9 minutes
31st October, 2023
After over a decade of trying to reduce operating costs, healthcare providers should start to focus more on how to increase hospital revenue if they want to be sustainable and profitable.
Following the Great Recession (2008-2009), the healthcare sector resorted to cost-saving schemes in order to cope with the economic crisis. Over the next decade, healthcare business owners and management began to realise that cost-saving schemes alone could not do the job.
Before the healthcare sector could fully revive, Covid-19 hit and countless hospitals and clinics found themselves in deep financial woes. And again, many tried their go-to strategy: reducing costs to keep operations afloat.
Current cost saving schemes however have proven to be ineffective. Consequently, hospitals and clinics should now aim to devote more attention to increasing their revenue in healthcare rather than chipping away at the budget.
Today, the main challenge the healthcare industry faces is increasing revenue while improving healthcare delivery and patient outcomes, to say the least, which is not an easy task.
In this article, we’ll consider 10 things every hospital can do to increase revenue:
At the end of this article, you will have everything you need to start boosting the revenue of your hospital.
The accounts receivable days (AR days) is the number of days it takes for you to receive money after offering a medical service.
Gone are the days where hospitals collected cash directly from their patients after service delivery. The introduction and ubiquity of medical insurance has changed this dynamic.
Today, hospitals have to prepare medical claims and wait for insurance companies to review, approve, and pay those claims. As you may already know, this is common practice in the Gulf Cooperation Council (GCC). Countries like the UAE, Saudi Arabia, and Oman have had mandatory health insurance laws for some time now.
One painful result of such mandatory health insurance laws is that many hospitals have to depend almost entirely on insurers for their revenue stream.
In some countries, it takes far too many AR days before hospitals receive cash from the insurers.
In Saudi Arabia, the average AR days are 45, while in the UAE, it can extend between six months and two years, according to a Gulf News report. For reference, according to Medusind, any AR days between 35 and 50 days is average, and if it is more than 50 days, it is poor.
If your hospital is in a country where your average AR days are beyond 35 days, the first step to increasing revenue in healthcare is to reduce your AR days.
[Have poor or average AR days at your hospital or clinic? Many do, and that is a problem. However, you can now improve your cash flow with healthcare financing services offered by KLAIM, which will purchase your medical claims and pay you cash within seven days.]
One of the top challenges that hospitals face when working with insurers is medical claim denials.
Even when insurers delay the processing of medical claims for weeks and months, there is still no guarantee that all claims will be approved and paid.
In the United States, claim denials increased by 23% between 2016 and 2020, according to a Change Healthcare report. The rate of claim denials in the UAE was 14% in 2018, according to a Gulf News report. And in 2020, Azad Moopen, managing director of Aster DM Healthcare, a private healthcare conglomerate in the Middle East, said that first-time rejection rate of medical claims by some insurers is up to 30%.
Rejected medical claims can lead to revenue loss in two ways.
First, there is a cost to resubmitting the claim. If the claim is successful the second time, the revenue you will earn will reduce (initial expected revenue minus the cost of resubmission).
Second, the claim may be rejected again and end up being unpaid. The Change Healthcare report above shows that about 24% of claims rejected the first time are not recoverable. Also, Azad Moopen puts the second-time rejection rate in the UAE at 15% for some insurers.
The only good news according to the Change Healthcare report is that 86% of rejected medical claims are avoidable (registration and eligibility, missing or invalid data, lack of authorisation, service not covered untimely filing, among others). Also, a major cause of these rejections is human error and inefficiency.
Therefore, with a good revenue cycle management (RCM) system, you can significantly reduce medical claim rejections and increase your revenue.
What’s the best way to achieve this?
Automate your revenue cycle management so that medical claims can be prepared and submitted without human errors and inefficiencies.
An automated and data-driven RCM has enough data on claims and claims denials that providers can analyse quickly to derive insights into the root causes of denials. Such insights will help administrators make decisions to reduce claim denials and the resulting loss of revenue.
More importantly, with the help of machine learning and AI, an automated RCM can identify patterns of claim denials and predict the claims that will be denied based on those patterns.
Apart from reducing your rejection rate, an automated and data-driven RCM can also help you prioritise the rejected medical claims that you should resubmit.
Why is this important?
In 2017, the Medical Group Management Association (MGMA) estimated that it costs $25 to reprocess a denied medical claim. So, reprocessing a claim that will still be rejected is bad business.
A data-driven RCM technology will use your existing data to identify which of your previously rejected medical claims should be resubmitted and those that should not, so you can avoid further revenue loss.
While insurers are now responsible for payment of a huge part of the medical services hospitals provide, there are situations where patients make out-of-pocket payments.
This we all know, in a technical term, as the co-payment.
However, research by Jonathan Wiik, Principal of Revenue Cycle Management Solutions at TransUnion Healthcare, as reported in his book, “Healthcare Revolution: The Patient is the New Payer,” shows that 66% of hospital managers consider patient revenue collection as a problem, with 74% saying it took over one month to collect money from patients.
Steve Ingel, Executive Vice President of DJO Healthcare Solutions, a leading provider of high-quality medical devices and technologies, believes that the solution to this impasse is for healthcare providers to embrace “patient access.”
For him, Patient Access is a “mix of technologies, processes, efficiencies, and strategies to engender patient accountability.”
