Four Major Challenges in the Hospital Revenue Cycle

Bill Banks, vice president for revenue cycle and managed care at St. Elizabeth Healthcare, a six-hospital system in northern Kentucky, discusses four major problems in the hospital revenue cycle.

1. More uncompensated care. As people lose their jobs and drop insurance coverage, the total cost of uncompensated care at St. Elizabeth has risen from 6 percent of gross charges before the recession to 8 percent today. The health system needs to get these patients enrolled in Medicaid, but that is not easy to do. "They see it as a stigma to take government money," Mr. Banks says. They also don’t like all the paperwork and revealing personal information, such as letting people know where they live.

2. Payors are heavily auditing claims. Private payors have become more aggressive with audits of past payments, looking for overpayments and improper payments. Mr. Banks says they are mimicking the RAC program for Medicare claims, even using the same vendors in some cases. "They can’t deny claims they have agreed to cover in the contract, but they can review every claim to look for errors," he says. For example, Humana has been reviewing 100 percent of St. Elizabeth's Medicare Advantage claims. St. Elizabeth has not had to pay much money back but gathering the data takes up a great deal of staff time.

3. Rise of high-deductible insurance. As insurers gradually shift payment responsibilities to patients, many patients can’t meet this new responsibility. "Having a high deductible means putting away money for unforeseen circumstances, but a lot of people don’t do this," Mr. Banks says. The growth of high deductibles and copays at St. Elizabeth has contributed to "leakage," which is the difference between what the hospital expects to bet paid and what it ultimately gets. "All hospitals have to find better ways to collect this money up-front," he says.  

4. Limits on cost-shifting. Medicare and Medicaid pay below cost and hospitals have more uncompensated care. Hospitals can turn to private payors to make up the difference, but only to a point. "It’s a balancing act," Mr. Banks says. "We can’t overcharge the commercial insurance companies. They are our best payors. But we have to make up for shortfalls."

Learn more about St. Elizabeth Healthcare.

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