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Dan Murdoch

October 26, 2022
Medical Billing

Why Medical Providers Struggle with Revenue Leakage

Why Medical Providers Struggle with Revenue Leakage

The healthcare revenue cycle is the lifeblood of any hospital, health system, or medical practice. However, each of these groups is leaving thousands, and in some cases millions, of dollars in unclaimed revenue on the table each month. While most providers know they are experiencing material losses in revenue, the challenging part is in determining where this revenue leakage is occurring.

Most billing audits do not reveal the full picture of what’s happening or where providers are losing money in their revenue cycle. Even worse, most practices do not know how to fix leaks when they are eventually discovered.

This post will help to define revenue leakage in the context of healthcare, examine why it happens, and suggest several solutions to spot and eliminate it from your practice’s revenue cycle.

What is revenue leakage in healthcare?

Revenue leakage refers to situations where a healthcare provider issued care and services to a patient but failed to receive payment. Most revenue leaks can be prevented, but since they typically go undefined within an accounts receivable and revenue cycle, many practices fail to put in place measures that can prevent them from occurring in the first place. The more leaks are hidden in your billing workflow, the greater the accumulated impact they’ll have on your revenue in the long run.

There are several reasons revenue leaks occur and the causes vary from one practice type to another. However, the impact is typically the same - stunted growth, revenue loss, and a higher cost of care passed along to the patient. Practices still leveraging manual billing workflows will have a particularly challenging time spotting revenue leaks.

What does revenue leakage mean for your practice?

According to a survey conducted by Sage Growth Partners and Fibroblast, over 40% of healthcare organizations reported losing more than 10% or more of annual revenues to leakage, 19% are losing over 20% of revenue, and 23% don’t know how much they are losing. Further exacerbating the issue of leakage, a JAMA study found that billing and insurance-related activities cost over $99,000 per medical provider per year and represent nearly $1 in every $7 collected by a medical facility. This means that on top of the high cost incurred just to process billing to insurance payers, a significant amount of revenue is leaking and physicians are never receiving payment for large portions of the care they provide.

Revenue leakage is bad news for any practice, especially practices looking to grow. This unintended loss of revenue can impact the bottom line considerably. Because factors causing revenue leaks differ based on each organization’s billing workflow and practice type, it can be challenging to determine the exact cause of leaks across the board.

Many forward-looking healthcare organizations have started replacing manual aspects of their billing workflows with robust AI-based revenue intelligence solutions, making it less challenging to spot leaks and proactively address them.  

What causes revenue leakage?

The first step towards eliminating unintended revenue loss is by identifying what caused the leaks in the first place. Some of the factors that cause leaks include:

  • Registrations / Eligibility

Revenue leakage related to Eligibility denials often stems from either the information not being obtained from the patient during preregistration or when they present at registration. Eligibility-related denials often result in a hard denial or one where you will not likely be paid, including those related to coordination of benefits, plan coverage, incorrect plan code entry, maximum benefit exceeded, inactive coverage, or member not found.

To address Eligibility denials, thoroughly audit how insurance is verified. Practices should scrutinize when phone calls are required because they are the most expensive and time-consuming way to check coverage. Instead, consider using a technology-first approach to run batch checks and have the option to automate when checks are performed.

  • Missing or Invalid Claim Data

These types of revenue leaks are typically categorized as soft denials, meaning you can usually fix the claim and resubmit it for payment. Missing or Invalid Claim denials occur when submitted data does not pass the payer’s adjudication edits - a clear sign that vital data may be missing. 

It is important to educate your team as to why these denials are occurring. However, they can also be prevented by using an edits library within billing or denial management software to stop claims from being submitted with missing or invalid data.

  • Authorization / Pre-Certification

Revenue leakage resulting from a denial of this type occurs when a required authorization was not obtained before service, or an invalid authorization number was included on the claim. There are also cases where prior authorization is received, but insurance still denies the claim due to an eligibility issue such as the patient’s coverage changing or expiring after receiving the authorization but before it was used. Many payers require authorization for services prior to or within 14 calendar days of services rendered.

Many forward-thinking provider organizations have begun leveraging interoperability, automation, and other technologies to address the need for treatment proof and approvals.

  • Service Not Covered

Non-covered service denials are typically hard denials, meaning this form of revenue leakage can be unrecoverable. When these types of denials occur, it’s often because the payer’s plan did not cover the provider service, or the patient's stay exceeded the maximum number of days allowed for a particular service.

This type of denial can generally be avoided by simply reviewing a patient’s plan or calling their insurer prior to a claim submission. However, practices lacking front-office billing workflows still tend to experience multiple percentage points of revenue leakage due to non-covered services.

