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Healthcare Revenue Optimization 101

Posted by Wayne Brown on 07 Apr 2016


banks and healthcare revenue optimization

The healthcare ecosystem has evolved considerably in the last six years, since the inception of the Affordable Care Act.  Self-pay revenues and declines in insurance reimbursements for providers have become a lot more prominent in today’s healthcare environment. However, bad debt continues to escalate for healthcare providers as more consumers are now responsible for larger self-pay portions of their medical bills. This situation leaves diminishing profits for the provider and has a direct impact on their viability.

Many physicians focus on building their practice by maintaining patient ratios and providing optimal care for their patients. As the medical industry expands, physicians must also focus on maximizing patient care, delivering care in innovative ways, and shaping the industry’s future.  At the same time, healthcare is a business and physicians must ensure cash flowing into the practice is greater than the expenses to maintain it.

From the practice management side, maintaining cash flow, reducing DSO, decreasing operating costs, reducing bad debt, and building patient relationships are the lifeblood of a practice. Does this mean a physician also has to have an M.B.A. along with their medical degree to be successful? Absolutely not; however, healthcare is and will continue to be a business, making sound financial standing an integral component of a successful practice.

Healthcare providers look to the financial services industry to help them build momentum and stay afloat. For many providers, their banker is part of the business management team. Furthermore, practice management vendors, business consultants, accountants and others all have their own objectives in working with the provider. This could be confusing for healthcare providers because business management 101 probably was not a required course in medical school training.

A key problem with healthcare banking is that banks have many silos that do not work together to provide a comprehensive bank product for providers. For example, the departments or divisions that lend to physicians have little interaction with the treasury side of the bank that can help providers improve their payments though products such as ACH, Patient Receivable Solutions, Lockbox, etc.

In contrast, an integrated approach can help providers improve cash flow through an infusion of capital, and simultaneously reduce expenses through financial products and services. Banks want to be in the space of offering free consulting to the provider so they can purchase their products and services. For example, the Citizens Bank’s Healthcare Solutions web page not only identifies a host of products aimed at the healthcare community, but also offers free consulting advice about key points to consider when evaluating a potential financial partner. This consultative approach has much more value and can save the provider from the brink of financial collapse.

It makes more sense for a bank to not only lend money to a provider, but also work with them to implement products that will improve operating efficiencies and reduce costs. Improving bad debt through revenue cycle management is an effective approach to help providers maintain good financial health. Automating patient payment collections can also reduce margins and improve cash flow.

Over the next few years, the financial service industry will likely focus on marketing a host of services to physicians to help them improve the business of healthcare.  Payment automation has already been successful in many other industries including utilities, government, education etc. Furthermore, check remittances continue to decrease as consumers migrate to digital channels— this trend is expected to significantly impact the healthcare industry as well.

For now, we will continue to watch an industry that should have embraced digital transformation years ago. Will healthcare providers be able to focus on the business side of their practices while offering optimal patient care? Time will only tell, but I am confident the industry will be affected by technological disruption and business consequences will mount.

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Wayne Brown Director of Business Development Wayne develops and manages business relationship at Alacriti. He brings over 25 years of financial services experience and worked with Metavante Corporation, Deutsche Bank, and MasterCard Worldwide before joining Alacriti. Wayne holds a B.B.A in Finance from Baruch College.

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