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In recent years, financial challenges have topped the list of issues that keep hospital and health system executives up at night — and 2023 is no exception.
Contributing factors include concerns about the economy, increased expenses, persistent labor shortages, contentious payer relationships and more.
To learn more about these challenges and the importance of optimizing revenue cycle management to address them— and how healthcare leaders are responding to these trends — Becker's Hospital Review recently spoke with Tim Kinney and Ian Stewart, two of Guidehouse's top healthcare experts. Guidehouse, a global advisory and managed services firm, recently earned four 2023 Best in KLAS awards, including for Revenue Cycle Outsourcing and Health IT Advisory. Both Kinney and Stewart are partners in the consulting firm's healthcare practice and lead its revenue cycle advisory and managed services offerings, respectfully.
In almost every conversation that Guidehouse has with healthcare clients, the topic of unsustainable cost pressures arises. "We've never seen this before," Kinney said. "We knew there would be some financial pain coming out of the pandemic, but the recovery is taking much longer than was expected."
Economic uncertainty is a major contributor. With a potential recession on the horizon, organizations want to protect their balance sheets. Increasing costs due to labor shortages is also a significant issue for providers on both the clinical and financial sides.
The payer struggle is a second factor contributing to dire financial conditions. Organizations are seeing increased denials. Write-offs are hitting net income and there's a lot of rework associated with claims. In addition, authorization requirements from some payers have doubled or tripled.
"Although many payers increased their [payment] rates for 2023, they quickly implemented policies and procedures resulting in payment delays, denials, or underpaying rates right out of the gate in January," Stewart said. "Health systems must be prepared for higher denial rates, more edits and increased activity related to coordination of benefits. Many organizations can't keep up with all the new rules and denials. I sympathize with revenue cycle teams right now. It’s an unfair playing field for providers. One of the unique advantages at a firm like ours is having deep advisory and managed services capabilities that’s able to leverage deep payer expertise and the right technology to stay ahead of the game.”
In recent years, the financial situation at children's hospitals has been less dire than at institutions primarily serving adult patients. "Children's hospitals have done better in terms of liquidity and profitability," Stewart said. "During the last part of 2022 and the beginning of 2023, patient volumes were very high due to RSV and children's flu spikes. Standalone children's hospitals in the United States have had good war chests. However, I think we are at a point where that's changing as well."
The entire healthcare sector is facing difficulties, including finding the necessary staff to support clinical and financial operations. "These organizations must hire people who understand the nuances of pediatric patients — many are high cost, short stay and have unique characteristics like the need for NICU care," Stewart said. "It's hard to find employees with that level of expertise. We have a practice solely focused on pediatric clients, and over the past year, we’ve been asked consistently to focus a number of staffing requests in all areas of the revenue cycle."
When it comes to care for adults, physician groups and regional medical centers are considering how to scale in sustainable ways. Competitive dynamics are further complicated by new market entrants. "Almost every day, you see some new healthcare player," Kinney said. "A good example is CVS's purchase of Oak Street Health. Not only is CVS the pharmacy for your patients, it now may deliver their primary care. Providers are starting to take a hard look and ask whether these new entrants will be competitors or partners in the future."
As government COVID relief funding dries up, hospitals and health systems must fine tune operations to make every facet as lean and efficient as possible. This means rethinking both clinical care and the revenue cycle. The goal is to not just survive but thrive in the future where the landscape is only getting more competitive.
Every component of healthcare revenue cycle operations carries a set of challenges. Access and the patient experience are a top priority for many health systems because those are levers for growth. Labor shortages, however, are a limiting factor. Administrative staff like front-end access employees, emergency department clerks, staff that handle authorization work and others are becoming very hard to find. As such, three out of every four leaders stated they would be increasing IT, coding and revenue cycle hires this year, a new Guidehouse/HFMA survey shows.
"It's not uncommon for patients to have call wait times of 15 to 20 minutes," Kinney said. "Then, it may take people three to four weeks to get an appointment. It's challenging to use access as a tool for growth when you are hindered by your lack of staff and limits on what investments you can make."
Stewart argued patient care could be negatively influenced by "labor shortages in combination with the increased administrative burden" associated with satisfying payer requirements.” People want to be free to get healthy without worrying about the costs or burden of the requirements of their insurance. Conversely, providers simply want to care for patients without administrative burdens.”
