Revenue Management: Why It Has Become More Necessary For Hospitals

Social Security Administration Office BuildingThe rating agency, Moody, said that the average operating cash flow margin among hospitals fell to its lowest point over the last 10 years, down 8.1% in 2017 from 9.5% in 2016. The metric serves as one important measure for a hospital’s profitability.

That means U.S. hospitals need better revenue cycle management services in the wake of record-low profits.

Declining Revenues

Some of the factors that affect hospitals’ revenue generation include the government’s repeal of the Affordable Care Act (ACA), following tax reforms in December 2017 that no longer required Americans to have individual insurance.

Since the ACA’s expansion in 2014, medical facilities in the country have “essentially realized” the benefits of more insured patients. Now, they would likely face more unpaid bills and more people without health insurance. Rita Sverdlik, an analyst at Moody, said that a challenging labor market and a shift to outpatient care also affected the industry’s median operating profits. In other cases, however, human error caused a decline in revenue.

Employee Mistakes

If you’re still unsold about proper revenue cycle management services, take the case of Cook County Health and Hospitals System in Illinois. The hospital lost around $165 million in the last three years due to billing and clerical mistakes of its employees.

The county’s inspector general released a report that cited a bureaucratic system in one of the biggest public hospital systems nationwide. It attributed the errors to the employees’ lack of self-motivation or an inadequate skill and knowledge set to perform the job efficiently. The hospital’s senior management must be accountable for the situation, even if there is no evidence yet about the revenue loss, according to Cook County Commissioner Sean Morrison.

Hospitals need to focus more on revenue management solutions, whether they are for enduring a tough business environment or a need to prevent costly human errors.