Healthcare costs are rising just as the government is mulling reimbursement cuts for some medical procedures and services, leaving hospitals feeling pinched.
While the recent healthcare reform bill means new revenue in the form of millions of newly insured patients, “it may not fully offset the cuts for most hospitals, so they’re all going to have to do more with less,” says Jonathan Lauer, managing partner at the Hospital Performance Alliance, or HPA, a healthcare-focused financial consulting firm based in Woodinville, Wash.
In the current economic environment, it’s imperative for hospitals to collect all the revenue they have legally coming to them, and cut costs, wherever possible, without impacting the quality of care. That’s where financial consulting and medical billing services could prove helpful to some hospitals.
“I think the time is right to really help hospitals cut costs and make sure they’re not missing out on any revenue opportunities,” Lauer said.
HPA consultants assist hospitals in doing both. It’s a hassle to switch vendors and the vendors know that, Lauer said. So they typically don’t offer their loyal customers the best deals. So, on the cost savings side, HPA performs an audit of the most frequent or expensive products and services – from sophisticated electronic medical records software to janitorial services – its customers purchase. It then either scours the market for lower priced options or tries to renegotiate prices with hospitals’ existing suppliers.
HPA lowers its customers’ costs by an average of 18%, Lauer said.
On the revenue side, HPA analyzes historical data to determine the price insurers and patients are willing or able to pay for certain products and services to maximize revenue for the hospitals. So instead of raising prices across the board by 3%, hypothetically, HPA might recommend a hospital increase what it charges for mammography screening by 5%, but leave the price of routine physical exams the same to get the highest revenue return.
In both cases, HPA charges its hospitals a percentage of the cost savings and increased revenue it creates, Lauer said. If HPA finds neither cost savings nor more revenue, the hospital pays nothing.
The whole process can take anywhere from a few weeks to a few months, Lauer said, and the cost savings consulting services are really for hospitals with $50 million or more in costs. Any hospital, regardless of revenue size, can benefit from the revenue consulting services, he said.
Another option for a hospital looking to increase revenue is to outsource its medical billing functions, according to Bill Gilbert, vice president of marketing at Warren, N.J.-based AdvantEdge Healthcare Solutions, or AHS. Gilbert estimates that most small to mid-sized hospitals that do their own billing routinely fail to collect between 10% and 20% of the revenue they are due.
Why? As Gilbert explains it, internal billing staffs and technology are expensive and often stretched thin. They may not be equipped to fight with insurance companies when complex billing disputes arise and, other times, collections can simply fall through the cracks.
“Every insurance company is different, so it’s a very complicated process,” Gilbert said. AHS “can simplify that whole process.”
AHS consultants are experienced in dealing with complex government compliance regulations and health insurance reimbursement policies and procedures, Gilbert said. And when disputes between hospitals and insurance companies arise, they handle the appeal process, including collecting additional documentation and contacting patients.
Like HPA, AHS charges customers a percentage – anywhere from 4% to 10% – of the additional revenue they collect. Gilbert said most customers see revenue collections increase by between 5% and 10% or more.
Hospitals considering either financial consulting or medical billing services should insist on customer referrals. Ask the vendors being evaluated for contact info for hospitals similar in size and specialty. Also be sure to ask each vendor how they plan to adapt to changes in federal and state healthcare laws, and if they offer dashboards or other data visualization software to keep customers informed of the amount of costs saved or revenue found, Gilbert said.