2024 Revenue Cycle Management Challenges and Emerging Trends

 

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January 16, 2024

Author: David Mancuso, Sr. Marketing Manager at The SSI Group, LLC

Welcome to the healthcare landscape of 2024 – a complex terrain where high stakes meet numerous challenges, defining a dynamic and demanding era in healthcare. This year promises to be a crucible of transformation, testing the resilience and adaptability of industry leaders while offering fresh perspectives on managing revenue cycles more efficiently and effectively. Join us as we dive into the intricacies of these changes and emerging trends, exploring how they’re set to redefine the financial heartbeat of healthcare in 2024 and beyond.

Payers and Claim Denials

The ongoing struggle between payers and providers over claim denials has emerged as a major challenge. This tug-of-war is characterized by high denial rates and administrative complexities that impact both the financial health of providers and the patient care experience. Here are key facts from various reports and studies:

  • Denial Rates and Impact: A recent survey finds claim denials are revenue cycle management’s greatest challenge, with more than 1 in 5 providers saying they lose $500K in annual revenue because of denials.
  • Commercial Payers vs. Medicare: A May 2023 report by Crowe Revenue Cycle Analytics (RCA) highlighted the difficulties providers face in dealing with commercial payers compared to Medicare. Although commercial payers generally pay more per claim, they also take longer to pay, require more administrative processes, and have higher frequencies of claim denials. In the first quarter of 2023, commercial payers initially denied 15.1% of inpatient and outpatient claims, starkly contrasting to Medicare’s 3.9% initial denial rate. The labor-intensive appeal process required for these denials is costly and time-consuming for providers.
  • Different Types of Denials: The Crowe RCA report also sheds light on specific types of denials. For instance, the rate of prior authorization and precertification denials for inpatient claims was 3.2% for commercial payers compared to just 0.2% for Medicare. Request for Information (RFI) denials, which delay payments by at least 45 days, were at a rate of 4.8% for commercial payers, significantly higher than Medicare’s 0.4%. These denials greatly affect cash flow and accounts receivable performance.
  • Accounts Receivable Impacts: According to a Becker’s Hospital CFO Report, over 30% of inpatient and outpatient claims submitted to commercial payers weren’t paid for more than three months in the first quarter of 2023, a stark difference from just over 10% of Medicare claims. This situation impacts the accounts receivable metric, further complicating the financial management of healthcare providers.
  • Patient Population Insured by Commercial Payers: According to a recent Crowe report, approximately 45% of a hospital’s patient population is insured by a commercial payer. This substantial proportion underscores the importance for revenue professionals to have robust systems to prevent and manage denials, ensuring that contracts with commercial payers are adhered to for maximum reimbursement.

These findings indicate a complex and challenging environment for healthcare providers. The high denial rates, the administrative burden, and the significant proportion of patients insured by commercial payers necessitate efficient and strategic management approaches to optimize reimbursement and maintain financial stability.

The Complex Dynamics of Providers vs. Payers

The relationship between healthcare providers and payers remains fraught with challenges. Divergent economic models and priorities have created a complex, sometimes adversarial dynamic. Providers struggle with reimbursement rates that often do not cover the cost of services, while payers are pressed to manage costs and ensure profitability.

  • The Shifting Landscape of Healthcare Economics:In 2023, the relationship between payers and providers underwent significant shifts, affecting the accessibility and quality of healthcare services. Looking ahead, value-based financial relationships between payers and providers continue to be one of the most dramatically effective methods for increasing both financial efficiency and quality in U.S. healthcare. In the past five years, there has been a seven-fold increase in the number of states implementing value-based contracts, according to a Primary Care Collaborative report.
  • Reimbursement Struggles for Providers:One of the biggest challenges for healthcare providers is dealing with operating losses, significantly highlighted in 2022. These losses are attributed to adjustments in staffing levels and the high cost of contract labor. Inflation and its impact on the cost of supplies further exacerbate the situation.
  • Rising Health Insurance Premiums:Efforts to improve efficiency notwithstanding, health insurance premiums continued to rise in 2023, posing challenges for individuals and businesses in balancing insurance costs with adequate coverage. Some plans opted for narrower provider networks to control costs, leading to limited choices for members and potential delays in care.

This complex interplay of economic pressures, reimbursement challenges, evolving care models, and technological advancements characterizes the payer-provider relationship. Both parties face significant hurdles in navigating this landscape, with implications for the quality, accessibility, and cost of healthcare services. As the industry moves forward, addressing these challenges will require collaborative efforts, innovative solutions, and a keen focus on balancing economic viability with patient care quality.

The Persistent Challenge of Workforce Shortages

The healthcare sector continues to grapple with severe workforce shortages, a trend that shows no signs of abating.

A survey conducted through the Healthcare Financial Management Association (HFMA) found that more than 400 healthcare finance leaders reported revenue cycle workforce shortages. One in four leaders reported needing more than 20 employees to staff their department fully. Nearly 60% of leaders had 100 or more vacancies across all hospital operations, with almost 20% having more than 600 open roles. In the revenue cycle department, 60% of leaders had between one and ten available positions.

These statistics highlight healthcare providers’ significant challenges in managing their revenue cycles and processing claims and denials, exacerbated by workforce shortages. The high turnover rates and the need for a substantial number of additional staff members underline the urgency of addressing these staffing issues to ensure efficient and effective healthcare administration and patient care.

Navigating Financial Constraints

Financial stability remains a precarious issue for healthcare providers. With hospitals operating on a median margin of just 3.5%, as the American Hospital Association reported, there’s little room for error. The same study reported overall expenses increased by 17.5% between 2019 and 2022. This increase outpaces Medicare reimbursement, which rose only 7.5% during the same period. This tight financial balancing act is expected to continue, with providers seeking innovative ways to optimize resources and reduce costs without compromising care quality.

Embracing Automation in Revenue Cycle Management

Automation is increasingly being recognized as a pivotal and transformative solution within the realm of Revenue Cycle Management (RCM). A Healthcare Financial Management Association survey indicates that one-third of healthcare leaders plan significant investments in automation over the next five years. This shift towards automated processes is seen as vital for enhancing operational efficiency, reducing errors, and improving financial outcomes.

According to Bain & Company’s 2023 Healthcare Provider IT Report, RCM IT solutions remain the highest priority among acute providers.

Bain & Company's 2023 Healthcare Provider IT Report

The report notes that RCM remains the highest priority due to its clear links to return on investment (ROI).

Bain & Company's 2023 Healthcare Provider IT Report

Looking Ahead

As we move through 2024, the healthcare industry must continue to evolve and adapt to these diverse challenges. The key to success lies in a strategic approach that combines technological innovation with a deep understanding of the sector’s unique dynamics. By embracing these strategies, healthcare providers can not only navigate the current challenges but also lay the groundwork for a more efficient, sustainable future in healthcare.

The Impact of SSI in Streamlining RCM

The SSI Group’s, LLC (SSI) solutions are designed to reduce denials and rejections, accelerate cash flow, and improve overall revenue cycle performance. Healthcare systems integrating SSI’s technology are witnessing notable improvements in process efficiency and revenue management, highlighting the importance of technological adaptation in this sector.

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“SSI has been and continues to be an asset for our organization. I cannot imagine our organization remaining financially successful without the SSI claims products and all the caring and helpful staff at SSI. “

– Wil Dourrieu | Business Office Manager, LSU Health Lallie Kemp Medical Center, Independence, Louisiana

Contact us today to begin your 2024 journey towards effective RCM solutions!

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