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Identifying Revenue Leakage in Healthcare

What Is Revenue Leakage in Healthcare?

Revenue leakage happens when a healthcare practice gives care but does not receive payment for the services it provided. Leakage can occur in a few ways, such as forgotten accounts receivable or missed appeals deadlines for denied claims. It impacts the revenue cycle, preventing businesses from becoming financially viable.

Revenue leakage often goes unnoticed, but its impact can be detrimental to healthcare practices seeking to grow their business and maintain a high standard of care for their patients. The longer providers take to address points of leakage, the less likely they will be to receive any reimbursement for their services.

What Is the Impact of Revenue Leakage?

Healthcare providers must keep up with expenses to secure customer satisfaction and keep their practice in business. Revenue leakage can lead to lower earnings, putting providers at a disadvantage to their competitors.

A lack of revenue will significantly impact a healthcare facility’s ability to maintain several aspects of its organization, including:

Staff: Healthcare practices require proper resources to maintain a team with all the talents necessary to meet patient needs, ensure smooth processes and promote detailed organization. Revenue leakage can make hiring and retaining a highly skilled workforce challenging.
Quality care: If a provider is experiencing revenue leakage, they may add more services to compensate for the missing revenue. Extra services may decrease a provider’s ability to maintain high-quality care by increasing the likelihood of burnout.
Growth: Steady revenue enables organizations to grow their services and meet the needs of an expanding community. Healthcare practices that experience inconsistent income due to leakage may need help to keep up with growth demands.
Innovation: Cash flow powers innovation, helping providers maintain a competitive edge. A decrease in revenue will prevent businesses from matching a competitor’s offer, leading to a decline in patients.
Business goals: Revenue leakage can inhibit healthcare providers’ ability to meet business goals and objectives. Proper funding is necessary to achieve high standards and goals that drive the business forward.

What Are the Top Causes of Revenue Leakage in Healthcare?

Many forms of leakage are accidental and easy to correct, but they first must be identified. Revenue leakage can come from numerous sources, from issues with a provider’s processes to how patients or payors handle payments.

Some common causes of revenue leakage include:

Inaccurate information: Insufficient or incorrect registration data may result in a denied claim or errors in billing. Any changes in a patient’s personal information may also lead to revenue leakage.
Unverified insurance coverage: Without a proper review of insurance eligibility or approval, procedures and services may be given without adequate coverage. Inconsistencies with insurance coverage may also come from errors in payor-provider agreements, halting the revenue cycle.
Pricing issues: Inadequate pricing may lead to missed revenue opportunities. Prices set too low may undermine services for what they are worth, while prices set too high may drive patients to seek care elsewhere.
Unpaid accounts receivable: Sometimes outstanding bills remain unpaid for too long, going unnoticed or becoming lost. The longer an accounts receivable goes unpaid, the less likely providers are to recover any reimbursement.
Claims denials and underpayments: Inaccurate information can lead to claim denials and underpayments, slowing the revenue cycle for a healthcare provider. Any delay in addressing these issues with insurance companies can lead to missed appeals deadlines and less revenue for services already given.
Unbilled claims: Without a dedicated team to manage claims, practices may experience a variety of problems leading to revenue leakage. Claims require accuracy and consistent follow up ensure all claims are correctly billed.
Scheduling issues: Revenue leakage can also result from missed opportunities to receive revenue. These instances include referred patients who have yet to make an appointment or gaps in scheduling that could have been filled to maximize available time and resources.
Lost patients: Previous patients who seek another provider for care instead of returning are another form of revenue leakage. Healthcare providers miss out on revenue opportunities when patients feel their needs will be met better elsewhere.
Billing errors: Manual input of data may lead to various types of billing errors, decreasing the amount of revenue providers could and should be receiving. Accidental discounts or other inaccuracies in billing will halt the revenue cycle.
Unaccounted costs: Administrative costs can sometimes be miscalculated, resulting in underpayment from patients or payors. Incomplete logs of materials and equipment used during treatment or medical procedures performed may also lead to inaccuracies in how much patients or payors are charged.

These forms of leakage are common and usually unintentional, making it challenging to track and manage potential revenue opportunities. Healthcare practices need to ensure careful follow-up to protect vital revenue streams and prevent any leakage.

Revenue management is essential in the healthcare industry. Consistent cash flow enables providers to establish themselves as trustworthy professionals that provide the high-quality care patients seek. Revenue also allows organizations to experience growth and innovation that helps them keep up with competitors and maintain a talented workforce.

Healthcare practices need to ensure they have the funds to support their services and maintain patient satisfaction. Providers have a thin margin of error to work with, making revenue leakage an essential situation to address and resolve if healthcare practices wish to enjoy the benefits of consistent revenue.

Guide to Different Types of Healthcare Contracts

Health Care Financial Consultant Contracts

Contracts are the glue holding every operation together within the healthcare industry.

They connect employees and employers, suppliers and buyers, ensuring each party remains protected. Whether dealing with hiring, your supply chain or equipment, contracts can be long and complex and require time and effort to ensure they’re structured in your best interest. Understanding the different types of contracts and how they work is the first step to an effective contract management operation.

Supply Chain Contracts

Healthcare organizations depend on countless materials and products to complete daily tasks. Some of the most common products used throughout healthcare centers and hospitals include syringes, defibrillators, sterilizers, gloves and masks.

You can create supply chain contracts to secure these raw materials, products and services from reliable suppliers. These written agreements guarantee the supplier will provide specified goods or services for a pre-determined period at a fixed cost. They also outline delivery schedules, consequences for failing to adequately buy or supply and termination conditions.

Types of Supply Chain Contracts in Healthcare Facilities

Healthcare professionals use expensive instruments daily, and they might have equipment lease contracts rather than buying items outright. This strategy provides additional flexibility and security to obtain the required tools at a more convenient price. However, there are other solutions healthcare providers might employ to get the resources they need. Common types of supply chain contracts found within healthcare facilities and organizations also include:

Purchase orders: A purchase order is a binding contract the buyer produces detailing what they want to purchase from a supplier. This document includes information like quantity, payment terms and delivery.
Service agreements: These contracts are lists of all the services a supplier agrees to provide. It also outlines pricing, timelines and the rights afforded to each party.
Distributor agreements: Distributor agreements are formed between suppliers and merchants. The seller, or distributor, agrees to market and sell specified providers’ products for a fixed fee.

