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When It Comes to a Hospital’s Revenue Cycle, Cost Is King

We are a cash company. Our contracts are typically contingent, our reports (rightly) brag about our collections, and maximizing revenue for hospitals and doctors has been one of our top priorities for over 36 years.

However, as we grow and become a larger part of a provider’s business, more and more of our conversations with clients center around two things: cost and aging. And at the moment, cost is king. You can see it in headlines across the country about layoffs big and small, medical and administrative. Whether you’re a stand-alone hospital or part of a larger system, you’re dealing with it. It’s all over the news – just click here to see for yourself. Also, notice how many of those provider names you recognize.

Now, like history, healthcare repeats itself. It’s cyclical. So, while this blog won’t age particularly well as the ship rights itself – a year or two later, it will suddenly be relevant again. Right now hospitals are in a crunch – and it’s important we understand why:

Now enter MedData. Let’s say we have an excellent (historic even!) month in Third Party Liability – and we collect a huge sum from auto insurers and other liable parties. Great news, right? Right?! Well, if you’re a director or VP of revenue cycle – it may not be.

You see, as Lisa Almaraz – a former Director of Patient Financial Services at St. Luke’s Episcopal Health Systems in Texas – explains it:

It’s counterintuitive. A director of revenue cycle is held accountable for the cost associated within their department. They aren’t seen as a revenue-generating center like the clinical departments. In a lot of ways, they’re considered a necessary evil to collect the revenue that the medical side has created. So really, they care a lot about budget and cost, and this becomes a large component of their overall performance.

So when those Directors of Revenue Cycle get our invoice for that excellent/historic month – they get really uncomfortable. We’re messing up their budget. Maybe they do or maybe they don’t do the math and realize that if our invoice is high, their cash is too. It doesn’t really matter. There’s a disconnect between our fees and the money we collect that can be difficult to overcome.

Then the inevitable happens. We get a call or an email either asking us to cut our rates or informing us that the work we’ve been doing (that’s been so successful from a cash perspective), is being brought back in house. They simply can’t afford to use us.

It’s a lot easier for a hospital to deal with the possibility of lost revenue because it’s spread across multiple payer types and can be excused in a million different ways. Whereas an invoice is visible. It’s tangible. There’s no denying its existence. In other words, it’s really hard to prove that a hospital is losing money, or exactly how much anyway. Conversely, you can literally hold up an invoice and point to the precise number they’re “losing” by using a vendor.

Now I’ve made a lot of blanket statements and over-generalizations here. This is an oversimplification of a complex issue that demands more thought and energy. But man, are we the team to do it! If you haven’t had a chance to meet many of your co-workers from around the country, if you haven’t seen the experience, the breadth/depth of knowledge that we collectively possess – it’s really astounding. We are truly experts. We have an instinctive ability to solve these problems. We think differently than our peers about these issues, and that’s a really, really good thing.

As an organization, we have thrived in the face of adversity. For example, a few years ago when the ACA was about go into effect, we had a leadership meeting. And there was clearly a contingent that felt it portended the end of us as a company – after all, how could we possibly deal with presumptive eligibility (getting people qualified for Medicaid was a good chunk of our business, so the argument was that hospitals would no longer need our help to do it)?

However, the exact opposite happened. We thrived. We grew. And it was because we modified our existing business to meet the current needs of our clients. Sure, some things got a little simpler and we had some losses, but other opportunities opened up and hospitals found themselves in greater need for assistance. We diversified. We added new service lines. And therein lies the takeaway:

Obstacles are opportunities.

The secret then is to listen – really listen – to our clients. Listen to what they are saying and what they aren’t saying. Somewhere out there, there’s a new way to provide our solutions or a new solution altogether. Somewhere out there, one of our advocates is about to uncover a new opportunity, and I hope we all pay attention when they do.

Matt Cardon

Matt Cardon

Matt Cardon is Vice President of A/R Services for MedData.

This Post Has 6 Comments

  1. Thanks Matt! Very informative information. I really like the part about really listening to our Clients. It is a great talent to be a really good listener. I feel to be a good listener we should resist the tendency of being a KNOW IT ALL! To grow we must always be learning. Remember little things can go a long way. Don’t forget to smile 🙂 Have A Great Weekend 🙂

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