“Revenue Leakage” refers to a situation where a healthcare provider has provided care and services to a patient but has not received payment.
Revenue Leakage usually occurs when accounts receivable (that is, unpaid invoices for care and services provided) remain unpaid for a long period and are unintentionally overlooked. The longer the claim (AR) remains unpaid, the less likely it is that the healthcare provider will recover the reimbursement, even if it is partial. If the AR cycle lasts longer than 120 days, the provider can only expect a redemption rate of 10 cents per dollar.
There is no single solution to address the root cause of the data breach, as the responsibility may be with the provider’s process, patient, or payer. However, a comprehensive strategy or outsourcing to medical revenue cycle management (RCM) companies can help minimize revenue losses and associated financial damage.
It doesn’t matter if you are big or small, urban or rural, commercial or non-profit. Hospitals and healthcare systems cannot afford to lose income. You may know the most common causes of
leaks. You may know which one is most likely to affect your organization. What you may not know is amazing statistics that show the depth of the problem and the potential revenue opportunities in solving it.
AR Cycles & Revenue Cycle Management (RCM)
Healthcare providers view billing and revenue on a cycle-by-cycle basis. The revenue cycle begins when an individual client or patient makes an appointment and remains open until the healthcare provider receives a refund. The AR cycle can last for months, so vendors must continue to recover costs through slow redemption periods.
Revenue Cycle Management (RCM) aims to minimize the inefficiencies that cause AR to be rejected by the payer, postponed by the patient, and aging without notice or follow-up. RCM streamlines management and process flow from the moment the front desk collects patient information. The AR cycle occurs within the revenue cycle from when the provider claims the patient or its insurance company to when it receives a refund. Providers typically classify AR based on age (30 days, 60 days, 90 days, etc.). This allows you to monitor pending payments. Aged AR contributes significantly to lost revenue.
Major causes of Revenue Leakage in Healthcare
Revenue Leakage can come from many causes, but by identifying the root cause, healthcare providers can find a solution. According to Effy, a company that uses big data analytics for healthcare organizations, sales losses or losses can be attributed to the following 10 main causes:
- Insufficient signup data entered
- Did not approve the payer before providing the care service
- Invalid registration of materials used during treatment
- Error when checking insurance coverage at hospitalization
- Inaccurate or inadequate recording of medical procedures
- Billing error
- Incorrect agreement between payer and provider
- Do the procedure without insurance
- Refusal of refund by payer
- Delays or errors in systematizing application procedures
Fortunately, vendors can address many of the above sources of revenue loss by assessing processes, identifying inefficiencies, and pursuing improvements. Unconfirmed insurance coverage remains the main cause of claim denial. Coding errors are the number one reason for complex Medicare and Medicaid refusals. Cleaning up common typographical errors can reduce the rejection of claims due to incorrect insurance and billing information.
Patient Leakage
In a widespread but incomplete transition from healthcare “service charges” (or volume-based models) to value-based care, providers make money while prioritizing the patient’s role as a decision-maker. Need to be increased. If the patient chooses to seek treatment from a provider on another network or a provider in a lower-value network, the clinician loses referral income and is at risk of losing future income.
Revenue Leakage Severity
Providers cannot afford to ignore revenue loss. Even before being affected by COVID-19, some of the top US hospitals showed that they couldn’t keep up with the rising costs and lost hundreds of millions of dollars. Providers need to address a small margin of error to protect profits if various leaks account for up to 20% of sales losses and 75% of “bad debts” are due to unanswered claims questions.
Throughout the healthcare industry, providers of all forms and sizes face financial challenges. Academic medical centers, which provide 25% of national health care and 40% of charitable health care and account for only 5% of hospitals, are suffering despite additional funding tools.
The problematic rural hospitals can’t afford the loss either. UNC’s Cecil G. Sheps Center for Health Services Research reports that in 2019, about 20% of local hospitals were on the verge of collapse and 40% of local hospitals were in the red.
Bottom Line
Quantifying Revenue Leakage is useful. This is also the first step in determining which sources have the greatest impact on your bottom line and how much and how much you need to fill the leak and grow your sales.
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