From financial distress to financial excellence: new strategies and tools for rural hospitals to improve their financial health

Rural healthcare systems have faced significant financial challenges for decades and many strategies and tools that have historically been used by larger health systems have been unavailable to smaller, rural organizations. This is finally changing. By tapping into these solutions, rural health systems can improve their pricing, productivity and overall financial health.

In a Becker's Hospital Review webinar sponsored by Eide Bailly — a top 25 accounting and consulting firm — Ralph Llewellyn, a partner at Eide Bailly, discussed past and current challenges for rural healthcare providers as well as strategies and tools that address immediate issues and position rural systems for future growth.

Five key takeaways were:

1. Rural hospitals face significant financial stress — which isn't new.  According to Mr. Llewellyn, more than 200 rural hospitals closed in the 1980s, an additional 186 closed in the 1990s and 182 more have closed since 2005.  "The closures brought up a need for a lot of new programs, and a search for new ways to try to help preserve rural healthcare settings," he said. 

Examples of new programs include critical access hospitals (CAHs), which began in 1997; but today many CAHs are experiencing financial distress. The Rural Community Hospital Demonstration began in 2004 and a low-volume hospital adjustment was initiated in 2005. Rural emergency hospitals are planned for 2023. While rural hospitals received big infusions of funding due to COVID, which provided temporary relief, that funding is running out. Many rural hospitals are facing greater financial stress as they experience rising costs and labor shortages.

2. Enhancing pricing intelligence and charge master integrity must go beyond transparency and CPT code assignment. Through greater pricing intelligence, rural providers can better understand their market and payer contracts to come up with strategic and defensible pricing. "At the end of the day, providers need to understand how pricing impacts net revenue," Mr. Llewellyn said. Tools are available for rural providers to drill down into revenue data, usage reports, payer mixes and more.

"Pricing strategy becomes irrelevant if the chargemaster and charge capture processes are broken," he added. "Properly designed charge master reviews are more than just a CPT code scrub or pricing update. They require deep conversations and education at the departmental level to help the users of the charge master know how to capture charges and make sure they are getting the revenue."

3. The majority of denials are preventable. A report from The Change Healthcare 2020 Revenue Cycle Denial Index showed that average denial rates have increased by 23 percent since 2016 with half of denials caused by front-end revenue cycle issues such as registration, eligibility and authorization. The report found that 86 percent of denials are potentially avoidable. "Denials management helps identify the causes and corrective action required so that rural providers are not spending time fixing individual claims on the back end," Mr. Llewellyn said.

4. Optimizing integration helps streamline financial reports, and cost reporting systems can be forward-looking. "Using Oracle NetSuite tools can help providers better tie into EMRs and other systems to make reporting much easier," Mr. Llewellyn said. He added that cost reporting can be much more than just a recording of the past. "There are many planning opportunities in the cost report that can actually improve reimbursement."

5. Maximizing productivity requires an ongoing cycle of collecting data, making improvements, measuring results and finding more opportunities. "The largest expense in most organizations is labor, so monitoring and managing productivity is an important piece of the puzzle," Mr. Llewellyn said. "Managing productivity requires accurate, timely and consistent data. You need tools to be able to change your trajectory; you need to be able to step back, look at the results, make changes and keep learning."

 

By taking advantage of tools now more readily available to rural healthcare providers, financial leaders at rural providers can discover new ways to harness pricing intelligence, avoid denials, create forward-looking strategies and maximize productivity — all of which lead to improved financial excellence.

 

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