Analysis: Average hospital misses opportunity of up to $22M in revenue capture

A recent Advisory Board analysis revealed the average 350-bed hospital could gain up to $22 million in additional revenue by putting more focus on improving revenue cycle management performance rather than managing RCM cost.

Advisory Board said the potential financial impact takes into account the average hospital improving from median to 75th-percentile performance in each of four key metrics: denial write-offs, bad debt, cost to collect and contract yield. The firm recommends hospitals respond to four market forces to fully take advantage of this revenue capture opportunity. These include increased patient consumerism driven by higher financial obligations, aggressive commercial denials and more complex payer contracts, physician engagement on documentation given demands on the acute care and medical group enterprises, and poorly executed integrations that waste potential economies of scale.

In analyzing these four forces, Advisory Board said they found the average hospital is losing 5 percent of their margin to commercial payer underpayments, denials and suboptimal contract negotiations. Advisory Board said they also found the portion of patient obligations being written off as bad debt increased from 0.9 percent in 2008 to 4.4 percent in 2015.

"To build more enduring relationships with patients and improve collections, hospitals and health systems should improve the patient financial experience with a foundation built on transparent search capabilities for price estimates, convenient access for scheduling and payment, a positive care encounter, and each point of financial contact contributing to the construction of a durable relationship," the firm said.

Additionally, Advisory Board found the Medicare and Chip Reauthorization Act "is adding new performance burdens to physicians and medical groups," and that consolidation is driven by various payer, patient and physician forces.

Read more on the analysis here.


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