How to Optimize Your Revenue Cycle through In-depth Assessment and Strategic Process Improvements

The healthcare industry faces the formidable challenges of rising costs and precarious profit margins. Elevated supply and labor costs, combined with structural revenue pressures, have created a financial environment where margins remain tenuous. Amidst this financial complexity, health systems are recognizing that growth strategies must be centered around preserving and optimizing margins. The best way to drive financial results is to create a measurable, strategic operational approach that is grounded in process improvement. As organizations embark on the journey of revenue cycle improvement, they must (1) Conduct an in-depth assessment across the revenue cycle; (2) Establish data-driven baselines; (3) Develop a comprehensive, strategic, evidence-based roadmap and action plan to guide process
improvements; and (4) Measure results continually.

Conduct an In-depth Assessment and Establish Baselines

To drive any measurable and substantive change, organizations must conduct annual, in-depth assessments to accurately understand their revenue cycle operations. A thorough assessment allows you to identify processes that are currently operating well and calls out where there are bottlenecks and inefficiencies so you can create a roadmap and action plan that will yield operational and financial improvements. An assessment will also help you establish data-driven baselines. These baselines serve as a foundation for quantifying and addressing the underlying factors contributing to suboptimal revenue cycle performance. A comprehensive analysis should include activities that impact the full revenue cycle, including:

1. Policy and procedure review.
2. Detailed account sampling to identify gaps within front, middle, and back-end processes.
3. Key Performance Indicator (KPI) analysis and comparison against performance in past years and industry benchmarks (Epic, HFMA, ACDIS, AHIMA, etc.).
4. Detailed analytics to quantify financial improvement opportunities, including net revenue leakage, net revenue optimization, cash acceleration and denial management optimization.
5. High-level organizational structure review and volume-based staffing analysis.

When conducting your assessment and establishing data-driven baselines, specific functional areas should be evaluated. These functional areas include:

• Access process: scheduling, eligibility, authorization, financial clearance /
  pre-registration and insurance verification
• Procedures for registration and admitting
• Utilization review and case management
• Coding and coding compliance
• Clinical documentation integrity process and initiatives with medical team
• Charge capture process and CDM review
• Billing practices and billing edit governance
• AR management: cash posting, follow up, denials management and payment variance
• Technology requirements and EHR/EMR system assessment
• Staffing allocation assessment within all departments

Another key step not to be overlooked in the transformation process involves a thorough review of the organizational structure, staffing patterns, job descriptions and skill mix within all revenue cycle departments. This includes observing, documenting and confirming current operational processes and flows. Operating statistics and performance indicators should be compared to industry averages and benchmarks to gauge the organization’s standing within the healthcare landscape. Additionally, an examination of the organization’s professional culture should be conducted to understand the prevailing ethos and values influencing revenue cycle operations.

Develop Your Roadmap and Action Plan

At the conclusion of the assessment, the goal is to have an identification and quantification of suboptimal revenue cycle performance, root causes and pertinent information to create a detailed plan that guides efforts towards achieving desired financial objectives and balance sheet and income statement goals. The components of the roadmap and action plan may vary based on assessment and organization needs but should consider the following:

1. Program management and governance structure.
2. Cross-disciplinary communication planning.
3. Functional organization structure and staffing allocations based on measurable workload indicators.
4. Identification of opportunities for improved process flows under current EHR/EMR and best-practice operating guidelines and proposed workflow for each major improvement process.
5. Recommendation of necessary training and programs to support gaps and redesigned processes.
6. Establishment of realistic operating goals and structure to monitor performance improvements through KPIs.

Measure Results

KPIs are essential to monitor between annual assessments as you continually evaluate the health of your revenue cycle. Create dashboards and processes to regularly analyze these KPIs to identify trends, measure progress and make data-driven decisions. Remain agile and responsive to the data you’re seeing to course correct and optimize throughout the year. Here are KPIs that should be regularly evaluated and measured:

High-Level Financial KPIs

• Cash collections
• Cash collections as a percentage of net revenue
• Cost to collect
• Net AR days
• DNFB days
• Percentage of AR >90 days
• Point-of-service collections as a percentage of total cash
• Bad debt write-off as a percentage of gross revenue
• Case mix index

Patient Access Operational KPIs

• Scheduled patients’ pre-registration rate
• Clean registration rate
• Point-of-service collection rate
• Average registrations per registrar/per shift
• Self-pay to Medicaid conversion rate
• Press Ganey scores

Middle Revenue Cycle Operational KPIs

• DNFB/DNFC
• Initial patient status error rate
• Coding denials
• Physician query submissions and response rate
• Late charges as a percentage of gross revenue

Back Revenue Cycle Operational KPIs

• Clean claim rate
• Rejection rate
• AR days
• Percentage of AR > 90 days and 180 days
• Cash per day
• Initial denial rate
• Denial overturn rate
• Denial write-off rate
• Bad debt write-off

Conclusion

Strategic operational and process improvements are pivotal for driving measurable results across the revenue cycle. Regularly reassessing and adapting to industry changes ensures that your revenue cycle remains agile and resilient in the face of evolving challenges. By adopting a comprehensive approach that includesregular assessment, process optimization, staff education and measurement, healthcare organizations can enhance efficiency, reduce costs and ultimately improve their financial health. It takes time and effort but is well worth it.