The COVID-19 pandemic has disrupted various industries, but its impact on the healthcare sector has been significant. Healthcare organizations faced challenges in maintaining their revenue streams during the crisis, with losses projected at $323 billion for 2020 alone. Medical practice administrators, owners, and IT managers across the United States should understand how these changes have affected revenue cycle management (RCM) services and what strategies to adopt moving forward.
Revenue Cycle Management is a financial and administrative process used by healthcare providers to maximize revenue and speed up payment collections. It covers administrative and clinical functions from patient registration to the final payment receipt. Given the complexities in the healthcare environment, RCM has become vital for maintaining revenue flows, especially during economic downturns like the one caused by COVID-19.
The pandemic led to a 19% decline in inpatient volumes and a 34% decrease in outpatient volumes for healthcare providers. As a result, facilities saw significant revenue downturns mainly due to reduced patient engagement and cancellations of elective procedures, which are key revenue sources for many hospitals and practices.
Approximately 25 to 43 million individuals were projected to lose their employer-sponsored health insurance during the pandemic, complicating the financial situation further. This situation highlights the need for healthcare systems to adopt strong RCM strategies and recovery plans.
As healthcare systems faced financial challenges, there was a notable shift toward virtual care. By mid-June 2020, 38% of Medicare beneficiaries were using telehealth services. This transition required a reevaluation of traditional care models. While telehealth promotes continuity of care, it generally comes with lower reimbursement rates, with the Centers for Medicare & Medicaid Services (CMS) compensating telehealth visits at about 80% of regular visit rates.
This change emphasizes the need for medical practice administrators to assess their financial landscape and manage costs while optimizing services to meet evolving patient expectations.
With the rise in virtual care, claims and denial management has become critical in RCM planning. In 2021, around 48.3 million claims were denied, making up 16.6% of all claims submitted. Healthcare organizations must implement agile claims processing systems capable of swiftly addressing denied claims and using data analytics to identify recurring denial patterns.
Analyzing denial metrics and employing management strategies is essential for ensuring revenue integrity, especially with increased competition from telehealth providers. Delays in claims resolution can result in longer payment cycles, impacting cash flow directly.
Healthcare providers were previously hesitant to outsource RCM tasks, favoring in-house management. However, the pandemic has caused a shift toward outsourced RCM services, with approximately 61% of providers intending to outsource these tasks soon. This trend aims to improve operational efficiency and reduce costs associated with in-house RCM management.
Given the complexities of RCM, particularly with new regulations and the growing emphasis on telehealth, outsourcing has become appealing for many organizations. Partnering with specialized vendors allows healthcare providers to access expertise, technology, and resources that may not be available internally.
As healthcare organizations work toward recovery, they should follow a four-phase recovery strategy:
These strategies are essential for aligning with new revenue realities and ensuring financial stability.
The adoption of artificial intelligence (AI) and workflow automation in revenue cycle management has increased due to the crisis. About 65% of U.S. hospitals are implementing AI in RCM processes. Providers are finding that intelligent automation can address many operational inefficiencies faced by traditional RCM systems.
AI-driven tools can streamline administrative tasks, such as appointment scheduling, insurance verification, and patient follow-ups, reducing the workload on office staff. Automated solutions enhance efficiency and increase the accuracy of claims submissions by minimizing human errors. In 2021, manual claim denial processes led to delays that negatively affected revenue.
Healthcare IT managers should consider the following AI applications:
AI and automation are essential components that can change how RCM operates in this new era of healthcare. By embracing these technologies, healthcare providers can enhance their revenue operations, making them resilient and adaptable to ongoing changes in the healthcare environment.
As organizations continue to recover from the crisis posed by COVID-19, adapting to a new normal is crucial. Efficient operational practices, supported by technologies like AI, are significant for sustained financial health. Additionally, embracing telehealth and diversifying services should align with strategies that optimize healthcare delivery and system efficiency.
Dealing with these complex challenges will require collaboration across various healthcare disciplines, ensuring all aspects of service delivery meet the overall goal of improving patient care while maintaining financial stability. By staying informed about trends in RCM and effectively utilizing public and private resources, healthcare providers can become stronger and more adaptable, ready to meet the needs of an evolving patient population.
The changes in revenue cycle management services due to COVID-19 have created fundamental shifts that healthcare providers must understand and accept. Stakeholders within medical practices need to adjust to new service delivery methods, apply innovative technologies, and optimize their financial management strategies to succeed in this transformed healthcare setting.
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