Labor Contracts

Standard labor agreements are legal contracts outlining the terms and conditions of employment at an organization or company. These documents vary by company and position and provide explanations of employee responsibilities and duties, employment terms, compensation and benefits and conditions of termination.

Commonly used labor contracts in every industry include:

Union contracts: A single, written agreement between the employer and a group of employees agreed upon using collective bargaining. These documents detail wages, hours and scheduling, time off, working conditions, advancement and more.
Non-union contracts: Customized documents that employers and individual employees negotiate. Individual employment agreements state conditions of employment and are often subject to governmental regulations.
Independent contractor agreements: Contractors are not employees and agree to perform specific services for a company in return for payment. These contracts outline the scope of work, compensation, deadlines and partnership length.

Special Healthcare Labor Contracts

Labor contracts are required for every employee within your organization. Which one you use depends on their position and union status and must meet all state and federal employment laws. However, there are special circumstances in which you must utilize other contract types, such as hiring a physician.

Many states prohibit medical facilities, like hospitals, from employing physicians directly. Detailed physician employment contracts or independent contractor agreements are often necessary.

They include schedule expectations, wages and benefits, on-call requirements and a restrictive covenant outlining non-compete conditions. If you are hiring for the role of medical director, a separate contract is also required and includes similar information.

Purchased Services Contracts

A lot goes into running and maintaining your healthcare facility. It takes time, effort and money to provide patients with the care and attention they deserve. Partnering with outside companies will ensure your operations are sustainable and run smoothly while saving you money. These partnerships are usually called purchased services and are part of your non-labor spending budget.

Purchased services agreements are the contracts between your organization and outside businesses. They include information regarding contract terms, scope of services, pricing structures and scheduling. Standard outside services many organizations choose to outsource include:

Laundry and linen
HVAC
Marketing
Rehabilitation services
Specialty equipment
Legal services

Types of Purchased Services Medical Contracts

Your healthcare business depends on the services you source from outside businesses and contractors. Outsourcing activities like coding, transcriptions and billing collections require managed services agreements (MSAs) and outsourcing agreements. These examples of healthcare contracts outline the promised service, payment structures, liability protections and timelines. They can also include penalties, fines and exit strategies.

Professional service agreements (PSAs) are another form of purchased services contract that aims to reduce company expenses. Facilities like hospitals often use PSAs to enlist the help of specialized physicians such as anesthesiologists, radiologists, hospitalists and many other professionals.

These professionals remain independent from the business while adhering to a contract tailored to fit the needs of your business or organization in return for payment. You can create them for a single service provider or a whole department, varying in term length, schedule type and responsibilities. These contracts tend to be more complicated, yet they can be extremely powerful when they are done right.

Informational Technology Contracts

As technology has continued to advance, it has become a staple of the healthcare world. Healthcare companies everywhere depend on cutting-edge technology and software to treat patients effectively and deliver reliable services.

Technology contracting is critical to these companies acquiring the resources they need. Most applications, software and information-based technology require licensing agreements detailing necessary fees, the duration of the agreement and prohibited activities.

Examples of Healthcare Informational Technology Contracts

The healthcare industry is extremely reliant on innovative technology to continue meaningful growth. With this, you may see various types of healthcare contracts, including:

Software licensing agreements: This is a legally binding contract between your healthcare organization and a technology company permitting the use of specific software. It defines where a purchaser can install the software, how to use it, how much it costs and how a party can terminate it.
Software development contracts: These agreements enlist the help of developers to design and implement custom programs and applications to expand business offerings and capabilities. A software development contract offers an overview of the project details and expectations, including the timeline, expectations, budget and other information.
Information technology outsourcing (ITO): ITO agreements are legal documents describing all the work to be handled by a third-party partner. You can establish relationships with vendors for infrastructure management, data center services and application development and maintenance.
Data use agreements (DUA): Providers use DUAs with patients when transferring protected health information, like limited data sets and identifiable data. This contract establishes both parties’ rights, responsibilities and obligations regarding permitted use, ownership and liability.
Application service provider (ASP) agreements: Healthcare companies can work with vendors to obtain the right to use their software or application. Instead of licensing and receiving a copy of the software, organizations rely on vendors to operate and manage the software on their behalf, often charging a usage fee or subscription.
Business process outsourcing: Organizations choose to streamline their technological supply chain by subcontracting specific jobs to third-party service providers. Popular online sectors that healthcare facilities create agreements for include finance and accounting, human resources and customer call centers.

Pharmacy Contracts

Drugs and medications are heavily regulated at the state and federal levels. Contractual agreements are used between healthcare organizations and pharmacies to protect each party’s rights and meet legal restrictions.

Pharmacy contracts are legal agreements between pharmacies and healthcare organizations. These detailed documents establish the terms and conditions regarding various operations, including purchasing, dispensing and paying for drugs and related services.

Types of Pharmacy Contracts

Pharmacy contracts will likely vary from pharmacy to pharmacy, and they are heavily dependent on provided services. Essential terms covered within these types of medical contracts include the scope of services, pricing, confidentiality, compliance and termination. Whether you run a pharmacy or work side by side with them, you should be aware of the following contracts you might encounter:

Manufacturer rebate agreements: Also known as vendor rebate agreements, these arrangements act as incentives to increase manufacturer sales while offering businesses reduced price points. This contract details the conditions a healthcare organization must meet before they receive a rebate check or future discount.
Group purchasing agreements: Specialty healthcare entities and pharmacies can enter into group purchasing organizations to secure supplier discount pricing. Organizations use these agreements to increase their buying power and negotiate with manufacturers, vendors and suppliers.
Pharmacy benefit management (PBM) contracts: These documents facilitate the relationship between pharmacy benefit managers and employers, health plans, labor unions, wholesalers and other organizations involved in healthcare. PBM contracts describe the manager’s role in processing and paying prescription drug claims and outline pricing areas and unique exclusions.

Choose Pathstone Partners to Handle Your Healthcare Contracts

Legal contracts come in all shapes and sizes within the healthcare industry, facilitating integral services that businesses and organizations rely on to succeed. Understanding how each operates and how to navigate through each situation accurately is crucial to your growth. It will ensure you’re capable of effectively helping and caring for customers and patients.

