Improving the collection process is crucial for effective revenue cycle management (RCM). Many healthcare practices across the US need help with reduced patient volume, leading to decreased revenue. Enhancing the patient collections process is essential for maintaining cash flow and overall financial health.
Key Reasons for Accounts Receivable (A/R) Pile-Up
Inaccurate Information Collection
One of the primary reasons for A/R pile-ups is inaccurate or incomplete patient information. Ensuring accurate insurance and contact information is critical for verifying coverage and following up with patients throughout the treatment and collection processes. A streamlined process for collecting current and complete information, both at the time of appointment scheduling and during visits, can significantly reduce errors and delays in billing.
Inefficient Eligibility Verification
Verifying patient eligibility and outstanding balances before or during service is essential. Without timely and accurate verification, practices may face delays in payment or claim denial. Implementing automated verification processes helps clarify payer rules, identify patient collection changes, and determine patient responsibility for payment upfront.
Types and Percentage of Claim Denials
Addressing claim denials is a critical part of optimizing RCM processes. The most common types of claim denials include:
| Denial Category | % of overall denials | Mitigation strategy |
|---|---|---|
| Eligibility Issues | 24% | Verification of eligibility and outstanding balances before or during service helps prevent these denials. |
| Missing or Invalid Claim Data | 22% | Ensuring accurate and complete patient information can significantly reduce these errors. |
| Authorization or Precertification Required | 18% | Implementing automated verification processes to identify these requirements early can help reduce these denials. |
| Non-Covered Services | 15% | Clear communication with patients about their coverage and responsibilities can minimize these denials. |
| Timely Filing Limits | 12% | Developing a proactive plan for follow-ups ensures timely submission and reduces these denials. |
Implementing Effective RCM Strategies
Comprehensive Information Collection
Accurate information collection at the beginning of the patient journey sets the stage for effective RCM. Revenue cycle management services ensure that insurance and contact information are correctly gathered and verified, enabling seamless follow-up throughout the treatment and collection processes.
Verification of Eligibility and Outstanding Balances
Effective RCM involves verifying coverage with payers to understand patient collection changes and determine patient responsibilities. This step helps prevent delays and denials, ensuring that billing is accurate and payments are received promptly.
Clear and Consistent Payment Policies
It is crucial to implement a smooth payment policy that requires patients to cover their financial responsibilities at check-in. This approach reduces outstanding balances and ensures patients know their payment obligations from the outset.
Offering Multiple Payment Options
Providing a variety of payment methods increases the likelihood of collecting balances at the time of service. An easy-to-use online payment tool, along with options for cash, credit/debit cards, and checks, facilitates patient payments and reduces A/R pile-ups.
The Financial Impact on Hospitals
According to a report by Kaufman Hall, hospital operating margins were negative for 2020, with a median of -3.3%. A 2021 study by the American Hospital Association found that 55% of hospitals expected negative operating margins by the end of the year. Additionally, hospitals faced a 7.5% increase in expenses in 2021, driven by labor costs, supply chain issues, and increased costs of PPE. These statistics highlight the importance of efficient RCM processes to maintain financial health and sustainability.
Imperatives for CFOs
“Efficiency is doing things right; effectiveness is doing the right things.” — Peter Drucker.
- Embrace Digital Transformation: CFOs must prioritize investments in digital solutions to streamline RCM processes. Robotic process automation (RPA) and artificial intelligence (AI) can significantly enhance efficiency, reduce manual errors, and improve cash flow management.
- Strengthen Compliance and Security: With the increasing reliance on digital tools, ensuring data security and regulation compliance is paramount. Implementing robust compliance and security measures protects patient data and enhances the trustworthiness of the healthcare provider.
- Focus on Patient Engagement: Patient satisfaction is closely linked to financial outcomes. Providing multiple payment options, clear communication, and proactive follow-ups enhances the patient experience, improving payment compliance and reducing A/R pile-ups.
- Optimize Workforce Management: CFOs should focus on optimizing workforce management by ensuring staff are adequately trained and equipped with the right tools. Investing in staff training and development improves productivity and reduces turnover rates.
- Implement Performance Metrics: Tracking key performance indicators (KPIs) such as days in accounts receivable (DAR), net collection rate, and denial rate helps identify improvement areas and measure the effectiveness of RCM strategies.
Improving Patient Collections
A significant factor contributing to A/R pile-ups is the inefficiency in patient collections. Here are some key strategies:
- Clear Communication: Communicate payment responsibilities clearly at the time of service.
- Follow-Up: Proactively follow up with patients who have outstanding balances.
- Technology Integration: Use technology to send automated reminders and offer multiple payment options.
By focusing on accurate information collection, eligibility verification, clear payment policies, multiple payment options, and diligent follow-ups, healthcare providers can enhance their revenue cycle and achieve their financial goals. These steps ensure better financial health, allowing healthcare providers to focus more on delivering quality patient care. With expert staff and advanced technology, revenue cycle management helps practices boost revenue and maintain financial stability.
