By Megan Williams, contributing writer
If there’s any application of IT in healthcare that can resonate with CFOs, it’s revenue cycle. On average, hospitals in the U.S. write off between 3 and 17 percent of their revenue due to payer denials. Many are hemorrhaging cash because of process inefficiencies, unbilled claims, coding errors, and poor communication with insurance companies.
In a low-margin business like healthcare, the potential losses are staggering.
According to Hospital Denials Management, the average hospital of any size loses an estimated 10 percent annual billed revenue in denials costs alone. That translates to figures like a $6.3 million per year loss for a 185 bed community hospital billing $63 million a year.
Taking into account an aging population and insurance companies tightening their claims adjudication processes, those numbers are only expected to rise. Dell Solutions estimates a 400 percent increase in the number of denied claims over the next four years.
Revenue Cycle Breakdown
Revenue Cycle Management is essentially the use of technology (ranging from decisions support software, EMR, billing software, data modeling, coding software, cloud computing, data repositories, and myriad other solutions) to support the four different functions of revenue cycle:
The Role Of Revenue Cycle
As time moves on, and hospitals’ basic needs continue to outweigh any concern a CFO might bring to the table, financial executives are left looking for new and effective solutions. According to EHR Intelligence, the use of revenue cycle systems is increasing as we approach 2015. Doug Brown, Managing Partner of Black Book Market Research, says, “Most hospital CFOs have no choice but to leverage next generation financial system solutions including software and outsourced services in order to keep their organizations solvent. The reimbursement challenges ahead to get paid may require several new applications, and the frank reality is that outdated, understaffed and failing current solutions could quickly close a marginally performing hospital for good.”
What To Expect
In the use of a well-integrated revenue cycle solution, a facility or system can expect to see increased, data-driven insight into trends in both commercial and government payor reimbursement, improved human resource management, better tracking of coding initiatives (including ICD-10 implementation), and feedback on reimbursement trends that have impact down to the clinical level.
To be clear, a facility, no matter their level of use of advanced technology, lives and dies by revenue cycle. The only question is how they’re using technology to optimize the flow of claims and cash through their organization. A revenue cycle solution, especially one that is integrated into an EHR system, will become increasingly indispensible as healthcare moves toward more patient-driven reimbursement models, and sees more care organizations focused on outcomes, over illness.
To stay on top of the impact of IT on reimbursement trends in the healthcare industry, sign up for our newsletter at the right.