Pathstone Partners is devoted to providing your business with a broad spectrum of exceptional healthcare consulting services to manage all your medical contract needs. We have a long history of working with healthcare organizations of all sizes, identifying challenges and capitalizing on opportunities to enhance performance. Our healthcare consultants have unrivaled expertise to oversee contracts across all your business ventures. Get in touch with us to get started today.

The Importance of Information Technology in Healthcare

Health Care Financial Consultant Technology

What is Healthcare IT?

Information technology (IT) plays an important role in the modern world, impacting many industries such as the banking industry and tech industry. Not as widely recognized is the importance of IT in the healthcare industry.

Before delving into the importance of information technology to healthcare, it is necessary to understand what exactly IT refers to in this space. Most commonly, healthcare information technology employs the exchange of health-related data via electronic systems involving the use of digital technology to record, assess, and distribute patient related-data.

Why is IT Important in the Healthcare Industry

The importance of information technology in healthcare is demonstrated when its effective use leads to improvements which medical care providers can bestow upon their patients. Medical care often involves the analysis and decision making of multiple specialists, payors, and the patient and readily available and accessible information is crucial to help inform the patient’s best treatment plan and increase overall efficiency of the health system. It is often difficult to share, access, and maintain consistent information across the many sectors and stakeholders present in medical care. Thus, minimizing the demonstrated gaps of information that present themselves in healthcare financial is where information technology proves instrumental to the industry.

That said, improvements to medical care are limited by the quantity and quality of the information that healthcare providers have on their patients. Insufficient medical information can lead to medical errors that may potentially affect the medical and wellness of patients, payors, and healthcare providers. For example, adverse drug reactions can be linked to insufficient access to medical information and cause over 350,000 hospitalizations and 1.3 million emergency room visits every year in the United States. Therefore, by assisting the delivery of accurate and accessible patient information, supporting shared decision making, establishing networks of social support for patients, and enhancing treatment compliance tracking, IT drastically improves the quality of care provided to patients and avoids the unnecessary costs of medical errors and information gathering.

The Benefits of Establishing a Healthcare IT Infrastructure

IT plays a role in medical data collection and research. By providing researchers with patient data, the development of new treatment options and clinical studies can be conducted. Additionally, IT eliminates unnecessary processes, such as physical test result interactions and information gathering interchanges using software such as MyChart.

IT also facilitates healthcare providers in the process of remaining compliant with increasingly complex regulatory policies and federal programs. An example is the 340-B Drug Pricing Program, where covered entities must maintain certain statuses and coverage statistics to qualify patients for reduced drug prices. With the development of platforms such as RxStrategies, hospitals and hospital networks can adhere to the strict regulations, minimize the costs of doing so, and maximize the benefit from such programs.

In conclusion, IT has impacted the healthcare industry across the multiple layers and institutions involved in the industry. Patients have benefited from improved medical care, physicians have been able to make better informed decisions, payors have been able to better track their beneficiaries, hospitals have been able to reduce unnecessary costs, and regulatory powers have been able to ensure complex regulation are complied. As information technology continues to develop, so will healthcare.

10 Key Metrics in the Healthcare Industry

Health Care Financial Consultant Metrics

Measurements in the Healthcare Industry

Like any business, hospitals must collect and analyze data about their processes and procedures to streamline operations, improve patient care and avoid overspending. Healthcare performance metrics are essential data points that indicate how efficiently an institution is running and allow hospitals to monitor their quality of care and spending habits.

In this guide, you’ll discover the common healthcare metrics that hospitals and facilities should leverage to provide outstanding patient care and remain as efficient and profitable as possible.

Metric #1: Length of Stay

The average length of stay measures the duration of a patient’s hospital stay from their admittance to discharge. According to the Centers for Disease Control and Prevention (CDC), the average hospital stay in the United States lasts 5.4 days.

Hospitals can track and segment this metric by hours, days, weeks, months or quarters. If desired, they can further categorize length of stay metrics by diagnosis or department. However, most hospitals typically track their average stay length using months or annual quarters as units of measurement.

Stakeholders can use this metric to measure efficiency and financial performance. The longer a patient stays in the hospital, the more their care costs, meaning shorter stays reduce a hospital’s cost per discharge. Post-acute care is also generally less expensive than inpatient care.

Metric #2: Readmission Rates

Patient readmission rate refers to the number of patients readmitted to the same hospital for the same condition after being discharged for less than 30 days. The most recent data from the Healthcare Cost and Utilization Project (HCUP) indicates the average 30-day hospital readmission rate for Medicare patients was 16.9% in 2018.

This metric fluctuates depending on the type of patient and condition. For example, the average 30-day readmission rate for Medicare patients with heart failure in 2018 was 22.9%.

Readmission rates demonstrate a hospital’s quality of care, as a higher hospital readmission rate indicates that care providers likely overlooked complications and prematurely discharged patients.

Hospitals also use readmission rates to measure financial performance, as hospitals with higher readmission rates might not receive full reimbursements from Medicare.

Metric #3: Bed Occupancy Rate

Bed occupancy or bed utilization rate measures the number of occupied hospital beds at any time. This healthcare performance metric helps providers to see the ratio of available beds to those awaiting care. Current data indicates the average national bed occupancy rate in the U.S. was 64.4% in 2019.

Much like a hospital’s readmission rates, bed occupancy rate helps hospitals evaluate their quality of care and financial performance. The higher the bed occupancy rate, the more staff is needed to care for patients. Adequate staffing is paramount, as quality of care could suffer if a hospital is understaffed.

Conversely, if a hospital’s bed occupancy rate is too low, the facility might lose money due to overstaffing and maintenance costs.

Metric #4: Incident Rate

A hospital’s incident rate measures the occurrence of care complications, including issues such as bed sores, infections, reactions or postoperative respiratory failure, hemorrhages, sepsis and pulmonary embolism.

According to a 2018 report by the U.S. Department of Health and Human Services Office of Inspector General (OIG), 25% of Medicare patients experienced harm during a hospital stay. These adverse events included pressure injuries, intraoperative hypotension and respiratory infections, resulting in the need for life-sustaining measures and prolonged hospital stays.

Having a lower incident rate indicates a hospital’s ability to provide high-quality curative care without adverse reactions. Better care also reduces a hospital’s financial losses because it minimizes the need for additional treatment, meaning that this specific performance metric has a substantial impact on other areas of operation.

Metric #5: Average Cost Per Discharge

The average cost per discharge is the median cost per hospital visit for each discharged patient. As with average length of stay, hospitals can segment the average cost per discharge based on diagnosis or department.

