The healthcare landscape is evolving rapidly, which poses significant challenges for physician practices. Financial pressures in the form of rising costs, lower reimbursement rates for healthcare services and complexities navigating relationships with payers are forcing practice leaders to seek out innovative solutions.
Physician groups that will thrive in this turbulent climate will do so because they employ proven revenue cycle strategies [download e-book] that relieve administrative burdens on staff while optimizing financial outcomes.
Optimizing the revenue cycle without sacrificing patient care quality
At the heart of every physician practice is an unwavering commitment to patient care. Yet, to sustain this critical mission, practices must establish strong financial foundations that can endure over time. That is why focusing on revenue cycle optimization is so critical.
When optimizing a multifaceted revenue cycle, there are certain areas where you’ll want to focus first:
- Improve staff efficiency: According to research from J.P. Morgan, 48% of healthcare providers continue to be challenged by staffing shortages and increasing labor costs.1 Practices must find ways to hire, train and retain staff without burning out their already over-stretched teams.
- Minimize denials: Sixty percent of medical groups report that claim denials are higher in 2024 versus this same time last year.2 High denial rates disrupt cash flow and increase administrative costs due to the need for claim resubmissions. Reining in denials while working low dollar inventory is another must for physician group leaders.
- Reduce days in accounts receivable (AR): Delays in revenue capture not only threaten the financial stability of a medical group but also restrict its capability to reinvest in essential resources and services. Lowering AR days is another top priority.
- Navigate the changing payer landscape: Practices are grappling with formidable hurdles in forming productive payer relationships. The stakes are high as lower and slower reimbursements from third-party payers threaten a physician group’s financial stability.
- Gain full visibility into financial health data: Practice leaders need complete access to actionable performance data. When visibility to this information is obscured, results suffer.
Forward-thinking solutions for revenue cycle success
There are considerable impediments to achieving financial resilience. Fortunately, fresh solutions to revenue cycle optimization can change the playing field and give physician organizations a significant advantage.
Create a strong denials management process
Keeping claim denial rates low can be a game-changer for physician practices, but it's not without obstacles. Your practices must navigate intricate payer rules while ensuring your team is fully trained and has access to effective systems to track and analyze claims.
Implementing a comprehensive denials management process is the most important step a physician practice can take to reduce denials. The process must include accurate documentation, proactive claims scrubbing, regular staff training, and a way to leverage advanced technology for claim tracking and analysis. Routine process audits are also critical.
When properly implemented, a strong denials management program reduces claim processing costs, improves staff efficiency and can yield higher reimbursements while reducing AR days.
Be strategic when managing payer relationships and contracts
Increased denial rates are not the only area where medical groups are facing headwinds with health insurance payers. Practice leaders face an uphill battle negotiating contract terms, staying on top of changing payer policies and managing the administrative workload associated with dealing with multiple payers.
When developing a payer strategy, effective contract negotiation is a top priority; be forewarned, it’s not a level playing field. Negotiating favorable terms with payers is challenging primarily due to the power imbalance that favors large insurance companies and the complexity of healthcare billing models.
In addition, physician groups often falter in contract negotiations due to an insufficient understanding of the reimbursement areas that most significantly affect their practice, which leads to mistakes in negotiations. To prevent this, practices need enhanced visibility into their own data. This will provide you with critical insights into payer terms that will have the most beneficial financial impact on your practice’s bottom line.
Partnering with a revenue cycle expert that has deep healthcare contract negotiation and payer management capabilities is often the best strategy for optimizing payer contracting and management. Be sure to work with a solutions provider that has a deep understanding of the changing payer landscape, a strong track record in negotiating fair terms and offers an AI-enhanced platform that provides visibility into relevant data. You want to work with a seasoned provider that has the deep bench strength required to manage multiple payers and stay on top of changes in payer policies.
Master best practices in AR
Days in AR are a key measure of your revenue cycle's health. Unfortunately, many physician groups are dealing with A/R creep — it's taking longer to receive payment for healthcare services. This can place a practice in a precarious position, causing cash flow interruptions, escalating the risk of bad debt and forcing staff to devote valuable time to financial concerns instead of patient care.
According to the American Academy of Family Physicians (AAFP), at a minimum, average AR should be below 50 days, though 30 to 40 days is preferred.4
Improving denials management processes and implementing strategic payer management initiatives are important first steps to keeping AR within acceptable ranges.
When tackling persistent AR challenges, physician groups should concentrate on addressing unpaid claims that present the greatest potential for revenue recovery, along with repetitive payment problems that, once resolved, can avert future complications.
If your practice is struggling with systemic AR issues that are putting the organization at undue risk, it’s best to engage a revenue cycle specialist who excels in identifying and rectifying the primary factors contributing to AR shortcomings.
Use automation intelligently
In a difficult labor market, it’s paramount that practices use technology solutions to reduce the administrative burden on their teams and reduce the accounts that need manual intervention. Advanced AI and RPA technologies offer tremendous opportunities for boosting revenue cycle effectiveness by enhancing systems to work claim inventory more quickly, reduce mistakes, aggregate work and efficiently work all claim inventory.
When deployed intelligently, automation offers unprecedented visibility into key performance drivers, thus helping leaders make stronger decisions. Automation is not a panacea and cannot replace human effort, but new technologies offer significant efficiencies while accelerating cash collection.
Keeping up with advanced technology developments can be difficult for medical groups, so once again, a best practice is to work with a tech-forward RCM provider. Look for an RCM expert that offers a platform powered by intelligent technology and has the next-level RCM expertise to optimize your revenue cycle at scale.
How to get started
The underlying strategies required to optimize your revenue cycle are relatively straightforward — reduce denials, improve payer management, strengthen AR and tap into advanced technology — but strategy implementation is complex.
R1 offers comprehensive RCM solution for physician practices that leverages decades-deep RCM expertise and strong partnerships to help you achieve your financial goals. This frees you to focus on doing what you do best: Delivering superior patient experiences. Reach out to R1 today to learn how we can help your physician group.
Sources
1 J.P. Morgan, Trends in Healthcare payments annual report, https://www.jpmorgan.com/insights/payments/payment-trends/healthcare-payment-trends
2 MGMA Stat poll March 5,2024. https://www.mgma.com/mgma-stat/strategic-improvements-in-your-rcm-to-reduce-your-practices-claim-denials
3 MGMA, Collection challenges growing for medical practices as inflation puts pinch on patient finances, https://www.mgma.com/mgma-stats/collection-challenges-growing-for-medical-practices-as-inflation-puts-pinch-on-patient-finances
4 AAFP, finances and your practice, https://www.aafp.org/family-physician/practice-and-career/managing-your-practice/practice-finances.html