Hospital margins are collapsing and some organizations wonder if it's even possible to make money in the acute care space.
Meanwhile, payers are doing everything possible to minimize reimbursements. Their efforts seem to be working, with many health insurers reporting record profits in the first half of 2022.
At a session sponsored by Ensemble Health Partners at Becker's 10th Annual CEO + CFO Roundtable, two senior leaders from Ensemble — Jim Gaffney, EVP, strategy and corporate development, and Shannon White, chief operating officer — discussed the challenging financial landscape and potential solutions.
Four key takeaways were:
- To generate revenue, hospitals and health systems are diversifying beyond acute care. One participant noted that her organization is expanding into the pre-hospital and post-acute spaces, as well as services like behavioral health that are critical to the overall care. Other organizations are launching initiatives like hospital-at-home and health system-owned insurance products.
"You have to be very focused on growing your top line through volume expansion," the CFO at a regional medical center in the Southwest said. "To have good margins, the focus must be on the top line, not solely on cost management." Another participant explained that his organization is turning away from traditional fee-for-service care and taking on more risk-only, value-based Medicaid contracts. "It's been better for us, because we've seen our revenues fall on the ambulatory side and encounters per patient are dropping," he said.
- In the wake of the pandemic, unacceptable behavior has become the norm among payers. Ensemble Health Partners' clients have seen triple the number of claims they have to check the status on. Revenue cycle teams at many providers have embraced robotic process automation to perform mass claim status checks, but payers are kicking the bots out, saying that automation can't be used to track claim status. Requests for information are the second biggest delay tactic. Payers adjudicate claims within the contract period, but then they refuse to pay until they receive additional medical records. "From our clients' perspective, unacceptable payer behavior has grown by 6 percent, which translates into a multiple-million-dollar delay in net revenue for these organizations," Ms. White said. Bad payer behavior is common upstream in the revenue cycle, as well. Most managed care providers are now taking seven days to authorize surgical services. Prior to COVID-19, same-day approvals were commonplace.
- Healthcare organizations must double down on revenue cycle management to protect their financial well-being. DRG validation must be done before bills are sent out. Ensemble Health Partners' technology tools scrub every coded record prior to billing. "We make sure the appropriate DRG is used to maximize net revenue and meet compliance requirements. With DRG validation, we see about a 2 to 3 percent lift in revenue," Ms. White said. Missing charges related to things like observation, infusion and injection and pharmacy quantities also offer opportunities to increase revenue. A simple charge reconciliation can generate meaningful results. Another often overlooked area is fatal denials. "Don't hide fatal denials within contractuals. Track them separately and make sure you have a robust appeal process. At our clients, many fatal denials are written off and they don't even have one appeal on them," Ms. White observed.
- With today's labor shortages, technology and automation are valuable tools for improving revenue integrity. Ensemble Health Partners leverages proprietary software that taps into client hospital information systems. "If a client doesn't have a contract management system, we'll use our own to identify variances," Mr. Gaffney said. "Then we can implement hard-coded rules to ensure the same issues don't arise again. Our system is constantly running machine learning, so it gets smarter over time." Technology is also useful for coverage discovery. Patient access is one of the revenue cycle areas with the highest employee turnover. "To relieve pressure on patient access teams, a best practice is to run a batch process that screens at seven days and again at 30, looking for appropriate coverage on the patient records," Ms. White said.
The current economic reality in healthcare is discouraging, but opportunities exist for hospitals and health systems to get fairly reimbursed. "Make sure you have a comprehensive review of the revenue cycle," Ms. White said. "It's the lifeblood behind quality care in our hospital systems and I think sometimes it's overlooked."