Greater Efficiency Guards Against Rising Operational Costs and Lower Reimbursements

Healthcare practices are facing increasing profitability challenges with lower reimbursements from private and government insurers, higher operating and labor costs, staff shortages and regulatory requirements. All of these issues cut operating revenue and reduce profitability. The most obvious solution, trying to rev up and treat more patients, doesn’t always work.

Part of the problem is that the revenue challenges that healthcare providers face don’t all come from one source. There are many issues throughout the revenue cycle that can delay reimbursement and eat up staff time.

But by analyzing your practice’s revenue cycle and finding ways to make operations and billing more efficient, your practice can become more profitable and control how much earned revenue actually reaches the bank account.

Managing the Revenue Cycle

A key strategy to enhance cash flow and profitability is to improve efficiency from the beginning of the revenue cycle to the end. The impact can be significant. Losing just 2% to 3% of collectible revenue through operational inefficiencies can eliminate the profit from dozens of patient visits each month.

The revenue cycle starts when a new patient is acquired and extends until a bill for services is paid. For an existing patient, it starts when the patient comes in for a service, such as a cleaning and whitening treatment, and extends until the bill is paid. Sounds simple, but there is a lot that happens between Point A and Point B, and some of it results in what is known as “revenue leakage.”

Revenue leakage occurs, for example, when there are eligibility verification issues, inaccurate coding, down-coding, charge capture gaps, delayed claim submission, insurance denials or delays in patient collections. All of this slows down the practice’s cash flow and results in staff devoting time to fixing preventable problems. Efficiency goes out the window. And remember — dollars that are left in Accounts Receivable (A/R) chip away at cash flow.

Running an Efficient Practice

The key to efficiency is to monitor the most important financial and operational metrics monthly, including net collection percentage, days in A/R, insurance denial rates, cash collections, provider productivity, patient access metrics, scheduling utilization and revenue per visit, among other data. If a practice is not using financial and practice management platforms that track all these metrics, it’s time to make that investment.

But technology is not the answer in and of itself. Financial dashboards are only helpful when practice owners use the data to identify what is happening. Where are the revenue leaks? Where are the reimbursement delays and patient collections delays, and how can they be improved? The value of the data is in the story it tells about why a practice is on the rocks and how it can become more efficient.

The bottom line is that you can’t invest in new software to solve the problem if you’re leaving the same processes in place. Technology can only support the process, not change it. Improved efficiency comes from redefined workflows, accountability, standardization, training, measurement and continuous improvement.

In the long run, it’s always better to prevent problems from occurring rather than work to correct them later. As they say in the healthcare world, “An ounce of prevention is worth a pound of cure.”

But none of us has perfect foresight. Inefficiencies in practice management may start small and be almost imperceptible until, suddenly, the owner finds they are struggling month to month. Consequently, the healthcare practices that are most efficient are those that focus on prevention. They put in place workflow practices to prevent insurance denials, verify benefits in advance of services, identify bottlenecks and align financial and operational functions.

All of this boils down to recognizing revenue cycle management as a strategic function that affects cash flow and, ultimately, provider compensation, growth investments and practice valuation.

First Steps Toward Improved Efficiency

The best way to get started on the path to improved efficiency is to work with a trusted advisor to identify the key pain points in your practice. An advisor can help with a number of approaches, including:

  • Revenue Cycle Assessment: Identify revenue leakage points, analyze collections performance, evaluate denial trends and root causes and review coding and charge capture processes.
  • Practice Performance Analytics: Develop meaningful KPIs and dashboards, benchmark key financial and operational metrics and turn financial data into actionable insights for owners and administrators.
  • Operational Efficiency Reviews: Evaluate workflows and staffing utilization, identify bottlenecks affecting patient flow and collections, and improve scheduling, capacity management and practice operations.
  • Strategic Advisory Services: Align financial performance with practice goals, support growth, succession and expansion planning, and help owners make informed decisions based on data rather than assumptions.

Questions?

As a practice improves its performance and efficiency, it becomes better positioned to invest in technology, hire staff, add providers, expand locations, increase owner distributions and prepare for succession.

Reimbursement pressures and operation costs will continue to rise in the foreseeable future, so healthcare practices can’t afford to delay addressing their inefficiencies. The time is now to optimize operations, improve collections and make strategic decisions based on timely, accurate data.

If you would like to discuss improving your practice’s financial and operational efficiency, contact an Adams Brown healthcare practice advisor.