  • Medical Documentation Requested

As the category implies, this area of revenue leakage is the result of denials due to missing documentation. In this case, either the requested documentation was not provided initially or provided but not received. Sometimes the documentation was simply not provided in the timeframe required by the provider, or inadequate or insufficient information was received.

While missing documentation denials are generally soft denials (the claim can be resubmitted with the necessary documentation), this extends accounts receivable timelines and increases the risk of revenue leakage as some of these claims are never resubmitted.

  • Medical Necessity

Medical necessity denials are typically a top area of revenue leakage. They are considered hard denials and require an appeal to request reconsideration. The primary causes of medical necessity denials are the lack of documentation necessary to support the length of stay, service provided, level of care, or reason for admission.

Practice leaders must ensure that their physician and nursing documentation clearly supports the services billed for and that the physician’s admission order clearly identifies the level of care. Otherwise, they risk additional denials and lost revenue.

Other factors that cause revenue leaks include but are not limited to:

  • Untimely Filing
  • Medical Coding
  • Provider Eligibility
  • Avoidable Care

How to tackle revenue leakage proactively

You need to periodically scrutinize your entire revenue cycle to spot potential areas that could cause leaks. This means auditing everything from your EHR/EMR and practice management software to your team’s workflow and activities.

However, this can be challenging to do manually, especially for practices processing large volumes of claims or with multiple locations and providers. As such, investing in a revenue intelligence tool that can offer a cockpit view of your entire RCM process, patient data, technology stack, and billing workflow for potential leaks is highly recommended. While any revenue intelligence tool is more efficient than a manual audit, not every solution can accurately spot leaks ahead of time.

Medical practices should index on solutions that seamlessly integrate with their existing technology and practice management stacks to spotlight potential problem areas where revenue leaks may be occurring, or might eventually occur. With real-time revenue leakage analytics, practice leaders can spot leaks and their causes ahead of time and plug them, so they don’t continue to adversely affect collection rates.

Steps to stop revenue leakage

1. Aggregate all relevant billing and patient data

Disparate systems and a lack of data connectivity have resulted in insufficient visibility within the healthcare revenue cycle. To eliminate leaks, the first thing to do is centralize all billing and patient data to provide a single view of the services being provided and the claims being submitted. This can be done either manually or by automating the step of data aggregation. By automating the aggregation of data, practice leaders should have an accurate view of their revenue cycle that is updated in real-time.

2. Analyze data with AI

Once you’ve pooled all related revenue cycle data into a central source of truth, the next step is to look through the aggregated data to spot where and why leaks have or may occur. This step can be particularly challenging because sifting through hundreds or even thousands of patient and claims records is time-intensive and not often realistic. Even if you are able to manually sift through this data, it is not guaranteed that you will be able to spot the problem areas within your billing workflow. 

The advantage of using a revenue intelligence tool when addressing revenue leakage is that the best solutions utilize Artificial Intelligence to aggregate and sift through data. This allows practice leaders to analyze the captured data with AI and easily spot when and where the leaks are happening and the reasons behind them, all within a single dashboard view. 

3. Implement company-wide changes in the Revenue Cycle Management process

Once you’ve established where and why revenue leaks are occurring, you can then implement company-wide structural changes that ensure your team follows the right process to avoid leaks.

For example, if the majority of revenue leaks occur during patient onboarding due to eligibility denials, a process can be put into place for eligibility checks to happen prior to a patient’s scheduled visit. Additionally, with the right revenue intelligence tool, automation can be put into place for the logging of patient payment information prior to the visit. This will ensure that in the case where eligibility is an issue, collection of the patient responsibility is more reliable. 

4. Measure the effectiveness of changes

Once the revenue leaks have been spotted and addressed, it is important for practice leaders to also measure the effect of fixing the leak to ensure it is successful. If you realize that collected revenue does not match forecasts, then there is a good chance continued interaction of the revenue cycle is needed. As with the previous steps in this process, a robust revenue intelligence tool can make a material difference in a practice’s ability to measure improvements and ensure that changes in the RCM process have fixed the leaks.

Ready to plug the leaks within your revenue cycle?

Adonis is the Revenue Intelligence platform for modern healthcare organizations. Our mission is to identify missed revenue opportunities and revenue leakage, allowing providers to focus on what they do best - patient care.

Adonis’ revenue intelligence platform unifies end-to-end RCM operations into a single, powerful view. By aggregating data from systems of record, the platform helps to create actionable insights resulting in improved KPIs. See how Adonis can help your practice stop revenue leakage for good.

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