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.
