Reducing Cost to Collect Amid Growing Revenue Cycle Challenges

R1 RCMAugust 28, 2023

Healthcare costs are rising. Labor shortages abound. Margins continue to shrink, and navigating the ever-changing revenue cycle landscape becomes trickier by the day. For many health systems, lowering the cost to collect seems unattainable given the growing number of revenue cycle challenges. However, with a smart revenue cycle strategy and the right solutions—it doesn’t have to be. 


A streamlined revenue cycle means that it’s time to evaluate the entire process: from order to intake, care to claim and claim to payment. Let’s take a look at the top challenges affecting health systems’ cost to collect and how you can solve them, all while lowering your costs. 


Facing the Challenges Head-On

It’s no secret that health systems are face monumental financial losses. Rick Pollack, president and CEO of the American Hospital Association, recently addressed the rising financial challenges for hospitals and health systems.  


“The bottom line is America’s hospitals are under severe financial pressure as they experience stark workforce shortages, broken supply chains, and rapid inflation that has increased the cost of care," Pollack said. 


To help prevent these high costs from wreaking havoc on your revenue cycle, it’s important to streamline your processes, optimize collections and prevent denials before they start. Here’s how. 


Managing Claims

One way to meet financial pressures head-on is to consider how you manage claims. Determine which claims should be managed in-house and which should be managed externally to help cut costs and increase revenue. 


Complex claims can be more difficult to collect efficiently without an outside partner. Some examples of complex claims include: 

  • Motor Vehicle Accident (MVA) / Third-Party Liability (TPL) 
  • Workers’ Compensation (WC) 
  • Veteran Affairs (VA) claims 

Working with a complex claims partner that leverages artificial intelligence combined with expert teams, health systems can maximize speed and reimbursement and: 

  • Increase cash by up to 15% 
  • Decrease AR days by up to 20% 
  • Reduce preventable denials by up to 70% 


Preventing and Recovering Denials

Investing in a denials recovery strategy that both overturns denials and prevents denials from happening in the first place is one of the best ways to decrease cost to collect. 


Chris Hartemayer, executive vice president of Patient Operations and Commercial Solutions for R1, recently addressed how denials contribute to skyrocketing cost to collect totals in the 2023 Revenue Intelligence  Data and Insights Report.


“Even a small percentage of all claims that require an appeal is substantial because medical necessity denials are going to result in an extensive appeal process, which negatively impacts AR days and cost-to-collect,” Hartemayer said. 


Consider this health system. A large, multi-department hospital with more than $1 billion in net patient revenue (NPR)previously used their internal team for denials management. They believed that some diagnosis-related groups (DRGs) weren’t worth appealing and downgraded them at the time of denial. By seeking an outside partnership for claims they did not wish to appeal, the health system was able to recover $40 million in just one year.  


Addressing the Cost to Collect of Patient Payments 

It’s imperative that health systems collect patient payments while still providing the best patient experience possible. Sixty percent of bad debt now originates from insured patients, so clearly the standard patient payment model isn’t working. A new model can increase patient payments and capture net-new cash—all while decreasing cost to collect.  


By implementing a patient payment solution that offers personalized payment options based on propensity to pay, health systems are much more likely to collect. Investing in a single vendor that can streamline this process with digital-first technology and compassionate call center agents to assist has been shown to decrease cost to collect by up to 30%.  


Stopping Revenue Leakage 

Revenue leakage happens, but why? Eventually, small leaks can accumulate—costing health systems millions of dollars and exploding their cost to collect. Payment rules and regulations constantly change, making it nearly impossible for health systems to keep up without making costly mistakes.  


Missing charges and incorrect codes on claims are inevitable but can be easily prevented or remedied with revenue integrity programs. Start by uncovering the hidden sources of revenue leakage and working with a partner to identify those gaps if you aren’t sure where you could be stopping leaks. 


The Bottom Line 

It might seem impossible to drive down your health system’s cost to collect given the current healthcare landscape. But when you invest in the right partners and streamline the revenue cycle journey, you can identify inefficiencies and remedy lost revenue and leakage—driving down the cost to collect and saving your health systems millions. If you’re ready to talk about driving down your health system’s cost to collect, reach out today. 




Author Bio: Content written on behalf of R1 RCM.

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