deliver."
The biennial survey of hospital benchmarks shows mixed results
across four critical performance indicators:
Denials claw back margins: Hospitals wrote off as
uncollectable 90% more denials than six years ago, a difference of
$3.5 million for a median 350-bed
hospital. The downstream picture also poses challenges: The median
for successful denial appeals for hospitals fell from 56% to 45%
for commercial payers over the past two years and from 51% to 41%
for Medicaid. For Medicare and Medicare Advantage, the rate of
successful hospital appeals increased from 50% to 64%. These
challenges are likely to persist as an increasing number of denials
are based on medical necessity rather than technical or demographic
error.
"With denials volume increasing not just for commercial payers
but especially for Medicare Advantage, health systems need
strategies to address denials proactively," said James Green, National Partner, Consulting at
Advisory Board. "The wide range of denials performance among health
systems—spanning 3% of net patient revenue between high and low
performers—amounts to a $10 million
swing for a median 350-bed hospital. Appeals are becoming
increasingly difficult, so health systems should focus on
approaches such as improved documentation and authorization
processes."
Cash flow accelerates but also hints at concerns: In the
best news for hospitals and health systems, median performance for
net accounts receivable days improved by 8% from 2015 to 2017 (and
by 21% since 2006). But these gains may be partially due to
writeoffs and other factors that could reduce accounts receivable
but pose other challenges for the institution.
Coverage expansion has been reducing bad debt but is offset
by the overall growth in patient deductibles: Hospitals in
states with Medicaid expansion produced better performance on bad
debt but the rise of high-deductible health plans has led to an
increase in unpaid patient obligations across all states,
regardless of whether the state had Medicaid expansion. This calls
for an increased focus on patient collections, especially at the
point of service (POS).
The median for collections at POS has risen from 0.24% of net
patient revenue to 0.80% over the past six years. For a 350-bed
hospital, this is equivalent to increasing collections from
$800,000 to almost $3 million. Organizations that collect a higher
percentage at POS tend to offer patient discounts for full payment
upfront, resulting in a 90% increase in POS collections compared to
organizations that do not.
Substantial running room to reduce cost to collect remains at
many organizations: The median cost to collect remained flat at
3.0% over the past four years, which may seem like an
accomplishment as overall hospital expenses grew by 7.5% in 2017,
according to Moody's Investor Service. But costs to collect remain
higher than historical benchmarks from 6 years prior. Furthermore,
driving down these costs takes on greater importance given the
softening hospital margin trends observed in the past 12 months.
Despite significant consolidation across the industry in the past
two years, many systems are yet to realize the advantage of
"centralizable" revenue cycle functions, and are likely missing
opportunities to drive down costs and capitalize on knowledge and
information sharing across facilities.
The 2017 benchmarks indicate a reduction in centralization of
revenue cycle functions revenue compared to the 2008 survey.
"While, for example, patient access is difficult to centralize,
other functions present good opportunities, such as coding,
billing, collections, denials, and payer contracting, especially
given their high operational costs for these functions," said
Christopher Kerns, Executive
Director, Research at Advisory Board.
Given the combined complexity of these challenges—added to the
wide further range of responsibilities for Chief Financial
Officers— Kerns advises health system financial executives consider
delegating oversight of the revenue cycle to a vice president.
Advisory Board honored for market leadership
Recently,
Advisory Board was named the No. 1 firm for a revenue cycle
category by Black Book for the third year in a row. In 2016 and
2017, Advisory Board led for end-to-end software and technology for
hospitals with 100-200 beds and in 2015 for reimbursement,
insurance processing and payer management for hospitals with fewer
than 200 beds.
In the biennial Revenue Cycle Survey, Advisory Board surveyed
senior acute care hospital and health system executives at 90
hospitals and health systems, mostly nonprofit, and nearly 300
organizations provided data through Advisory Board
Technologies. The survey is disseminated and analyzed every
two years; the previous survey was in 2015. For more information,
visit www.advisory.com/rcbenchmarks.
About Advisory Board
Advisory Board is a best
practices firm that uses a combination of research, technology, and
consulting to improve the performance of 4,400+ health care
organizations. As the health care business of The Advisory Board
Company (NASDAQ: ABCO), Advisory Board forges and finds the best
new ideas and proven practices from its network of thousands of
leaders, then customizes and hardwires them into every level of
member organizations, creating enduring value. For more
information, visit www.advisory.com.
View original content with
multimedia:http://www.prnewswire.com/news-releases/hospital-revenue-cycles-showing-strength-but-risks-include-denials-300555731.html
SOURCE Advisory Board