Hospital operations may reach equilibrium in terms of staffing numbers and new work arrangements long before patient volumes do. State and municipal regulations may curtail elective surgeries in areas where COVID-19 volumes are high and threaten to potentially overwhelm provider resources. In other areas with less community spread, patients may still be concerned about contracting COVID-19 if they come to hospital facilities for screenings, wellness care or electives. Further, even if patients clamor at the door, providers’ physical constraints, including the availability of specific medical staff such as surgeons and anesthesiologists, mean they cannot meet all pent-up demand at once.
For these reasons, we expect providers’ financial travails, including traditional revenue lag time, or days sales outstanding, to worsen even as patient volume increases.
While some larger institutions have access to endowments and credit lines in addition to substantial cash reserves, many smaller and rural providers may have only seven to eight days of cash on hand. All will feel the effects if financial losses continue over the next seven to 12 months. This makes it imperative for providers to act immediately to address their RCM issues for their viability.
Addressing the impact of COVID-19 on RCM operations
COVID-19 has affected both the administrative and clinical sides of the revenue cycle. Here are key areas providers need to address:
1 Revenue loss.
Reduced inpatient and outpatient volumes for elective care and the higher cost of care for every COVID-19 patient are resulting in declining revenue. Even payer reimbursements for COVID-19 care may not offset increased expenses and reduced elective procedures. Medicaid beneficiaries have increased, but the Centers for Medicare & Medicaid Services (CMS) reimburses Medicaid services at rates less than those for Medicare or commercial insurance. CMS has announced temporary payment parity for virtual care visits, but many commercial payers reimburse virtual care services at lower rates. Lastly, collection activities have been curtailed during emergency orders, resulting in delayed or no collection from patients of their co-pay and deductible amounts.
Reduced inpatient and outpatient volumes for elective care and the higher cost of care for every COVID-19 patient are resulting in declining revenue. Even payer reimbursements for COVID-19 care may not offset increased expenses and reduced elective procedures. Medicaid beneficiaries have increased, but the Centers for Medicare & Medicaid Services (CMS) reimburses Medicaid services at rates less than those for Medicare or commercial insurance. CMS has announced temporary payment parity for virtual care visits, but many commercial payers reimburse virtual care services at lower rates. Lastly, collection activities have been curtailed during emergency orders, resulting in delayed or no collection from patients of their co-pay and deductible amounts.
- Recommendations: Providers need to promote services they are offering and the measures they are taking to safeguard their patients against COVID-19 to encourage patients to resume screenings and elective procedures. Ensure RCM operations are up to speed with prompt claim submission and follow-up. Federal and state relief measures such as the CARES Act and Paycheck Protection Program have helped providers compensate partially for COVID-19-related revenue losses, but these losses may never be fully recovered even as patient volumes normalize. Also, as the relief funds dry up, providers must be prepared to take measures to expedite recovery.
2 Patient payments.
Layoffs with economic causes and the resulting loss of employer-sponsored health plans lead to patients being unable to cover their out-of-pocket costs. Patients may receive preauthorized services for which they are no longer eligible, causing a claim to be rejected. Conversely, patients may be newly eligible for a service and forgo it, not understanding their new coverage status.
- Recommendations: By ensuring automated eligibility verification at every encounter, providers can capture up-to-the-minute eligibility data and understand patient responsibility amounts. Providers should provide financial counseling to patients to inform them of alternative payment plans. Providers should consider a tailored approach to collections based on predictive analytics-derived stratification of patient propensity to pay. They may also use a variety of payment mechanisms, including Apple Pay and Google Pay, as well as their own portals.
3 Virtual care.
Care delivery through virtual channels, such as telehealth, has greatly increased as fear of COVID-19 keeps potential patients out of hospitals and physicians’ offices. In addition to declaring payment parity with office visits for Medicare and Medicaid virtual care visits, CMS has relaxed requirements for providers offering virtual services crossing state lines.
While telehealth has been a bright spot, it is not certain whether CMS will continue parity reimbursement. As for commercial payers, virtual care coverage varies. If reimbursement rates decrease while patient virtual care visits remain above pre-COVID-19 levels, this will result in a new revenue gap — one between telehealth encounters and potential billing for in-person care.
- Recommendations: Gain full reimbursement due for virtual care services by ensuring that clinical documentation flows efficiently from virtual care platforms to electronic medical record systems and billing systems. Robust virtual care offerings could continue to generate revenue with options for patients who cannot commute to physician locations. Incorporating telehealth into care team workflows could create greater efficiencies that might offset some of the revenue reduction.
4 Staffing challenges.
COVID-19 creates unpredictable staffing demands for front-, middle- and back-office RCM functions as claim volume fluctuates. Current staffing models tend to be static to handle normal operations. Manual RCM workflows, with workarounds between systems, don’t enable efficient remote RCM operations. Further, remote operations increase the challenges in monitoring and ensuring or tracking staff productivity. From our observations, back-office operations do not have the analytics-based automated workflows and work allocation solutions necessary to prioritize accounts receivable tasks and maximize revenue recovery.
Claims rework volume also has increased, adding to pressure on RCM staff. The industry has created new diagnostic codes for COVID-19 and its procedures (the COVID-19 diagnostic related group, or DRG, virtual encounters, serology tests, FDA-authorized tests, partial hospitalizations, etc.). In addition, government and commercial payers are continually changing policies about COVID-19 treatment co-pays, patient responsibility amounts and their collection. Processing the new codes and keeping abreast of evolving policies has led to increased appeals, added claim resubmissions due to changes in patient responsibility and reworked patient statements.
- Recommendations: Providers must consider flexible staffing strategies, including work from home, work performed globally, and work from anywhere as a core operational foundation. In addition, automated workflows streamline delivery of work to appropriate team members in virtual settings. However, flexible staffing is only one piece of the puzzle. Providers need to engage in partnerships for outcome-based, service level agreement-driven managed RCM services. Based on our experience, focusing on critical RCM metrics can lead to a 30% cost reduction in RCM operations. A gain-sharing model independent of staffing is needed to provide a financial incentive to internal operations and partners. Lastly, providers need to optimize business processes to improve employee productivity in the new era of virtual work.
Actions to take now
For many providers, focusing on virtual care, digital enablement and managed RCM services in the short term will help improve operational efficiency and cash flow. The following figure shows some near-term digital RCM (dRCM) operations to consider.