Current data indicates that the average cost per discharge for Veterans Affairs Hospitals was $40,763 in 2020. According to the HCUP, the average cost of a common hospital stay in the U.S. in 2017 was $12,100, compared to $11,700 in 2016. Septicemia, osteoarthritis and heart failure were among the most expensive inpatient conditions in the U.S. in 2017.

Hospitalization continues to be one of the most expensive aspects of medical treatment. Tracking the average cost per discharge helps hospitals measure inpatient costs to assess their spending efficiency and monitor areas of overspending. The average cost per discharge metric also showcases where hospitals routinely profit.

Metric #6: Operating Margin

A hospital’s operating margin is its net revenue minus its operating costs. Operating costs include but are not limited to staff salaries, medical equipment, supplies, utilities, liability insurance, treatments, medications, meals and marketing expenses.

According to the American Hospital Association, one report indicates the average operating margin for over 900 U.S. hospitals at the beginning of 2022 was -3.45%, meaning that many U.S. hospitals did not turn a profit early in 2022.

A hospital’s operating margin is an essential healthcare performance metric that demonstrates the institution’s financial health, as a higher operating margin translates to greater profit for the hospital. Higher operating margins also indicate excellent management revenue cycle and patient care.

Metric #7: Inpatient Mortality Rate

Inpatient mortality rate refers to the percentage of patients who die in a hospital’s care. Mortality rates differ based on patient demographics and diagnoses.

For example, a National Health Statistics Report from the CDC asserted that 35% of patients hospitalized for pneumonia in 2016 died during their hospital stay. Other serious conditions, such as congestive heart failure, will naturally involve a higher mortality rate, while more minor issues and illnesses are less likely to result in a patient’s death while under care.

This metric is especially important for informing stakeholders of an institution’s performance because it is an Inpatient Quality Indicator (IQI) demonstrating a hospital’s ability to stabilize and adequately care for patients. Though variation is expected based on patient demographics, higher overall patient mortality rates indicate care deficiencies.

Metric #8: Asset Utilization Rate

A hospital’s asset utilization rate refers to the percentage of time its hospital equipment is in use, with a higher asset utilization rate indicating better performance. That’s because the more a piece of equipment is in use — or the higher the utilization rate — the more the hospital generates revenue from that investment.

A lower utilization rate might mean a hospital has more equipment than is reasonably necessary, hinting at overspending. Without knowing how often a hospital’s staff uses its assets, it’s challenging to budget for or justify equipment expenditures, so this metric is vital for assessing a facility’s financial status.

Metric #9: Patient Satisfaction

Patient satisfaction refers to a patient’s satisfaction with the care and service provided during their hospital stay. Factors that might influence a patient’s satisfaction include staff temperaments, wait time, visit length, technology, facility condition and diagnosis.

According to a 2019 study by the Centers for Medicare and Medicaid Services, only 8% of U.S. hospitals received a 5-star rating on patient experience. In the same study, it was found that the majority of U.S. hospitals receive 3-star ratings.

Why is measuring patient satisfaction important? Patient satisfaction provides actionable feedback and data hospitals can use to improve care and optimize services.

Patient satisfaction also affects the likelihood of a patient recommending a hospital to their loved ones, contributing to its reputation. A positive reputation can bolster a hospital’s bottom line.

Metric #10: Time to Service

Time to service refers to the time it takes a patient to receive care at a hospital, from the first arrival to when they receive healthcare services. This metric also includes the time it takes for a patient to see a physician.

Hospitals can segment time to service based on diagnosis, discipline or department, such as in the case of emergency room (ER) visits. The current time to service for U.S. emergency departments differs by state, with North Dakota having the lowest wait time at 104 minutes as of 2022.

Time to service is an important metric for hospitals to track because it provides information about their ability to provide prompt patient care. Wait times also directly impact patient satisfaction, meaning hospitals can improve their patient satisfaction rates by focusing on improving service times.

Leverage Hospital Performance Metrics With Pathstone Partners

If you’re looking for ways to leverage healthcare performance metrics data to improve your hospital’s operations and finances, consult the experts at Pathstone Partners. We’re a leading healthcare management consulting firm that assists healthcare organizations with developing streamlined operational strategies. We’ll help you identify trends that can enhance your facility’s operations to improve your quality of care and boost your bottom line.

Contact us today to learn more about improving your healthcare organization’s efficiency by analyzing healthcare performance metrics.

Cost Reduction Initiatives For Healthcare Organizations

Cost Reduction Initiatives

Cutting costs can be tricky, especially when patient health is on the line. Targeting spending less in larger areas like staff, supplies and equipment seems simple. However, these are essential to keeping the hospital running efficiently and delivering a positive patient experience.

Instead, consider the following initiatives as alternative ways to create a successful cost-reduction strategy.

Optimize Revenue Cycle

A healthcare revenue cycle helps organizations stay financially healthy as they provide services for treating patients. Some factors can enhance the revenue cycle and help avoid debt collection. These include:

Patient education: Patients should continually be educated on the costs of care, especially early in the treatment. Financially clearing patients early and consistently can help them be prepared and not confused when bills arrive in the mail.
Electronic medical billing: Provide online payment opportunities for patients to conveniently and quickly pay their bills.
Data analytics: As we mentioned before, data analytics are important in maintaining costs. With this concept, you can get a clearer picture by analyzing your revenue cycle trends.
Process updates: Continue to revisit your daily operations to ensure all pieces work smoothly. You can address any issues at the root and adjust strategies where needed to avoid large costs or debt for later maintenance.

Improve Supply Chain

The post-COVID supply chain has greatly improved through enhanced communication opportunities between the medical staff and management. Doctors relaying helpful information on certain products and treatments to management can improve the inventory of adequate medical supplies.

Additionally, regularly evaluate your suppliers. Are they providing quality products at a reasonable price? From here, identify what goods are being transported along the supply chain, including how much of the product is being delivered vs. how much you use between shipments. Knowing what and how much you use can help avoid wasting equipment.

