Hospitals Throw Money Away and May Not Know It

You’ve likely heard the expression “no margin, no mission.” I recall having many debates with healthcare colleagues on which should come first – the margin or the mission. Whichever way you look at it, we can all agree that investments in the patient care mission require capital, something that many hospitals are struggling to find.

This is not surprising when you consider a recently published study in Health Affairs that shows that more than half (55 percent) of U.S. hospitals lose money on each patient they serve. Why is this? Too often, healthcare organizations cling to outdated operations that actually create barriers for patients and referring providers, eating away at profit margins. Consider the three areas highlighted in our infographic where revenue and patient volume are often lost: ill-managed referral networks, unused scheduling capacity, and insurance authorization denials.

  1. Mind Referral Networks or Risk Losing Patients

On average, a single referring provider represents $1.7 million annually to destination providers. However, many organizations fail to cultivate or manage these important relationships. It’s all too common for patients to slip into the proverbial “referral black hole” – leaving providers and patients equally frustrated. A startling 46 percent of faxed referrals never result in scheduled patient visits. On top of that, more than half the time, referring providers receive no communication once the referral is sent.

  1. Tap Unused Scheduling Capacity

Sixty minutes and $200. That’s what each open slot costs a typical physician. Now multiply that across 100 physicians in a large group practice. For referral destination providers – hospitals and imaging centers – multiply the cost of each open MRI and CT slot. Next, throw in the cost of no-shows. The costs for unused capacity add up pretty quickly as expensive resources are left idle.

Now consider the reasons why valuable resources are left idle. Fundamentally, healthcare organizations lag far behind the retail and travel industries when it comes to providing easy, fast ways for consumers to conduct business online. A majority of patients (65 percent) say they face challenges when trying to engage with their healthcare providers. However, a recent Accenture report states that 77 percent of patients think the ability to book, change or cancel appointments online is important. Contrast this with the fact that only 2.4 percent of appointments are patient self-scheduled online today.

  1. Don’t Overlook the True Cost of Insurance Authorizations

$31 billion is a staggering figure. That’s how much healthcare organizations spend each year dealing with insurance authorizations and payments. Ninety percent of providers still process authorizations manually – a typical manual authorization costs $14.07 without attachments and more than triples to $45.49 with attachments.

All that manual processing is slow and error-prone, meaning lack of authorization is the leading cause of patient-access related denials. Up to 36 percent of those denials are due to insufficient authorizations and patient registration issues, according to HFMA. From there, costs compound all down the line. When authorizations don’t arrive in time, patients have to be rescheduled, oftentimes when they’ve already arrived for care. In reality, many never get rescheduled at all. Treatment and payment get delayed, slots on provider and equipment schedules go unfilled, and patient volume is lost.

Improve Profitability

Given the three areas just highlighted where hospitals lose money, organizations can use several ways to improve profitability.

  • Healthcare organizations that create a smooth, convenient experience for providers and patients have the differentiating opportunity to become the referral destination of choice in their market. This includes the use of technology that easily connects your organization to referring physicians to automate the capturing and management of incoming orders. This also eliminates the patient-dependent workflow that often results in no appointment at all.
  • Organizations can optimize scheduling capacity to be sure available slots get filled while taking steps to reduce no-shows, such as automatic reminders. The use of a smart rules engine can guide staff through the scheduling of any service according to the clinical and operational requirements of your providers, departments, and facilities, while making sure medical necessity is met, insurance eligibility is verified, and authorizations are obtained prior to the scheduled appointment. This will ensure accurate and efficient completion of the scheduled appointment while protecting revenue at the same time.
  • Lastly, automating authorization processing as an integral part of the referral and appointment scheduling process can dramatically reduce an organization’s costs and denials. This also allows your organization to more rapidly convert referrals into insurance-approved, schedule-ready appointments, ensuring payment of services and delivering an enhanced provider-patient experience.

Get the Infographic to learn how to increase profitability.

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