4 revenue cycle management challenges for hospitals

The average 350-bed hospital has overlooked the chance for $22 million in revenue capture.

By focusing on costs over revenue cycle performance, hospitals leave significant revenue on the table, according to a new analysis.

The Advisory Board found that because of the focus on cost, the average 350-bed hospital has overlooked the chance for $22 million in revenue capture.

"From top-performing revenue cycle organizations to the bottom quartile, critical benchmarks have been either stagnant or steadily sliding since 2011 and need a strategic overhaul," said James Green, national partner, consulting at Advisory Board.

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Four market forces challenge revenue cycle performance, according to the analysis:

  1. Commercial payers are more closely scrutinizing claims. More denials means providers have less money to offset the reduced reimbursements Medicare and Medicaid pay out. The Advisory Board found that, on average, hospitals are losing five percentage points of their margins to underpayments, claim denials and suboptimal contracts with payers.
  2. Patients’ obligations can negate the benefits of increased coverage. High-deductible health plans are becoming increasingly common, and many patients are writing off their financial obligations as bad debt. Between 2008 and 2015, the portion written off as bad debt rose from 0.9% to 4.4%, according to the analysis. To tackle this issue, providers embrace price transparency and offer convenient access for scheduling and payment.
  3. Regulations in MACRA are increasing performance burdens on physicians and medical groups. The Medicare and CHIP Reauthorization Act includes penalties for not just poor quality and financial performance but insufficient reporting. In response to the increased complexity of regulations, many physicians are seeking hospital employment. Hospitals must have the infrastructure in place to quickly document performance standards to minimize the risk to their revenue.
  4. Hospitals aren’t the driving force behind consolidation. More holistic integration is necessary to maximize revenue, according to the Advisory Board, which recommends deploying a common business intelligence platform across all entities in the system.