Effectively Addressing Declining Profit Margins

Thehealthcareindustryhaslongstruggledwithdecliningprofitmargins. However,recentyearshaveseenevenmoresignificantchallengesrelatedto financesandstaffingasmanyhealthcareorganizationsareoperatingataloss duetotheCOVID-19pandemic.Infact,aJanuary2023reportfromKaufman Hallfindsthatsomehospitaloperatingmarginsarestill-1%.Thisdeclineis duetovariousfactors,includinglaborcosts,workforceshortages,inflation, risinghealthcareexpenses,reducedinsurancereimbursements,anaging population,andsupplychainshortages.

Risinglaborcosts,particularlyinareassuchascoding,aresignificantly impactingprofitmargins.Theincreaseddemandforskilledcodersanda competitivemarkethaveincreasedsalaries,puttingpressureonhospital finances.Moreover,workforceshortagesmakeitdifficulttoadequatelystaff hospitals,placinglimitsoncashflowandfurtheraddingtothestrainon resources.

Inflationisalsoimpactinghealthcarecosts,affectingthepricesofsupplies, equipment,andpersonnel.Healthcarecostsareincreasingfasterthanthe generalinflationrateandinsurancecompaniesarereducingreimbursements, resultinginlesshospitalrevenue.

AnAugust2022reportfromtheAmericanHospitalAssociationdetailshow theCOVID-19pandemicresultedinmanypatientswithchronicdiseases delayingnecessarycareandtreatment.Asaresult,whenthesepatients eventuallyseekmedicalattention,theyarepresentingwithmoreacute conditions.Thisleadstolongerhospitalstaysandaddstothefinancialand staffingchallengeshospitalsarefacing.

Additionally,theagingpopulationintheUnitedStateshasledtoanincreased demandforhealthcareservices,includingchronicdiseasemanagement, rehabilitation,andlong-termcare.Atthesametime,governmenthealthcare programssuchasMedicareandMedicaidhavenotkeptpacewiththe increasingcostsassociatedwiththisdemographicshift.

Finally,lingeringoverseassupplychaindisruptionsaremakingitdifficultfor hospitalstoobtainnecessarysuppliesandequipment.Thiscanleadtodelays inpatientcareandincreasedcostsforhealthcareorganizations. Toaddressdecliningprofitmarginseffectivelyandimproveprofitability, healthcareorganizationsneedamulti-facetedapproach.Theshifttovaluebasedcaremodelsisincreasingtheneedtoprioritizequality,outcomes,and efficiency.ByembracingAI-basedtechnologiesthatimproveproductivityand quality,optimizingrevenuecyclemanagement,consideringoutsourcing options,andfocusingondocumentationaccuracy,hospitalscanstreamline processes,reduceexpenses,andboostrevenue.

Implementingcomputer-assistedcoding(CAC)andclinicaldocumentation improvement(CDI)platformshelpseliminatecodingbacklogs,improve efficiencies,andincreaseaccuracy,leadingtoimprovedrevenuecollection. Investinginartificialintelligence(AI)anddataanalyticstoolscanimprove

productivity,quality,andthepatientfinancialexperiencewhilereducing overallcosts.

Collaboratingwithexperiencedpartnersinrevenuecyclemanagementand healthcaretechnologycanprovidevaluableinsightsandsolutionstailoredto specificneedstomeetspecificgoals.Outsourcingrevenuecyclemanagement functionscanhelpreducein-houseoperationcostsanddenials.Specifictasks likecoding,transcription,faxing,andmedicalrecordindexingareallpotential outsourcingoptions,particularlyinaremoteworkenvironment.

Focusingondocumentationaccuracyandcomplianceisalsoimportantfor maximizingreimbursementandminimizingtheriskofexternalaudits. Hospitalsshouldhavecomplianceauditsinplacetoidentifyandaddressany potentialareasofvulnerability.

Asanexample,ahealthsystemfacingchallengeswithcodingdenialsdidnot havestafforthetechnologyandanalyticstodeterminetheirtopdenials. Therewasnowaytoeliminatethedenialsonthefrontend.Ourreviewof historicalandcurrentdatafoundthatfront-endauditscouldpreventthose denials.Byconductingfront-endaudits,analyzingdenialstatistics,and providingeducationtohealthcareprovidersandrevenuecyclestaff,those denialswerereducedby88%andcollected$13.2millioninrevenueloss preventionovertwoyears.Inanothercase,naturallanguageprocessing improvedoverallqualityandhelpedtooptimizeoneorganization’scasemix indexby4.9%.Intermsofvalue,thisequatestomorethan$1million. ListentotherecentAGSHealthRCMChatpodcasttohearmore.

Source of content: AGSHealth Blog- Effectively Addressing Declining Profit Margins