By Ritesh Ramesh, COO, MDaudit.
Healthcare organizations undoubtedly felt a sense of relief as 2022 faded in the distance, taking with it a devastating financial performance that resulted in negative profit margins for more than half of U.S. hospitals – the worst year hospitals have faced since the start of the pandemic, according to Kaufman Hall. Not only were operating margins down for most of 2022, but hospitals also struggled with higher labor costs in a more competitive market plagued by chronic clinical and administrative skill shortages.
Physician practices fared no better, with 90% saying that soaring expenses outpaced revenues last year, according to a survey by the Medical Group Management Association. Staffing and labor costs were cited most often as the source of rising costs. Other common culprits were lower reimbursement rates, significant increases in lab supply and drug costs, higher utility costs, lower patient volumes, and rising malpractice premiums.
The new year does not mean healthcare organizations are out of the financial woods, however. A plethora of new challenges to the bottom line have emerged, led by a sharp uptick in third-party audits. Supported by a $2.5 billion budget for the Healthcare Fraud and Abuse Control and Medicaid Integrity programs, federal payers are stepping up both pre-payment and retrospective claim audits – and private payers are following suit. This not only increases the risk of penalties and claw backs, but it also slows claims processing and, subsequently, reimbursements and puts greater pressure on providers to submit clean claims the first time.
Five Revenue Integrity Trends
To avoid a repeat of 2022’s dismal financial performance, revenue integrity leaders surveyed by MDaudit are placing a priority on revenue opportunities (34%), compliance pressures (29%), revenue risks (29%), and staffing issues (9%). For 37% of respondents, all these issues are top of mind for 2023.
These concerns align closely with the focus on growth, revenue, and profitability that dominate most organizational planning – and is evident in the following key revenue integrity trends identified in the 2022 Annual Benchmark Report.
Defending revenue will be as critical to health systems as growing revenue in 2023. A proactive revenue strategy is imperative. This is particularly true given the immense pressure coming from payers, especially on the Medicare and Medicaid side of the house, to ensure that every claim is scrutinized and properly adjudicated. Consider that 82% of initial claim denials came from Medicare – an increase of more than 20% over 2021. Thus, provider organizations need to have in place the processes and systems to defend claims and earn the revenue they deserve for the services they provide.
The role of billing compliance will continue to be increasingly data-driven and cross-functional, serving as a business partner to other teams to meet changing and more complex risks.Healthcare organizations are working to maximize their resources and do more with less. As part of this trend, we see a growing number of chief compliance officers focused on collaboration and working cross-functionally across coding, revenue cycle, revenue integrity, finance, pharmacy, and clinical to tackle their revenue and compliance agendas. At the same time, revenue integrity is simply more data-driven now than it was in the past. The line between a compliance problem and a revenue problem is thinning, which means risk must be monitored on a monthly or even weekly basis, which requires accurate data.
Resolving accuracy issues in billing and coding operations, which can help retain 15%-25% of overall revenue, is a high priority.In MDaudit’s analysis of billions of dollars of denied claims, we found that the average healthcare system can save up to 20% of its overall revenues just by making sure coding is done accurately and properly, and that resources are not wasted on things like duplicate claims, missing modifiers, and billing issues. It is why we are seeing significant investments into artificial intelligence (AI), coding solutions, and other software capable of streamlining revenue integrity processes and driving positive revenue outcomes.
Organizations will focus on monitoring their payer mix and the unique risks associated with each. All payers are not equal. The greatest risks for organizations increasingly dependent on federal payers are a larger burden of proof for timely payments, administrative costs, and defending audits – not to mention lengthening adjudication cycles. Thus, it is important as part of a proactive revenue integrity strategy to monitor the mix of payers in a healthcare organization’s network and their payment trends on at least a monthly basis. Administrative costs must also be closely managed to ensure resources can be dedicated to pursuing the claims that matter most to the bottom line.
Powerful technologies, including cloud, AI, machine learning (ML), and predictive analytics, will catalyze health systems to proactively monitor and rapidly address compliance and revenue risks.All the previous trends present real opportunities for healthcare organizations to build a strong business case for deploying advanced technologies to drive outcomes. The use of AI, ML, and analytics is no longer theoretical. Rather, it is now being put to practical use in real-life scenarios.
A Technology-Enabled Strategy
When it comes to achieving revenue integrity in today’s healthcare environment, the best revenue defense is a powerful technology offense. Particularly effective are solutions that bring together proven integrated risk capabilities and audit workflows into a single platform that streamlines the revenue integrity process and leverages denial insights to help focus auditing efforts while also incorporating prospective audits to reduce denials.
An integrated auditing platform allows healthcare organizations to increase the impact of their existing compliance programs by more rapidly identifying and addressing risk, resulting in improved revenue flow and reduced risk of takebacks. Further, when that platform also incorporates robust analytics dashboards, it helps focus improvement efforts and provides an at-a-glance understanding of performance by enabling prospective and retrospective audits to be performed and tracked.
Importantly, there is a solid business case for investing in the right platform – one that can override budget constraint arguments by protecting the organization from compliance risk, optimizing reimbursements, and improving revenue retention.
Acting on identified revenue integrity trends will go a long way toward helping healthcare organizations bounce back from 2022. A unified, technology-enabled revenue integrity-based approach will streamline and accelerate auditing efforts, which will in turn optimize revenue flow, reduce the risk of financial penalties, and eliminate revenue leakage.