Revenue cycle management (RCM) leaders feel it every day: financial pressures continue to mount, with hospital and laboratory operating margin compression becoming a challenge for even the most financially sound healthcare organizations. To combat claim denial pressures and strained lab and hospital profit margins, healthcare providers should start with the beginning in mind.
Strained lab and hospital profit margins are particularly evident in revenue cycle operations, where every dollar billed to a payer needs to find its way back to the system. Rising labor costs, increased expenses for purchased services, and declining patient demand – plus inflationary pressures and labor shortages – have exacerbated these issues. As a result, many hospitals and health system leaders are struggling to maintain financial sustainability. The best revenue cycle leaders must deftly navigate a complex mix of denial management strategies and AI-based technology, like Patient Access Curator, to maximize revenue and improve operational efficiency.
Payers aren’t helping lab or hospital profit margins
Payers, facing their own financial pressures, are tightening hospital operating margins even further, leading to increased claim denials, hyper-focused audits, and reduced reimbursement rates. These strategies create a series of cascading challenges for RCM teams, including increased administrative burdens and revenue leakage.
According to a report by Healthcare Finance, 84% of health systems cite lower reimbursement from payers as a top cause of low operating margins. Additionally, 82% of CFOs have seen a significant increase in payer denials since pre-pandemic levels. Higher labor costs are another major driver of margin pressure, with 96% of CFOs reporting this as a significant issue.
Healthcare leaders agree – strained profit margins are an ongoing struggle
In Experian Health’s own research, healthcare executives identified strained profit margins as their biggest challenge. The underlying struggle is about money—keeping cash flowing and supporting a healthy organization. One of the country’s top health system CFOs stated that it’s the first time in his 30-year career where his beds are full, but he has zero margin. This highlights the severity of the issue.
Jason Considine, President at Experian Health, says, “We talk to healthcare leaders frequently and our survey and polling have revealed their primary concerns leading to strained margins – and a highly-pressured financial environment. Some of these reasons might be front and center [for a particular organization], others secondary or tertiary. But all of them are driving down margins across health systems: inpatient revenue erosion, cost of labor, rising staffing and supply complexity, delayed payer reimbursements, regulations, and a very fluid, shifting payer mix. It’s consistent from system to system, hospital to hospital.”
Quick fixes only deepen the problem
How have most healthcare organizations been playing catch-up? They throw various fixes at the problem, like cobbling together denial management teams, and adding more software, contingency vendors, and labor. However, those solutions can be a knee-jerk reaction, and only compress margins further.
Take a look at coordination of benefits (COB) denials. Revenue cycle leaders often don’t have the complete data picture when they look at a 271 response to establish primacy and ignore the “noise” of secondary or tertiary payers. Many don’t truly know their system’s current process for COB denials – nor that of the vendors or staff who try to ‘fix’ the problems.
Bud Zuberer, VP of Sales at Experian Health, says, “On a daily basis we hear that COB denials, contingency fees, and labor costs are crippling revenue cycle teams. They’re paralyzed with too many decisions to make. This collection of problems has led to a rise in denial management teams and personnel. We’re witnessing the invention of companies to ‘solve’ the problem. But that’s not the answer. The answer lies in ensuring the data ingestion is correct from the start.”
Adding more solutions or software to an already full slate of vendors can also be problematic, as it requires more human touchpoints and capital investments. Ultimately, this affects cash flow, cash acceleration, and days in accounts receivable (AR).
Prevention is the best medicine to improve strained lab and hospital profit margins
The fastest way to ease the pain of rising claim denials and falling cash flow is denial prevention – fixing downstream problems upstream, before they occur. As Zuberer points out, clean data from the start will reduce denials and chasing cash on the back end. Experian Health’s all-in-one Patient Access Curator prevents claim denials in seconds by solving bad data quality and real-time data correction, drastically cutting contingency vendor fees and accelerating cash flow.
Some of the key benefits of Patient Access Curator include:
- Reducing billing errors: Artificial intelligence (AI) and machine-learning guided technology improve claim and data accuracy.
- Quick, accurate patient registration and scheduling: Streamlines processes.
- Lower denial volumes: Prevents claim denials at the front end.
- Decrease human resources related to denial management: Eases staffing shortages and frees up team members for higher-value tasks.
Client success story
Exact Sciences, one of the largest laboratories in the U.S., recently began using the Patient Access Curator in its revenue cycle operations.
Thanks to Patient Access Curator, Exact Sciences achieved the following results:
- 15% increase in revenue per test due to accurate eligibility and fewer denials
- 4x business volume without increasing headcount
- 50% reduction in denials and major improvement in timely filings
- $100 million added to the bottom line in 6 months
“You know when Patient Access Curator went live because you can see it in our stock price. It helped us drive a $100 million bottom-line improvement within two quarters.” – Ken Kubisty, Vice President of Revenue Cycle at Exact Sciences
Read the full case study or see what Kubisty had to say in a new testimonial:
Prevent strained profit margins in the long run
Strained profit margins are a significant challenge for healthcare organizations, impacting revenue cycle operations and overall financial health. By adopting strategic approaches and leveraging technology, healthcare leaders can navigate these complexities and confirm every dollar is accounted for. In this evolving landscape, proactive and adaptive leadership is crucial for sustaining financial stability and delivering high-quality care.
Learn more about how Patient Access Curator helps prevent strained lab and hospital profit margins by solving for bad data, all at once.
