Businessman evaluating hospital's operating margins

Many hospitals will see negative operating margins despite the best-case scenario of smooth vaccine rollouts and reduced COVID-19 hospitalizations according to a Kaufman, Hall & Associates, LLC report released by the American Hospital Association (AHA).

39% of hospitals will operate “in the red in 2021,” the report claims. This year, median margins are expected to be 10.5% below the pre-pandemic baselines. With the median hospital margin baseline at 3.5% pre-pandemic, the percent decrease would bring the average operating margins below zero. The worst-case scenario includes operating margins plummeting 80% from pre-pandemic baselines.

Another report released by the AHA earlier this year forecasted a decrease in hospital revenue between $53 billion and $122 billion compared to pre-pandemic baselines.

Rick Pollack, AHA president and CEO stated, “…as this report makes clear, hospitals and health systems will need further relief to meet the health care needs of their patients and communities.”

To prepare for the expected reduction in operating margins this year, hospitals should review all aspects of their revenue cycle to ensure that missed revenue is minimized. A good measure to understand how your revenue cycle is performing is understanding and evaluating your Clean Claims Rate. The higher the clean claims rate, the better. Below are some tips for revenue cycle improvement.

Automation and Digitization of Processes

Automation and digitization of various steps of the revenue cycle have led to increased operational efficiency. Automating the processes to create and submit medical claims reduces human intervention along the process. As a result, the process becomes less error-prone.

Many hospitals and health systems have been seeing the benefits associated with automating revenue cycle processes. For example, Lynn Ansley, senior director for revenue cycle at Moffitt Cancer Center headquartered in Tampa, Florida told Healthcare Finance that automation has saved about 27,000 hours in a month, which equates to around $500,000.

Using Artificial Intelligence-Based Tools

Artificial Intelligence (AI) offers many solutions for improving the healthcare revenue cycle. One aspect of the revenue cycle AI can especially help to improve is medical claim denials. An effective way to decrease missed revenue is to decrease claim denials.

AI-based tools used in healthcare facilities have efficiently decreased claim denials. AI is used to predict the probability of a claim being denied and suggest improvements to the claim to increase the likelihood of acceptance and reimbursement following the first submission. The reduction in the need for rework and resubmission of claims saves providers both time and money.

Read more about Data-Core Healthcare’s various tools and services that help improve the healthcare revenue cycle here.