The administrative load in health care has never been higher. It's one of the major factors of physician burnout, according to The New York Times. The International Journal of Health Services reports that physicians are spending one-sixth of their time on administrative tasks and it's lowering their job satisfaction. A significant portion of these administrative tasks are associated with a practice's revenue cycle.
Across the United States' health care system, administrative inefficiencies associated with billing and insurance-related activities may be costing the system up to $183 billion annually. The majority of these administrative costs are a result of redundant or inefficient activities performed throughout the billing and insurance ecosystem. According to research conducted by James G. Kahn, MD of the University of California, these inefficiencies arise as a result of the complexity, variation, and friction within the ecosystem.
Studies have shown that administrative costs for revenue cycle related activities represent 13% of revenue for a physician practice and 8.5% of revenue for a hospital. How much are inefficiencies in your revenue cycle costing your practice? What dollar amount would 13% of your revenue equate to?
This probably isn't a surprise to you. You know that revenue cycle management is complex. You know that there is a high level of variation across the requirements and reimbursements you've negotiated with each payer. Complexity and variation often lead to a decrease in how fast and how much you get paid; in other words, they lead to friction.
Friction includes hurdles to payment such as pre-authorizations; formulary restrictions; claim denials that ultimately get approved; and initially receiving partial payment, underpayment, or no payment for services. When you think about how to improve your revenue cycle's efficiency, tackling the friction is a good place to start.
What can you do to begin reducing the friction present in your revenue cycle?
The Advisory Board recommends making a strategic shift: Invest in your revenue cycle team as a critical, strategic asset. To position your revenue cycle function as a strategic priority, you can pursue one—or all—of these four initiatives:
Integrating your revenue cycle team into your clinicians' workflow can improve your revenue cycle's efficiency by reducing the time and labor spent on submitting claims. Typically, the revenue cycle team receives documentation of the patient encounter after the encounter has taken place. Often, the revenue cycle team must spend additional time seeking clarification and corrections from the care team. The Institute of Medicine's Roundtable on Evidence-Based Medicine released a study that found, on average, physicians are spending 3.8 hours per week—the equivalent of $88,855¹—on interacting with payers. How much time is your staff spending chasing down coding documentation? How much is this costing your practice?
Think about every touchpoint during the patient's visit that involves documentation for billing purposes. Evaluate each touchpoint to determine where documentation is being filled out incompletely or incorrectly. Your revenue cycle team can provide training on the touchpoints that most frequently cause issues. You can also have members of your revenue cycle team communicate with clinicians during the patient visit to ensure completeness and accuracy.
This can reduce the number of claims that get sent back to the care team for improved clarity or completion and can reduce the number of claims that are initially denied, but ultimately approved by the payer. The Advisory Board reports that one health system was able to realize $30M of new revenue by integrating their revenue cycle team with their care team.
If the administrative burden of billing and collections is too high to execute fully in-house, consider bringing in revenue cycle management experts. Utilizing a revenue cycle management company directly reduces the time your staff is spending on billing and collecting. This may enable you to either redeploy staff to revenue-producing activities or to reduce headcount. And if you grow your practice, your revenue cycle management company will grow alongside you—you're no longer responsible for accommodating the change in staffing needs for this function.
Beyond alleviating the administrative burden, Becker's notes that you'll receive additional benefits that can help maximize your revenue cycle's efficiency. Revenue cycle management companies will conduct routine evaluations of your revenue cycle's performance to identify areas of improvement and ensure your objectives are being met. They will help you ensure your clinical operations are aligned with your finances; for example, making sure you get reimbursed for the flu shot you gave. This enables you to proactively improve your revenue cycle's efficiency. Your revenue cycle management company will also keep track of any changes in coding and billing rules. This ensures that your practice won't experience unnecessary denials or payment delays.
Another source of friction is the collection of payment from your patients. To alleviate this, look for ways to make it easier for patients to pay you.
Medical bills are notoriously complex. In fact, a study by the Advisory Board found that 70% of patients reported that they were sometimes or always confused by their outstanding medical bills. Consider redesigning the way your bills look to make them easier to understand and to include layman's terms.
It's also important to consider how easy it is for patients to pay you. Do you have an online payment vendor? In this digital age, patients want to be able to pay online—just as they do for other purchases. 7 out of 10 patients prefer electronic payment methods over paper billing, according to Revenue Cycle Intelligence.
It's easier in a lot of cases, especially for tech-savvy patients, to get a bill electronically, to go online, see what they owe, see why they owe that amount, what visit it's from, and pay by credit card right there rather than having to submit a check in the mail." - David Claim, athenaResearch
It's easier in a lot of cases, especially for tech-savvy patients, to get a bill electronically, to go online, see what they owe, see why they owe that amount, what visit it's from, and pay by credit card right there rather than having to submit a check in the mail."
- David Claim, athenaResearch
Do you have financing options? The Federal Reserve's 2018 Report on the Economic Well-Being of U.S. Households states that 27% of households would have to sell something or borrow money to cover an unexpected $400 expense and 12% of households wouldn't be able to cover the expense at all. Financing options can help your patients meet their full financial obligation.
Fortunately, McKinsey's research uncovered that most patients are both willing and able to pay their medical bills. Making bills easier to read and to act on can enable them to pay and improve your collection rate.
Payers and providers are often seen as having competing priorities: payers want to reduce payments and providers want to maximize them. However, there is an area where the two share a common objective: reducing the administrative time and expense associated with claims. Any time spent fighting claims that ultimately get approved is time and money wasted by both you and the payer. The Advisory Board reports that administrative costs associated with appealing denials reached $6B in the U.S. in 2017.
One health system reduced the administrative burden by looking for patterns in the denials that were ultimately approved and renegotiated that process with the payer. If you audited claims that were initially denied but ultimately approved, what would you find? This particular health system found that a lack of prior authorization was causing the denial. To combat this, they enabled the payer to authorize procedures in real-time, thus reducing the number of denials.
Look for other areas where you may share common goals with payers. What other processes can be improved to both of your benefits?
As you think about the possible areas for improvement in your practice, it's essential to put them into the context of your practice. Which initiative has the most potential to improve your revenue cycle's efficiency? What investment is required to lift that initiative? What do you think will have the most impact to your bottom line?
Health care providers are facing challenges from all sides—patients, payers, government, employers. Turning your revenue cycle into a strategic function can help put your practice on the path to improving profitability and increasing your operational efficiency.