April 29, 2020 | In Brief

A tighter focus on RCM and AR can help healthcare providers survive an economic shock

A tighter focus on RCM and AR can help healthcare providers survive an economic shock

Clearly, COVID-19 was an unexpected shock to the global health and economic landscapes. For many ambulatory and retail health clinics, shelter-in-place orders translated to dips in patient volume and thus revenue. Specialty and multispecialty groups are facing upwards of 80% decline in monthly revenues, forcing them to make hard cost reduction decisions.

Yet, there is an opportunity to “make hay where there ain’t no sunshine,” as the saying goes—by examining revenue cycle management (RCM) and accounts receivable (AR) processes while patient volume is slow.

As it turns out, what would be considered a bad practice during good times can lead to good fortunes during bad times. Most ambulatory and retail providers that have experienced rapid growth over the past several years have not yet optimized their revenue cycle and AR management processes to keep up, resulting in AR backlogs of insurance and patient balances.

Now is a critical time to concentrate on RCM process enhancement and driving your aging AR work down. Aging balances captured now can alleviate temporary losses in new patient revenue. In fact, for many providers, the uptick in AR collections stands to make up for, and potentially exceed, average monthly net profit.

The methodology for AR work down initiation and execution is straightforward, and an efficient formula can further expedite the process:

  • Categorize outstanding AR into:
    • Commercial insurance claims
    • Government insurance claims
    • Workers’ compensation claims
    • Patient balances
  • Categorize claims into those within timely filing limits and outside of timely filing limitsFor cases outside of timely filing limits, submit those to payers to get a legitimate denial and balance bill the patient according to the organization’s patient billing policy
  • Continue working down AR in an organized fashion by distributing the inventory internally and possibly externally with billing vendors

The inflated AR phenomenon isn’t just favorable for providers, but also for M&A private equity or strategic buyers pursuing either distressed asset turnaround or buy-and-build-value strategies. RCM and AR processes have room for improvement in many small provider practices up for sale. Conducting appropriate diligence on AR health can lead to both a lower purchase price as well as an immediate post-close value realization through collection of outstanding AR.

In essence, by examining RCM and AR processes and taking some time now to work down AR backlog, it is possible to make hay when there is no sunshine in sight and capture revenue even while patient volume is down. Then, when volume picks back up, processes will be in better order and backlog trimmed for greater efficiency, swifter collections, and a healthier bottom line.

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