In the mid-revenue cycle, revenue integrity and clinical integrity are essential. It's hard to find great staff, but it's never been more important. To mitigate denials and increase the likelihood of payment, organizations must ensure staff are coding and documenting every single claim correctly. On the back end, denials are also increasing.
Many organizations are considering outsourcing and whether to adopt onshore, offshore, or nearshore staffing models to address persistent talent shortages.
"When exploring outsourcing, leaders need a partner that can tailor a solution to their needs. Every organization is unique and there is no one-size fits all approach to outsourcing,” Stewart said. "We have to dip our toe in, figure out what makes sense for the organization and then create an overarching go-forward strategy for what the revenue cycle team will look like in the future that balances quality, costs and performance."
When Guidehouse works with clients to improve revenue cycle management with technology, Guidehouse recommends organizations prioritize available solutions in two areas 1) improving patient satisfaction and quality and 2) driving financial improvement and enhancing the bottom line.
At the front end of the revenue cycle, some organizations are weaving CRM into the EHR. Others are using chatbots, texting and other technologies to keep patients engaged throughout the continuum of care. Stewart noted per the rising expectations of healthcare consumers, “Patients expect a seamless ‘Open Table’ style experience on the front-end. Our teams leverage a lot of advanced technologies, like hyperautomation, to help our clients keep peace with expectations.”
In the mid and back ends of the revenue cycle, some EHRs are adding functionality to support revenue integrity. Some large healthcare information exchange systems have become more sophisticated and now support automated charge capture. "Over the last 18 months, a number of health systems have automated repetitive administrative work," Stewart said. "They're using automation to check statuses, verify insurances, do authorization work and handle payment posting and AR follow-up tasks."
However, using artificial intelligence for denials management is not a simple fix to a larger problem. "AI doesn't always eliminate staff — in fact, you usually need an expert who can digest the big data and translate that into a business case which shows where the organization should spend its time," Stewart said. “When approaching AI, it’s essential organizations have a well-informed strategy.”
Healthcare revenue cycle teams can benefit from more automation, but experts say deploying solutions is often harder than anticipated.
"We're telling clients to look at revenue cycle technology through the lens of a maturity curve," Kinney said. "Where are you on the curve? What makes sense and is worth the money and effort to implement? EHRs continue to invest in this area, so consider what you can do with your host system."
Guidehouse has seen organizations succeed with bolt-on solutions for revenue cycle tasks like pre-authorizations. "There is also cool technology coming with conversational bots that can correspond with insurance companies for pre-auths or to ask follow-up questions," Kinney said.
Another opportunity area is work queues on the back end of the revenue cycle. Several vendors have developed different automation processes such as real-time eligibility checking.
Technology solutions themselves are only one part of the equation, however. Labor shortages can hinder the implementation process. "IT is usually a function that is very lean and under-resourced in healthcare," Kinney said. "That can create backups in the organization. Hospitals and health systems also must ensure they have the right infrastructure in place to maintain these systems."
The healthcare industry continues to face significant financial challenges in 2023, which are creating unsustainable cost pressures for hospitals and health systems. As leaders face these challenges, they are turning to emerging technology and vendor partnerships. While automating select processes in the revenue cycle is an effective way for hospitals and health systems to address financial challenges, Guidehouse believes back-end revenue cycle operations will not require significant human labor.
The goal is to shift work efforts that are usually done retrospectively to the pre-visit. Systems will automate all the work required for patients like pre-scheduling, verifying insurance, providing a cost estimate, tokenizing credit cards and gathering all the paperwork required for payers.
"When you check a patient in, there should be nothing else to do," Stewart said. "It's better to get it all done up front because there is very little rework in a model like that. Systems are getting closer and closer to having 100% of that work perfectly aligned and completed prior to arrival. I think before my career is done; we'll experience that utopia of Open Table for healthcare."
About Guidehouse’s Revenue Cycle Management Services
This article previously ran in Becker’s Hospital Review.
Guidehouse is a global consultancy providing advisory, digital, and managed services to the commercial and public sectors. Purpose-built to serve the national security, financial services, healthcare, energy, and infrastructure industries, the firm collaborates with leaders to outwit complexity and achieve transformational changes that meaningfully shape the future.