Key takeaways:
- The healthcare industry isn’t necessarily recession-proof, but revenue cycle leaders can take steps to build financial resilience.
- Financial resiliency strategies in healthcare should include: diversified revenue streams, operational efficiencies and strategic financial planning.
- Leveraging technology to optimize patient collections helps providers enhance the collections process and improve financial resiliency now, and in the case of a recession.
The relationship between economic downturns and the resilience of the healthcare industry is complex. Healthcare is an essential service, so whether the economy is considered good or bad, people still need to see their provider. However, with many economists anticipating a potential recession, it begs the question: is healthcare truly recession-proof?
In this article, we’ll explore healthcare’s economic resilience and why financial resiliency and collections optimization may be the key to surviving the next recession.
The healthcare sector’s economic resilience: fact or myth?
While not necessarily recession-proof, the healthcare sector has historically been more insulated against economic uncertainty than other industries. However, since healthcare delivery organizations, like hospitals, typically operate with narrow health margins to begin with, a recession could further compound the issue.
Factors that already affect a hospital’s everyday bottom line could significantly worsen during a recession. Today’s hospitals are burdened by high fixed costs, staffing shortages, regulatory and compliance costs, value-based care pressures and the financial challenges of low reimbursement rates and insured patients. During a recession, even the slightest shift could potentially knock a healthcare delivery organization’s revenue cycle off balance.
The importance of financial resilience in healthcare
Financial resilience is crucial for healthcare organizations that want to cultivate long-term stability, regardless of what’s happening in the economy. To weather economic uncertainty, healthcare organizations must have a solid financial foundation.
The cornerstones of creating financial resilience for healthcare organizations include:
- Diversified revenue streams: Providers that offer multiple service points have more opportunities to better serve patients. To attract and retain patients, healthcare organizations must stay nimble and invest in new revenue-generating services, such as virtual or outpatient care.
- Efficient operations: Streamlining every aspect of the revenue cycle — especially through technology like automation and artificial intelligence (AI) — not only eliminates costly, error-prone processes, but also bolsters the bottom line, prevents revenue leaks and allows for new investments.
- Strategic financial planning: The healthcare industry is constantly evolving, from automated patient collections technology to artificial intelligence (AI) in claims management. Revenue cycle leaders can use data-driven insights from these technologies to inform short- and long-term financial planning.
Patient collections during a recession: a critical area of focus
Accelerating patient collections is always a top priority for revenue cycle leaders, especially as patients shoulder an increasing financial burden for the cost of care. However, during a recession, the focus on patient payments becomes even more critical. Recessions often bring job loss, leaving patients without insurance or the income to pay their medical bills.
This can leave providers scrambling to update insurance information, chasing patients for payment, sending unpaid bills to collections, or worse — getting stuck with bad debt.
Healthcare organizations can improve patient collections and maintain steady cash flow during tough economic times by adopting technology to optimize the patient collections process. Tools like Experian Health’s Collections Optimization Manager streamline the entire patient collections process without adding additional workload for existing staffing.
Leveraging technology for recession-proofing healthcare operations
Recessions often come with many unknowns, but healthcare organizations can take steps to help recession-proof their financial operations. Adopting healthcare technology, like collections optimization tools, can help providers in these key ways:
Streamline collections
Solutions like Collections Optimization Manager uses intelligent segmentation to help billing teams quickly prioritize high-priority accounts based on propensity-to-pay scores. This frees up busy staff from the burden of chasing accounts — and is especially beneficial with large accounts receivable volumes. Instead, billing teams can focus on a small amount of patient accounts that have a high propensity to pay and bring in high revenue.
Additionally, costs are further reduced since these accounts don’t need to be sent to an external collections agency. To further streamline collections, complementary automated patient outreach tools, like PatientDial and PatientText can send patients bill reminders and self-pay options via voice or text message.
Patient Financial Clearance takes this a step further by helping providers run their presumptive charity process, which estimates a patients’ Federal Poverty Level percentage (FPL%), to identify those who qualify for greater financial assistance.
Enhance financial forecasting
Collections Optimization Manager offers healthcare providers real-time insights into collection performance with reports and dashboards that focus on key metrics. Billing teams can see how their team measures against industry standards to improve patient payment forecasting and successfully manage bad debt reserves. Plus, users get access to an experienced collections consultant to evaluate reports and further refine collections strategies.
Improve financial resilience
Implementing billing and collections optimization gives providers more visibility into the collections cycle, allowing for improved short- and long-term strategic planning. This can be useful for healthcare organizations that need to make financial decisions to prepare for upcoming recessions or shift priorities as needs change mid-recession.
Emerging technologies, like predictive analytics, machine learning and artificial intelligence also offer providers a deeper understanding of patients’ financial needs, allowing for a more compassionate collections experience. In times of economic uncertainty, when patients may struggle to afford their medical bills, a supportive collections process can help improve collection rates and reduce the chance of bad debt.
Building a recession-resilient healthcare organization
While it may not be possible to fully recession-proof a healthcare organization, revenue cycle leaders can take proactive steps to make their organization recession-resilient. Turning to technology that leverages a growing range of automated solutions for clearer billing, personalized payment options and increased efficiencies is one way healthcare organizations can start to build financial resiliency for today – and for any future economic downturns.
Learn more about how Experian Health’s data-driven patient collections optimization solution helps revenue cycle leaders enhance the collections process and improve financial resiliency during challenging times.