In essence, Steve believes that the way to get more patients to promptly pay their co-pay can be achieved by hospitals becoming more accountable and transparent.
A key part of patient access is scheduling pre-appointment checks with patients. This enables hospitals to set expectations with the patient by estimating the cost of the medical care, explaining the treatment options, identifying any assistance plans, estimating what the insurance will cover and the total financial obligation that the patient will bear, and the various payment options available.
The more patients understand what they are paying for and why, the higher the possibility that they will pay up quickly.
Priti Shah, Chief Product Officer at Ontario Systems, believes that the solution to the patient collection problem is the deployment of better technology as “any ability to gain visibility into your data and use that to drive insights about patient payment patterns will improve cash flow.”
Data-driven revenue claim management, especially one that uses machine learning and artificial intelligence to understand and predict patient behaviour, will help healthcare advisors make better decisions.
This includes when to send a bill, which payment channel to use, and which payment options can be potentially offered -- all of which will be optimized to ensure a higher collection rate.
Such a data-driven system helps hospitals match patients’ expectations, which is often different from that of the insurers.
For example, while 88% of providers rely on manual and paper-based transactions for patient collections, 46% of consumers prefer electronic communication for medical bills while 65% prefer online portals or mobile apps for payment, according to the 2018 McKinsey Healthcare Consumerism report.
Harnessing this kind of data and your practice will allow your hospital to be better positioned to offer patients what they want, improve collection rates, and increase revenue.
Covid-19 has upended traditional healthcare delivery, forcing many hospitals to accept the reality of telehealth, also known as remote healthcare.
Research by Mckinsey and Co shows that the use of telehealth in February 2021 was 38 times its use in February 2020. That rate of usage, as the graph shows below, is now the median.
However, as far back as 2011, a UK Health Department report showed that the correct deployment of Telehealth could reduce emergency room visits by 15%, emergency admissions by 20%, elective admissions by 14%, bed days by 14%, tariff costs by 8%, and mortality rates by 45%.
The provision of remote healthcare is not only a cost-saver: Remote healthcare will also open a new world of patients, people who don’t fancy in-person visits to the hospital.
The 2020 Global Remote Healthcare Market report by ReportLinker expects that the market for remote healthcare will grow at a CAGR (compounded annual growth rate) of 33% between 2020 and 2025.
That’s a huge growth rate, and makes remote healthcare one of the top drivers in the global sector.
Learning how to increase hospital revenue has to go beyond improving current services. You should also research opportunities for new service lines that can provide new revenue streams.
If there is any service that people want and no one in your locale is providing, that is a big revenue opportunity.
Instead of focusing on how to maximise the returns from your current offerings, it is thus important to consider the possibility of opening up a new service line.
There are two ways to come up with ideas for new services. First, by looking at what hospitals outside of your location are doing.
Another way to do this is by speaking to your customers. Ask them if there are any services they wish you (and hospitals around town) are offering. This can easily be done through customer feedback forms or other alternatives.
The two steps mentioned above can bring up some new ideas. A product/service market fit can determine the profitability and benefits of introducing such service(s).
Payer contracts put in place years ago can be renegotiated!
If you believe that the quality of your healthcare is improving and better than others, you can renegotiate better payer contracts with insurers and earn more revenue.
This is especially necessary after you have invested money in new technologies designed to improve healthcare delivery and patient outcomes.
Hospitals need to maintain good relationships with customers and other healthcare providers to maximise the potential of referrals.
A good part of maintaining good relationships with customers goes back to patient accountability. The more a hospital can meet the expectations of their patients, the greater the likelihood of a referral.
Beyond patient accountability, ensure your hospital has good customer service, from the gateman to the nurses, doctors, and lab technicians. Nothing keeps the word of mouth from spreading more than a satisfying experience.
A report by Accenture shows that hospitals that offer “superior” experience have a 50% higher net margins than those who offer “average” experience. Be more transparent and accountable, employ company-wide customer service standards, and you can increase your revenue.
Also, maintaining good relationships with other healthcare providers will help you get referrals from them if their patients request services they cannot provide.
Managing referrals is now a big issue, with many referral patients choosing not to show up. About $900,000 are lost in revenue per employed physician due to leakage in the referral system, according to ReferralMD. Additionally, HealthViewX puts referral leakage at about 55-65%.
Apart from the use of technologies that improve the referral management system, a good relationship with other healthcare providers will encourage them to communicate and coordinate with you so that referred patients show up at your hospital.
An often ignored way of increasing revenue in healthcare is patient retention and loyalty.
Marketers have always instinctively known the importance of customer retention to revenue generation. Research by SEMRush shows that existing customers are 50% more likely to try a brand’s new product and 31% more likely to increase their average order value.
A mild increase in retention rates can lead to a significant rise in revenue. This report by Harvard Business Review shows that a mere 5% increase in retention rate can increase revenue by 25%-95%.
Finally, a study by Elastic Path, a MarTech (marketing technology) shows that it costs 5 times more to gain a new customer than to keep an existing one, thus boosting your revenue just by increasing your patient retention rate.
Over the coming years, hospitals need to increase revenue to increase profitability, stability and improve healthcare delivery and patient outcomes.
These 10 tips, if well implemented, can lead to a total transformation of the hospital business.
Now that you have learned how to increase hospital revenue, you’re ready to take the necessary steps to implement these ideas and be well on your way towards growing a sustainable hospital.
