COVID-19's Impact on the Revenue Cycle and Optimization Strategy
As COVID-19 struck the world in 2020, humanity faced an unprecedented crisis. Aside from causing 4.9 million deaths as of August 2021 (JHU 2021), this new chapter of human history devastated the economy. From skyrocketing the unemployment rate to the closure of immeasurable businesses, the pandemic has brought catastrophe to the world. While economic recovery is in the works, the impact COVID-19 marked on the healthcare revenue cycle needs more advocacy. With the altered policies regarding the pandemic, hospitals and their healthcare providers are suffering mentally and economically under grueling work hours and large pay cuts. To resolve such issues, revenue cycle optimization–the critical analysis across the entire enterprise–is the key to the future of the healthcare industry.
An assessment of the effect of COVID-19 on the revenue cycle is integral in figuring out a solution. In the U.S., expenses like canceled surgeries and personal protective equipment had already cost hospitals $50.7 billion U.S. dollars between March and June 2020. According to the American Hospital Association (AHA), this brought the total projected losses to hospitals and health systems in 2020 to $323.1 billion U.S. dollars (Revcycle Intelligence 2020; Yood 2020). This substantial amount of debt was primarily due to a decline in the volume of patients. Over 97% of all medical practices experienced a negative financial impact from the pandemic (Luz 2021). While this impact was apparent to hospitals of any size, it was particularly detrimental to nonprofit hospitals. Due to the continuous resurgence of the virus, these smaller institutions need additional staffing and supplies. Nevertheless, as hospitals compete for a limited number of professional nurses, expensive contracts pose significant financial challenges to hospitals (Lagasse 2021).
So, what can be done to recover and improve this situation?
Revenue cycle management optimization should focus on four critical areas for improvement: revenue leakage, denial management and prevention, federal aids, and the effectiveness of the revenue cycle workflows on Telehealth (Yood 2020).
It is essential to review the revenue cycle Key Performance Indicators (KPI). KPI is a powerful statistical tool to measure the long-term health of a corporation–a phenomenal measure to spot revenue leakage. KPIs give a more discrete picture of where the loss is incurring the most by featuring factors like accounts receivable, clean claim rates, collections per visit, and metrics (Twin 2021). Accounts receivable shows the debt owed to insurance companies, while clean claim rates exhibit the success rate and reimbursement of insurance claims. Collections per visit and metrics measures also show the magnitude of service the hospital provides to each one of the patients. All these different factors contribute to forming KPI. Using KPI as a background, staff can record up-to-date patient information, document patient interactions, and capture details about the care provided. In the back office, staff should check the payments regularly, which would minimize code errors and mitigate bigger mistakes like delaying or denying reimbursements later on (Luz 2021). KPIs are numerical measures that explicitly reveal the state of revenue. Incorporating this information to recover the revenue cycle would be highly beneficial in examining the dilemma in the revenue cycle.
KPI is a significant source of measurement that indicates the health of the revenue cycle. However, denial management and prevention is a very overlooked area in the revenue cycle. Denials in healthcare refer to the refusal of an insurance company to process a request by individuals or hospitals to pay for healthcare services obtained from healthcare providers (Change Healthcare). While the rejection rate of medical bills is relatively low at 5–10%, a large volume of patients often leaves the hospitals with plenty of unresolved requests to process (RevenueXL). Denial management solves these unresolved and outdated denial processes or any fundamental corrections that are necessary to reclaim lost revenue and maximize reimbursements. High denial success rates are achieved through two principal methods. The first method is developing a solution to determine the causes of denials quickly. The second method is implementing corrective action for the resolution of denials (Yood 2020). HIPAA 835 Transaction is an electronic remittance system that provides accurate and timely reports on the causes behind denial trends. HIPAA 835 Transaction can also yield significant cash acceleration benefits by reducing the aging of receivables, daunting reworking of appeals, and claim rebills (Yood 2020). Utilizing proper strategies to process denials would lead the healthcare industry to get back on board with the normalized cash flow and revenue.