Optimize Information and Digital Technology

Technology continues to advance, and healthcare organizations are beginning to use that to their advantage. Hospitals can utilize technology to create efficiency and cut costs by doing the following:

Automate administrative tasks: Doctors spending hours on monotonous administrative tasks can take up more than just time. Technology can make these tasks more cost-effective by automatically importing test results into a patient file, scheduling appointments and providing prescription information to patients.
Improve workflow and operations: Technology automation can reduce the risk of human error, saving the hospital from negligence claims. Implementing telehealth can also improve a clinician’s productivity through e-prescription refills and e-visits, allowing the clinician to see more patients.
Rethink human resource expenses: Digital applications can analyze labor demands, identify open beds and check equipment status to allow clinicians to focus on patient outcomes.
Process digital claims: An automated digital claim processor can assist patients with billing, improving turnaround time and reducing fraudulent claims.

Optimize Labor and Streamline Management Structures

Labor expenses are expensive for hospitals, so discovering where to cut costs in this realm could be very beneficial. You can start by looking over your current medical staffing schedule and administrative positions.

In short, it is about optimizing the right labor in the right departments. Every unit should have a list of necessary tasks and noticeable credentials that need to be fulfilled in each. For example, if nurses are responsible for food delivery in a particular unit, consider hiring a less expensive food tech to pass out trays. Doing so can reduce five nurses to four by eliminating a task from their list that can be handled by another employee.

You can also recognize trends in your organization and adjust the staff. Are there seasons or certain circumstances where patient counts are likely to increase? This process may take some time in the beginning, but it could save you quite a bit of money in the end.

Additionally, for every doctor, there are 16 healthcare workers — and only six are involved in patient care. The other 10 are administrative roles.

Now, these labor and management structures can be simplified. Technology can help streamline a patient’s care and reduce administrative costs but sometimes only leads to workload reduction. Technology in healthcare should streamline these processes instead of creating additional work.

Each administrative position should have a specific role that works for the good of the whole. Let the mundane tasks be taken over by technology, such as scheduling appointments, billing patients, managing patient communications and collecting payments.

Improve Patient Throughput

Now, take a look at your patient flow. Are things moving efficiently? Identifying ways your patient flow can improve is another area of strategic cost reduction.

Consider the following to improve your patient throughput:

Enhance collaboration between caregivers across units.
Improve communication between a caregiver and patient.
Continuously monitor the patient and make good notes.
Allow caregivers to spend more time with patients.

Every patient should be seen with the same careful attention in a timely manner. Doing so will improve the patient experience and decrease bottlenecks, reducing delays and ensuring the maximum occupancy for each hospital bed.

Optimize Utilization

Utilization in healthcare defines the usage of products or services within a certain hospital. This is another area where data analytics can be beneficial, as they can accurately assess current operations. Understanding what your hospital uses can help you avoid overtreatment and lower costs while increasing trust.

You can also optimize utilization by encouraging employee feedback. For example, when looking at the data, get a second opinion from employees before deciding what areas are unnecessary. A well-planned feedback system maintains consistent data to take action with, even when you aren’t in a crunch. This system can help your organization stay on top of cutting overall costs.

Introduce a Hospital Asset Management Plan

Hospitals spend a lot on fixed assets, including physical infrastructures like heating, air conditioning, ventilation, plumbing and generators. These assets also include healthcare-specific items like wheelchairs and beds. Instead of reducing the use of these needed items, aim to protect them through a hospital asset management plan.

A hospital asset management plan can help maintain a safe and clean environment in the most cost-effective way possible. Some ways to do this are by tracking your hospital’s most critical equipment, ensuring safety requirements are met and supporting a preventive maintenance approach.

Get the Results You Deserve With Pathstone Partners

At Pathstone Partners, we are committed to providing your company with the right plan to reduce costs. Our healthcare consultants can help you identify, implement and sustain a cost-reduction plan that fits your organization’s exact needs. Contact us today to get started.

Cost Reduction Strategies for Healthcare Providers

Health Care Financial Consultant Cost Reduction

Cost Challenges Facing Healthcare Organizations

Hospitals used to be reimbursed at a line-item level, where a charge was only issued with each item used or service provided. That bill was then sent to the patient or insurer, incentivizing procedures and tests.

Now, hospitals are given a certain amount for each diagnosis-related group (DRG). The hospital must then figure out how to best spend that fee while keeping the patient’s overall health status as the priority. Below are three of the most significant risks involved with delaying these strategies.

Lack of Resources or Bandwidth for Strategy Management

When we think of healthcare resources, we paint a picture of physical supplies like gloves, medications or medical kits. As you can imagine, a lack of these resources for healthcare settings can affect the quality of patient care and the work environment for providers. For these reasons, increasing the supply of resources is one of the first places organizations invest extra funds, delaying any plan or initiative.

However, consider extending the needed resources for hospitals to include general knowledge about strategic management — or bandwidth. For the success of cost-reducing plans, teams must have the capacity, energy and motivation to deal with the situation. Understanding your goals and knowing how to implement a strategy can help your organization manage cost reduction.

Decision-Making Process Complexity and Length

Making the final decisions for these strategies can be lengthy and full of multiple levels. Because of this complex process, implementing strategies can be seen as more of a hassle than a help. People and organizations have often pushed a cost-reduction strategy to the wayside because of the many factors involved, including maintaining employee and patient safety.

However, don’t let the lengthy process scare you away from making necessary changes for the betterment of your healthcare organization. Taking the required steps can change this daunting task into a helpful resource to utilize for years to come.

Poor or Inadequate Data for Initiative Support

Data analytics in healthcare are important for categorizing data to use it toward the organization’s operations and services. Poor data organization can add to your costs.

Insufficient data can interfere with patient medical records, increasing potential errors and hindering the patient experience. It may even impact your organization’s security, and data breaches are exceptionally costly.

Take control of your data to best help with the decision-making process. This way, you can pinpoint precisely where cost reductions are needed based on recent data, making initiative support much more efficient.

Take Action

Any organization has several challenges that threaten the success of reducing costs. Overcoming these challenges is vital to ensure we create an environment for patients to heal and thrive. What healthcare organizations decide to implement now can create a sustainable model for the future.

Contact Pathstone Partners today and discover how we can help your margins!

The Value of Supply Chain Management in Healthcare

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What is Healthcare Supply Chain Management?

Healthcare supply chain management involves the procurement of resources, the management of supplies, and an interlinked group of processes that are required for healthcare professionals to carry out their operations and increase productivity. Each link in the medical supply chain influences overall cost, patient outcomes, and service efficiency.

