Reduce Denials and Improve Patient Collections for Revenue Cycle Improvement
For years, narrow margins have beleaguered hospitals and other healthcare organizations, raising the recent importance of revenue cycle improvement. According to the April 2023 Kaufman Hall National Hospital Flash Report, hospital margins approached nearly zero percent in March 2023, up from -1.5% in February.[1] With the threat of an impending recession, many providers are on high alert, fearing what could be an even rougher road ahead.
Omega Healthcare partnered with Eliciting Insights to conduct a survey of 125 hospital revenue cycle leaders from across the country to find out how they’re focusing on revenue cycle improvement over the next 12 months.1 Of all issues reported, denials, audits, and takebacks came in at the top spot, with 67% of respondents reporting it as a top concern. Others included improved patient collections, workforce retention and training, improved coding documentation and accuracy, and declining revenue as top concerns.2
In this blog post, we examine key areas for revenue cycle improvement that require close attention, as well as possible solutions for revenue cycle outsourcing if you’re looking to accelerate cash flow and recoup revenue.
Survey Offers Outsourcing Insights from Revenue Cycle Leaders
In the survey, Omega Healthcare asked respondents which revenue cycle processes, if any, they currently outsource or were planning to outsource over the next 12 to 18 months.
- The top RCM processes that are currently outsourced are Patient Collections (48%), A/R Management and Collections (48%), and Coding & Chart Audit (45%).
- Looking forward, respondents indicated that they plan to outsource these RCM processes: Authorization & Medical Necessity (19%), Denials & Appeals Management (18%), and Underpayment Analysis & Recovery (18%).
These responses align with the latest reports on industry trends, one of which found that 61% of providers have plans to outsource certain revenue cycle processes as a strategy for revenue cycle improvement.
Focus Area #1: Denials
Denials can make or break a healthcare organization. Of the approximately 3 trillion in claims submitted each year, more than $260B, or 9% of all charges, were initially denied each year. In the simplest of terms, denied claims impact A/R which impacts cash flow which can impact financial viability. No wonder this preventable revenue loss is at the top of the list of issues concerning leaders for revenue cycle improvement.
According to a report from MGMA, the average denial rate has risen 23% since 2016 and a sizable 11% since the start of the COVID-19 pandemic.3 Although the pandemic exacerbated the issue, the primary causes and origin of denials have remained the same for quite some time. They include issues with prior authorization, inaccurate eligibility information, incorrect patient data, missing information, as well as inaccurate, outdated, or nonspecific coding.4
On a positive note, 63% of denied claims are recoverable by appeal, but that takes time and money.5 The average claim costs $118 to appeal, and it’s projected that denials cost as much as $8.6B in administrative costs each year.
Focus Area #2: Patient Collections
Across the healthcare industry, there are more than $7.5B in uncollected patient payments each year.6
From a patient’s perspective, there are many reasons why they don’t pay their medical bills. Many do not understand their coverage or are unclear about final costs. An inability to pay even causes delays in care or failure to comply with recommended treatment with 44% of people with high out-of-pocket costs reporting that they’ve put off medical care or failed to fill a prescription.7
For some, it is generalized financial stress and having to prioritize rent, utilities, and food, since 17% of Americans cannot pay all their bills each month.8 Others are unable to come up with the full amount due or are already paying on multiple medical bills to multiple providers. In fact, medical debt and medical expenses are responsible for approximately two-thirds of all US bankruptcies.9
To combat these challenges, providers can improve patient payment features including improving insurance eligibility verification, better cost estimation, and increasing convenient payment options, improving revenue cycle results in the process. One patient survey revealed that 71% of patients polled said mobile pay and billing alerts improve their satisfaction with their provider, and 95% said they’d pay online if their provider had that option.10
Strategies to Reduce Denials and Improve Collections
Providers looking gain revenue cycle improvement must first focus on improving patient collections and denial rates, including identifying root causes of denials, improving the first-pass clean claims rate, staying up to date on payer and regulatory changes, eliminating errors, and more.
Achieving maximum reimbursement and revenue cycle improvement is critical for maintaining optimal operating margins. According to an analysis of ~441 million hospital claims across more than 1,500 U.S. hospitals, the average denial rate is up 3% since 2016, hitting 12% of claims denied upon initial submission in 2022.11
Denied claims create a cog in the entire revenue cycle, delaying reimbursement, lengthening days in A/R, and reducing cash flow. But many providers lack insight into identifying root causes upstream in the patient accounting system, or the bandwidth to research clinical or administrative denials. Others do not have the expertise or staffing resources with which to manage the appeals process, to pursue underpayment recovery, or to perform thorough audits.
Outsourcing is growing in popularity as a strategy for health systems and providers to leverage cost-effective ways to identify revenue leakage and to collect more, faster.
Omega Healthcare Can Help
As health systems look to recoup revenue lost during the pandemic and focus on revenue cycle improvement, outsourcing can be an attractive option for hospitals, health systems, and provider practices looking to alleviate the stress and administrative burdens of revenue cycle management. By outsourcing, healthcare organizations can redeploy their staff to focus on more strategic initiatives.
Omega Healthcare’s business office specialists, enabled by ODP-COLLECT, can manage the entire revenue process on the provider’s behalf, from scheduling and registration, to coding and audit, to billing and claims submission, to payment posting and reconciliation, to A/R management and patient collections, and to denials management and underpayment recovery. Omega Healthcare’s team of specialists is always current on the latest industry regulations and ever-changing payer requirements, helping to significantly reduce denials and ensure the collection of every dollar their clients are owed.
Omega Healthcare gets results:
- More than $15B in A/R collections each year
- 15,500+ A/R specialists
- Expertise in 80+ billing systems
- 15 million transactions processed for eligibility verification and prior authorizations per year
- 99% payment posting accuracy
- Clients experience a 30% average reduction in A/R days and a 25% average increase in collections
- More than 1,000 BOTs deployed to automate repetitive tasks and processes
Learn more in the white paper, “RCM Leaders Share Top Concerns”
1 “National Hospital Flash Report: April 2023,” Erik Swanson, Kaufman Hall, May 3, 2023
2 “Market Insights Study,” Eliciting Insights, sponsored by Omega Healthcare, April 2023, N=125 hospital RCM decision makers/influencers
3 “6 keys to addressing denials in your medical practice’s revenue cycle,” MGMA, March 18, 2021
4 “13 top reasons for claims denials,” Andrew Cass, Becker’s Hospital CFO Report, January 23, 2023
5 “Change Healthcare Analysis: An Estimated $262 Billion in Healthcare Claims Initially Denied in 2016,” Change Healthcare, June 26, 2017
6 “How Payment Plans Could Cure A $7.5B Medical Malady,” PYMNTS, January 15, 2019.
7 “The Problem of Underinsurance and How Rising Deductibles Will Make it Worse,” Sara R. Collins, Petra W. Rasmussen, Sophie Beutel, and Michelle M. Doty, The Commonwealth Fund, May 20, 2015.
8 “Nearly 40% of Americans can’t cover a surprise $400 expense,” Alain Sherter, CBS News, May 23, 2019
9 “Medical Bankruptcy: Still Common Despite the Affordable Care Act,” David U. Himmelstein MD, Robert M. Lawless JD, Deborah Thorne PhD, Pamela Foohey JD, and Steffie Woolhandler, MD, MPH, American Journal of Public Health, March 2019
10 “12 trends in patient responsibility payments, up 29.4% since 2015,” Dyrda, Laura, Becker’s ASC Review, October 24, 2017.
11 “The Change Healthcare 2022 Revenue Cycle Denials Index,” accessed via Internet on May 30, 2023