Besides the practice done within medical facilities, the healthcare industry should take advantage of federal benefits. The government offers a few very beneficial options. For example, federal aid through stimulus checks offers a decent amount of money to medical institutions at a relatively simple sign-up process. In addition, the American Rescue Plan (ARP), which explicitly targets nonprofit hospitals for funding, provides greater financial support for institutions in dire financial conditions (Lagasse 2021). Institutions must take advantage of these relief funds. Even with the funding provided by the government, hospital operating margins are still down 28% compared to 2019 (Yood 2020). The legislation does not impose strict provisions in allocating the funds, which allows hospitals to compensate the area of their needs freely. These funds also let the hospitals make investments to bolster the nation's COVID-19 response with vaccines, treatment, testing, contact tracing, personal protective equipment, and workforce development (Lagasse 2021). Thus, taking advantage of the available federal funds will benefit all of society, not just the revenue cycle.
As the world thrives in the digital age, Telehealth emerges as a new candidate for the future of the healthcare industry. The pandemic put extreme measures in place for in-person checkups, significantly decreasing the volume of visiting patients. Telehealth gained prestige during the early stages of COVID-19, with a weekly increase in virtual visits from 13,000 patients pre-pandemic to nearly 1.7 million in April (RevCycleIntelligence). Telehealth allows medical staff and patients to meet through virtual means, such as FaceTime, and enables consultation with the healthcare providers in the same manner. While this method may initially seem questionable, many hospitals have expressed positive thoughts about the initiative. Philip Coule, chief medical officer at Augusta University Medical Center in Georgia, said, "We were well-positioned with telemedicine to quickly pivot to telemedicine visits as a way of maintaining the continuity of care and continuing to support those patients and have the encounters that would have been unbillable otherwise and may not have been an as high level of care" (RevCycleIntelligence). Despite the slowly rising rate of in-person visits, researchers remain optimistic about sustaining the employment of Telehealth even during the post-COVID era. If procedures such as preclinic surveys, back-to-work assessments for employees, and self-scheduling can all be completed using Telehealth, it would be a revolutionary tool that can save a tremendous amount of money.
With these practices in hand, hospitals can improve cash flow back to normal. The 2020 CAQH Index revealed that in the United States, with better practices across the entire revenue cycle, healthcare providers could have saved $16.3 billion in 2020 –a significant amount (Luz 2021). While the revenue cycle disruptions have emerged beyond anybody's control, "a focus on revenue cycle management, the identification of system shortcomings, and the implementation of process and technological improvements designed to enhance and update revenue cycle management systems are examples of strategies within a provider's control that can improve cash flows for short-term and long-term benefits" (Yood 2021). With patience and consistent effort to save the healthcare system, the future of healthcare looks very optimistic–maybe even better than the pre-COVID era.
References
Lagasse, Jeff. “Covid-19 Surges Put Pressure on Nonprofit Hospital Margins.” Healthcare Finance News, https://www.healthcarefinancenews.com/news/covid-19-surges-put-pressure-nonprofit-hospital-margins.
Luz, Marvin. “How an Effective Revenue Cycle Management Strategy Can Help Reduce Burnout.” Medical Economics, Medical Economics, 11 Aug. 2021, https://www.medicaleconomics.com/view/how-an-effective-revenue-cycle-management-strategy-can-help-reduce-burnout.
“Medical Billing Denials Are Avoidable: How to Help Prevent the Top 5.” Change Healthcare, https://www.changehealthcare.com/insights/medical-billing-denials-avoidable#:~:text=The formal definition of a, obtained from a healthcare professional.”&text=The industry benchmark for medical billing denials is 2% for hospitals.
Prasad, Alok. “What Is Denial Management in Healthcare ?: Revenuexl.” Electronic_Medical_Records, https://www.revenuexl.com/resources/what-is-denial-management.
RevCycleIntelligence. “Healthcare Revenue Cycle Recovery after the COVID-19 Pandemic.” RevCycleIntelligence, 3 May 2021, https://revcycleintelligence.com/features/healthcare-revenue-cycle-recovery-after-the-covid-19-pandemic.
Twin, Alexandra. “Understanding Key Performance Indicators (Kpis).” Investopedia, Investopedia, 13 Oct. 2021, https://www.investopedia.com/terms/k/kpi.asp.
Yood, Kenneth. “And We Have Lift-off: Improvements in Healthcare Revenue Cycle Management to Address COVID-19 Challenges.” The National Law Review, https://www.natlawreview.com/article/and-we-have-lift-improvements-healthcare-revenue-cycle-management-to-address-covid.