The Importance of Supply Chain Management in the Healthcare Industry

COVID-19 related supply chain disruptions across the United States have expedited the need to optimize hospital supply chain management. This is especially true for health systems that aim to provide high-quality care, ensure service availability, reduce cost and boost profitability. Over the course of the past few years, supply chain management in healthcare has become a central focus due to increasing pressures to reduce cost from the pandemic, while improving patient outcomes and reimbursement. Healthcare supply management and optimization within health systems achieve these goals through improved data collection and employment, attentive vendor management, and incentive alignment.

How Does the Healthcare Supply Chain Work?

The healthcare supply chain for healthcare consists of numerous stakeholders. Each one plays a significant role in how the supply chain operates. These stakeholders include:

Manufacturers: The manufacturers are the labs, biologists and vaccinologists. They perform the research, development, manufacturing and monitoring. These groups make medical, surgical and pharmaceutical supplies and watch for shortages.
Distributors: The logistic partners and wholesale distributors sell, deliver and monitor products while following proper procedures.
Providers: Providers include pharmacies, urgent care centers, hospitals, assisted living facilities, dialysis centers and long-term care facilities. These places receive products from the distributors so they can prescribe them to patients. They submit orders to distributors, look for inventory shortages and call in prescription refills.
Patients: The patients are the people in the community who use these products or services. They influence the demand for medicines and other products with their unique needs.

Contact Pathstone to discover the critical role of healthcare supply chain management in ensuring the seamless flow of resources and services within the healthcare industry.

What is Revenue Cycle Management (RCM) In Healthcare?

It is extremely important for RCM in healthcare to run smoothly

Healthcare Revenue Cycle Management (RCM) is the financial process that organizations use to manage the administrative and clinical functions associated with different steps of patient care from start to finish. The process starts when a patient schedules a visit for medical services and finishes when all claims and patient payments have been collected. In summary, revenue cycle management in healthcare serves as the strategy for streamlining processes, ensuring steady collections, and making healthcare providers financially viable.

With RCM in healthcare, the goal is to discover any possible problems in the revenue cycle and solve them before they become a bigger issue. It is extremely important for RCM in healthcare to run smoothly to keep your entire system working properly.

How Does the Revenue Management Process Cycle (RCM) Work in Healthcare?

There are seven main steps in the revenue management cycle for healthcare. These include:

Patient eligibility check and insurance authorization
Medical coding and billing
Claims creation, validation, and submission
Error/denial check and correction
Statement to patient (EOB and/or bill)
Payment collection from patient
Continuing data analysis

Why is Revenue Cycle Management (RCM) Important for Healthcare Providers?

While healthcare providers are largely focused on the quality of patient care, there remains a level of concern regarding reimbursement and collections. The process from initial delivery to full payment is complex and implementing effective RCM is essential for to minimize the number of errors, increase the likelihood of payment, avoid aging accounts receivable, and improve overall profitability in health systems. Often there is a significant delay between services and payment collection, making it difficult to see the exact view of cost, spend, and revenue.

Managing revenue is essential for any business and focusing on improving the revenue cycle plays an important role in increasing claims efficiency while reconciling costs against revenues to optimize cash flow. In addition, the healthcare revenue cycle process houses important patient information and data leaks could have substantial legal ramifications. Ultimately, the goal of revenue cycle management in the healthcare industry is to develop a process that helps organizations get paid the full amount for services as quickly as possible by identifying points of friction and resolving them.

Benefits of Focusing on the Revenue Cycle in Your Health System

There are many benefits to efficiently managing your revenue cycle such as improved patient satisfaction, maximized monetary benefit, reduced administrative burden, and simplified processes.

Improved Patient Satisfaction: Revenue Cycle Management (RCM) enhances the patients’ experience with the entire hospital billing process through increased transparency in cost of service, added support throughout entire care process, and minimized number of forms for tracking patient data.
Reduced Administrative Burden: Revenue cycle management in healthcare serves as the entity for streamlining the processes. Outsourcing and automating the revenue cycle alleviates the administrative burden of the providers, allowing for a greater focus on delivering quality care to patients.
Maximized Monetary Benefit: “According to a report from Sage Growth Partners, more than a third of health systems have faced more than $10 million in bad debt annually. The situation is worsening due to unpaid bills and every year up to $125 billion is lost in unpaid and underpaid claims”. Effectively implementing RCM results in lower denial rates, which leads to increased cash flow and faster speed to payment. The process brings accuracy to the system and leaves little room for errors during insurance verification, coding, and claims processing, in turn maximizing collections.
Simplified Processes: Successfully managing your revenue cycle drives efficiencies through workflow automation, which improves scheduling processes, coding and billing, and payment processing. Removing the complexities in the workflow leads to improved operational efficiency of the providers, ensuring they meet their revenue targets.

Methods to Measure Productivity in Healthcare

Health Care Financial Consultant Productivity 2

The Importance of Quality

For patients, quality of care is far more critical than quantitative evaluations. The outputs of services delivered return as inputs when patients leave positive reviews. Such reviews increase a practice’s reputation and can draw in more patients.

Patient Visit Lengths

Since each patient’s time is valuable, you want to respect their time. Often, knowing whether to shorten or lengthen patient visit lengths depends on patient satisfaction. If your patients are frustrated with how long appointments take, shortening them may be necessary. On the other hand, you should consider taking more time with each appointment if patients feel rushed and misunderstood.

The traditional productivity metric with patient visit lengths is to keep them as short as possible so you can see the most patients per day. While brevity still matters, patients appreciate feeling understood and heard rather than rushed and dismissed.

Spending an extra couple of minutes with patients may seem counterintuitive from a productivity standpoint. Yet, it involves making the most of each appointment. Patients will feel that your clinic and staff do the utmost to care for patient health.

Either way, ensure each physician at your medical facility records patient visit lengths. Doing so helps determine whether you should shorten or lengthen appointments to enhance productivity.

Patient Wait Times

For patients, brevity matters most in the waiting room. Still, it’s better to shorten patient wait times through greater administrative efficiency than rushing appointments.

Making checking in and seeing a provider as efficient as possible for patients may be the best option. Focusing on administrative factors lets you shorten wait times without harming patient outcomes. To measure this factor, have staff record check-in times and the beginning of each appointment when the provider sees the patient.

Patient Satisfaction Rates

Patient satisfaction is the ultimate metric for qualitative productivity evaluations. Unless patients provide unprompted feedback, it’s often unclear how satisfied patients are with your services. Clinics without such information interpret data such as patient retention rates, missed appointments and wait times to determine patient satisfaction.

