One of the most frequent questions from hospital and health system CFOs pertaining to net revenue is, “Why does it take so long to finalize net revenue each month?”
The truth is, many hospitals spend an inordinate amount of resources and time – often eight or more business days – pulling together data for month-end review instead of analyzing it. As a result, CFOs often find themselves in monthly leadership meetings lacking sufficient detail and insight to explain trends and variations happening with net revenue.
At a time when so many changes are happening in healthcare, maintaining a handle on net revenue and having this insight are essential. In addition, the factors driving this month’s net revenue are likely to change next month, so even historical patterns may not apply.
For example, with the rollout of the Affordable Care Act, hospitals in states that expanded Medicaid are seeing a reduction in the numbers of uninsured patients due to increased Medicaid coverage. At the same time, the growth of the insurance exchange marketplace has increased bad-debt write-offs associated with insured patient responsibility. Much of this trend stems from rapid growth in the numbers of patients insured under high-deductible health plans. Health reform-era shifts such as these necessitate the development of new financial strategies to mitigate the bad-debt risks associated with a burgeoning insured patient population.
Tools to Analyze Net Revenue
To keep financial risk under control, hospitals need to spend more time on analysis to gain a clear understanding of trends and fluctuations in net revenue and the forces catalyzing those trends. Four tools can help greatly in this regard.
A timeline for month-end activities. Many hospitals become bogged down in month-end data preparation. By the time they finish, they often are already several days into the next month. Opportunities for meaningful analysis of the month’s activity have fallen by the wayside. Developing and adhering to a timeline can facilitate the timely completion of the necessary data processing and free up time to probe the business intelligence behind the numbers.
A checklist of month-end tasks. Such a list can be very useful in driving the timeline and helping to 1) ensure that the appropriate staff members use the right data and tools at the best time, 2) reduce days spent on data collection and manipulation, and 3) increase opportunities to use the information for analytics and strategic decision-making.
Ideally, the timeline should be built around a closed schedule that includes both pre-close and month-end activities. The majority of preparation tasks should be completed approximately four or five business days prior to month-end. These four or five days should provide the time needed to conduct zero-balance account and hindsight activities and to discuss transaction postings during the month with the patient accounting and managed care departments.
Documented policies and procedures. Having policies and procedures in writing can provide important safeguards against failures in the month-end process, such as a vacuum that is created when a staff member leaves or is out sick.
Written policies and procedures also support month-end activities. In addition to reviewing what happened the previous month, policies and procedures should include flexibility to allow reactions to market-specific factors.
Technology. Whether it involves using a specific analytic tool, such as the Crowe® Revenue Cycle Analytics (Crowe RCA) solution, or setting up macros in a spreadsheet, the aim is to use technology to work smarter, not harder, and to turn data into action.
The goal is to move into analytics quickly after the end of the month, using details pulled from various subledgers and systems that will point to root causes of changes.
For example, spikes in a specific claim code denial could be due to the absence of a certain question in the registration process. The ability to see these spikes eventually can lead to identification of the root cause.
Emphasizing the “Why”
The purpose of all these measures is to improve the month-end net revenue process and shift the focus of month-end activities from preparation to analytics so the bulk of time can be spent understanding why changes are happening. What you don’t want to do is spend days working on the same report each month without having time to figure out what the report means. If it doesn’t offer answers about net revenue, then you have to question its value. To understand net revenue and help manage risk in the current environment, use analytics to remove the “I think” from discussions in favor of the “why” behind the changes.
The Crowe Revenue Cycle Analytics (Crowe RCA) solution was invented by Derek Bang of Crowe. The Crowe RCA solution is covered by U.S. Patent number 8,301,519.