To measure patient satisfaction accurately, ask patients to provide feedback. Such feedback may come in questionnaires, direct interviews or email and text forms. Ask detailed questions about the quality of care patients receive, and leave room for additional comments.

Patient Retention Rates

Patients who are satisfied with your clinic’s services are more likely to return for follow-up appointments. Many factors influence patient retention rates. Some are outside your control, while others, like patient satisfaction, directly relate to the quality of care. Keeping track of patient retention rates through data analytics can give you insight into the quality of care your clinic provides. If you notice low retention rates, review patient feedback to diagnose the issue. Reasons for low retention rates can include long wait times or insufficient care quality.

Improve Productivity With Pathstone

At Pathstone, our healthcare consulting experts can help you improve financial and operational performance in healthcare settings without sacrificing patient outcomes. Contact us today to learn more about how Pathstone can enhance your productivity.

Standardization in the Hospital Supply Chain

Health Care Financial Consultant Standardization

What is Standardization in Healthcare?

Standardization can be defined as the extent to which hospitals are making use of the same products, services and processes. Due to the sheer number of suppliers and products available in the market combined with a diverse array of end-user preferences, hospital leaders often find they have a variety of similar products and services being used across the organization.

Standardization delivers the following benefits to an organization:

Financial benefits ranging 15 – 30% depending on the category
Leveraging system purchasing power
Improved consistency of service levels across the organization
Improved patient care and access

Key Opportunity Indicators

Supplier Fragmentation

The use of multiple suppliers providing similar products and services may be a strong indicator for standardization opportunities. A closer review may reveal differences in both pricing and quality amongst the suppliers.

Client Example: Pathstone worked with a large health system that used multiple suppliers for over the phone interpretive services. By consolidating its supplier base through a competitive bid process, the client was able to leverage the health system buying power to negotiate market competitive prices and save over 25% in annual costs.

Product Fragmentation

The use of multiple products or services that fulfill a similar need can be another indicator of potential standardization opportunities. Different end-user preferences are a key contributing factor to product fragmentation, which can lead to varying price points for similar products and services. A thorough review of purchase orders or supplier invoice data can be a good starting point to understand the degree of product fragmentation.

Client Example: Pathstone recently reviewed print services for a client and discovered over 40 different copier models being used across the organization, resulting in variable device leases and cost per page rates. A deeper analysis showed over half of the devices had similar functionality but were billed at different rates. By standardizing devices, the client was able to achieve significant savings.

Incomplete Category Definition

An incomplete understanding of a total product or service category due to extensive fragmentation can lead to missed opportunities to take advantage of key supplier relationships. If there is a narrow view of a category and its scope, it can significantly restrict the hospital’s leverage in negotiating key supplier contracts.

Client Example: Revisiting our previous example, the key driver behind the client’s fragmented supplier base was its decision to allocate business based on the type of interpretive services, such as in-person, over the phone and video interpretation services. Pathstone worked collaboratively with the client to identify suppliers with capabilities for all types of services, thereby generating more leverage for negotiations with existing and new suppliers.

Varying Service Levels

Disparate service level expectations across departments or facilities may also suggest opportunities to achieve cost or service efficiencies. This is often an overlooked identifier but can drive more consistent service delivery at a lower cost overall.

Client Example: In the same example as mentioned above, Pathstone discovered varying break/fix Service Level Agreements (SLAs) for the copiers across departments, resulting in inconsistent service and higher staffing costs due to the vendor’s inability to implement standardized practices. By standardizing and aligning break/fix SLAs with actual needs, the client was able to not only reduce costs but also improve service levels by optimizing staff deployment based on the “density” of areas (the volume and devices at a certain location).

Key Success Factors

Utilize a Data-Driven Process

High-performing organizations remain disciplined in utilizing data as a foundation to identify opportunities for change. Since standardization requires a change in end-user preferences for suppliers, products and services, data is crucial for an objective approach to arrive at the best solution. Without the use of data, organizations may resort to anecdotal information that will not drive optimal results.

Increase Knowledge of Complex Categories

Understanding the strengths and weaknesses of suppliers, products and services enables organizations to select the best solution that meets internal objectives. By conducting market due diligence, organizations can evaluate a wide range of options considered by their peers. Partnering with third party consultants such as Pathstone may be beneficial to access market intelligence and provide assistance in determining what change is truly best-in-class and beneficial to the organization.

Engage Key Stakeholders Early

Any standardization initiative that does not have support and buy-in from key stakeholders is bound to fail over the long-term. A strong leadership team that participates in initial decision making and ongoing management is essential to reduce costs and improve service levels. When working with clients on standardization initiatives, Pathstone proactively identifies champions that can engage end-users and hold them accountable. By doing so, initiative benefits can be sustained over the long term.

Medical Billing in Healthcare: In-House vs Outsourced

Health Care Financial Consultant Medical Billing

Understanding Medical Billing in Healthcare Practices

One of the more complex components of running a medical practice is managing your organization’s medical billing process. With thousands of potential medical codes for different diagnoses and procedures, on top of the numerous payers in the market, having the ability to effectively manage billing is a key driver of success in today’s healthcare industry.

In-House vs Outsourced Billing: No One-Size-Fits-All Solution

There is no “one-size-fits-all” as it relates to medical billing solutions; however, the two primary options for a healthcare organization are in-house medical billing and outsourced billing. There are three overarching considerations when evaluating whether to implement in-house or outsourced billing:

The cost
An organization’s capacity to execute billing
Maintaining confidential health services while billing

Evaluating the Cost of Medical Billing

Evaluating the cost implications of your selected billing option is critical for revenue management. For small clinics, there may not be enough revenue generated to cover the fixed costs of billing and turn a return on investment (ROI). It is important to do a cost-benefit analysis to ensure that the clinic can expect a net income.

Essential Internal Billing Activities

Whether or not your organization elects to keep billing in-house or outsource billing, a handful of important billing activities must be maintained internally. As an organization, you are held accountable for submitting accurate and timely billing information to the outsourced billing agency or to individual third-party payers. The organization is also responsible for:

Insurance verification
Medical patient registration
Coding

Maintaining Confidentiality: Written Billing Policies

Finally, it is of utmost importance to have clear written healthcare billing policies on how to manage bills and balances to ensure private patient information is managed appropriately.

Exploring In-House Billing

In-house billing includes the staff of a clinic or healthcare organization being responsible for all aspects of revenue cycle management. They submit claims to a clearinghouse, directly to Medicaid, or to the insurance company for reimbursement. They also set charges, collect patient fees (copays and deductibles), and manage the accounts receivable.

In-housing billing comes with several advantages all of which include:

More visibility over the billing process
High flexibility
Increased control over patient accounts

Nevertheless, it’s essential to be mindful of the potential difficulties linked with in-house billing, which encompass:

High upfront expenses for labor and technology
Ongoing training needs
High dependency on your staff members

Outsourcing: A Common Solution to Medical Billing

Many healthcare organizations opt to outsource their medical billing to a third party. These third-party companies typically take a percentage of a healthcare organization’s collections as payment for managing many aspects of a revenue cycle, on top of recurring monthly fees.

Outsourced billing has countless benefits which may include:

Having more experienced parties managing your billing
Advanced software options
Saving on internal time and resources

However, outsourced billing requires your organization to:

Maintain and oversee contractual obligations to the selected third party
Outsourcing gives your organization less control over patient accounts

Weighing the Choices: Outsourced vs In-House Medical Billing

The decision in outsource medical billing versus billing in-house is very dependent on your organization’s needs and resources, and each option has its own benefits and disadvantages.

To learn how Pathstone Partners can help your organization with medical billing, contact our team of healthcare experts.

How to Improve Clinical Documentation in Healthcare

Health Care Financial Consultant Clinical documentation

What is Clinical Documentation Improvement (CDI) in Healthcare?

Clinical documentation improvement (CDI) aims to represent a patient’s clinical status into coded data. This data is then used for medical research, quality reporting, financial reimbursement, public health data, and disease tracking/trending. By enhancing clinical documentation, medical data collection, reporting, and digital health technology, hospitals will improve their cost efficiency, thus maximizing their revenue and increasing productivity in their organization.

Why Are Clinical Documentation Improvements Important?

With the increasing complexity of medicine and healthcare, there is great importance of capturing data accurately for further analysis. Physicians spend about six hours per day performing data entry into patient records, which includes clinical documentation. These administrative tasks detract providers from focusing on patient care, which is what they are trained on. Physician education typically doesn’t include payer rules for clinical documentation, or other factors that influence a hospital’s revenue.

Moreover, physicians typically don’t prioritize improvements in clinical documentation, and consider it to take away time from providing patient care. The implementation of physician advisors, or clinically experienced professionals, can act as a bridge between healthcare providers and other staff to support clinical documentation improvements.

What Are the Challenges of CDI?

While implementing CDI can improve hospital revenue and efficiency, you should account for potential pitfalls. When creating a CDI program, consider the following:

Technology issues: Some outdated technology may make communication and reporting more challenging. While implementing a CDI plan, there may be necessary technology updates as well.
Conflicting information: Some client intake charts may have duplicate or conflicting data with their patient records. CDI can help remove and prevent unnecessary reporting.
Physician engagement: After the CDI system implementation, physicians must comply with new standards and communicate as necessary.

While you may face these challenges, the overall impact on patient well-being makes CDI necessary for many individual healthcare practices. As employees address the individual challenges, they’ll create a trickle effect that enhances all aspects of the hospital system.

Benefits of Clinical Documentation Improvements

There are several benefits to implementing clinical documentation improvement within your health system. The main advantages of CDI include:

Reduced Claim Denials: Insurance companies can deny a patient’s request for healthcare coverage due to ineligibility, lack of detail, late submission, missing information, and more. With enhancements in clinical documentation, claims will be thoroughly completed on time, which reduces the chances of a patient’s claim being denied.
Lower Physician Queries: Improved clinical documentation will also decrease physician queries, by ensuring the Current Procedural Terminology (CPT) and Classification of Diseases (ICD) codes are precise based on physician notes.
Improves Communication: Lastly, CDI strengthens communication not only for the patient and provider, but for everyone who accesses the patient’s charts, specifically billing companies. Clinical documentation improvement keeps both the healthcare provider and billing company on the same page regarding the patient’s healthcare, so they will better care for the patient. Payers continue to push for CDI and accurate clinical data not only to tie financial reimbursement to value, but to consequently improve care quality overall.

A 2016 Black Book Market Research survey found that nearly 90% of hospitals that implemented CDI earned at least $1.5M more in healthcare revenue and claims reimbursement, showing a clear benefit for hospital revenue.

Improved Documentation and Performance

CDI also advances patient care. When a patient’s record is accurate detailed, healthcare professionals can create more personalized treatment plans. Better documentation not only improves patient care, but also provider performance. The Heritage Valley Health System in Pennsylvania found that better CDI reduced their predicted mortality by 27%, showing clear and tangible benefits. With better clinical documentation, healthcare providers can more easily identify and correct gaps in care. This comprehensive data allows providers to catch a potential complication before it arises, therefore improving patient safety and shortening hospital stays.

Different Types of CDI Metrics

Knowing which key healthcare metrics to look for will help you understand how your system works and where to make adjustments. If you want to analyze trends and gaps, Pathstone Partners will assist as you interpret and visualize the data.

Review Rate

The review rate accounts for how many documents the CDI team reviews in a given time. This metric helps administrative staff measure productivity within any organization. You can break this number down by timeframe and assign quantitative goals to each CDI team member.

Query Rate

The query rate is the number of queries per the number of reviews. This number helps leaders notice how their team handles documentation and manages communications.

Response Rate

This rate represents how often staff is responding to queries. You can see which groups are struggling to respond and offer guidance and education to improve this rate.

Response Time

Your response time is how long it takes physicians to respond to queries once they receive them. You might consider setting a standard response time goal across all teams. Reaching this goal will improve communication and ensure patient needs are met quickly.

Case Mix Index (CMI)

The CMI is the average relative weight of all diagnosis-related groups (DRGs) within a hospital. This number determines how sick patients are at any hospital and helps staff calculate payments to meet demand. You should monitor this number monthly and compare it to similar institutions with the same services.

Need Help With Clinical Documentation Improvement?

As a leading healthcare management consulting firm, Pathstone Partners can help with CDI in any facility. We work with your team and offer strategies and software that improve performance across the board.

Whether you want to implement a new CDI program or refresh your policies, we can find a custom solution for your facility. Contact us today to learn more about our CDI consulting capabilities!