Healthcare organizations are constantly in a state of change. Seeking improvements and planning for the future is nothing new. Risk adjustment, active management, and increasing post-COVID-19 margins are just a small handful of the ways that healthcare organizations pursue continuous improvement.
Patients with complications and additional health issues cost providers more money than they would receive from a standard patient insurance plan. By reporting these additional complications, a risk adjustment can be made. A risk adjustment is a payment that a provider receives periodically in addition to what it already receives for patient treatment to help cover estimated financial burdens imposed by certain patients. This is essentially another source of funds that can assist a hurting business. To obtain these funds, accurate documentation is key. Many providers do not receive these funds because they lack a firm grasp on risk scores and do not have a complete understanding of the electronic health records (EHR) system. In addition, the proper portrayal of acuity is essential. The acuity is then depicted in a subset of ICD-10 codes known as Hierarchical Condition Category (HCC) codes that describe a patient’s sickness level, risk category, and overall cost of care. The bottom line: inaccurate documentation yields less payment.
In management, it is easier to be a passive leader—not as many conflicts arise, but neither do any significant gains. As the pandemic surged through, it was almost necessary to be passive because there was no indication of what the new standard would be. A lot of questions about the future of healthcare remain unanswered, but taking a passive stance at this time is no longer a profitable option. Patients need care, and providers are fighting to stay open. Active management participation and adopting alternative payment models can help providers step up their game.
What does active management participation entail? It includes creating goals, establishing processes, and empowering people to execute on those strategies while also holding them accountable for their tasks. So, what is going on in the active management participation world that providers should be aware of? Right now, there is a further push toward providers accepting and managing risk, with a few examples being mandatory government and bundle programs, cross-model capacity development, and blurring lines in the Medicare Advantage relationship.
After being hit hard by COVID-19, healthcare providers are looking for ways to keep their doors open and stay in a positive operating margin while promoting growth despite increases in supply costs and employee salaries. In 2021, a third of all hospitals posted that benefits expenses contributed to a negative operating margin, as did labor shortages, contract labor, and the cutting off of CARES Act funding.1 So how can providers find extra funds? Providers can assess opportunities for both cash acceleration and expense management. Just as an organization can bring in more cash, it can also find more savings within its current operating structure.
Start with expense management. While a large portion of money is spent on labor, that cost spike has decreased, while other costs have grown significantly. Some costs, like labor and salary, are hard to change. Focus on costs that are not such a mountain to move, such as medical/surgical supplies, medical devices and implants, medications, the pharmacy department, food and nutrition, utilities, technology, and even employee benefits. Monitoring supply prices can indicate to an organization whether they are receiving the lowest supply prices from their group purchasing organization. If not, renegotiating the contract is a possible solution. Make sure that service organization charges are at or above the agreed-upon payor reimbursement price in the contract. Also, documentation and accurate depiction of patient acuity can help fill in some of the monetary reimbursement gaps. At the end of the day, make sure the organization receives appropriate payment for services rendered.
Increasing cash inflow is another way to increase the operating margin. If the cardiovascular unit is the receiving the highest levels of reimbursement, then route more staff and resources to that unit instead of a lesser reimbursed one. Additionally, there will be a more consistent cash inflow if claims are accepted when first submitted. Denials are common, but they are costly and discouraging to the workforce because they are returned to the provider with a fee, take time to resubmit, and risk the chance of expiration. Removing these unnecessary costs helps route resources to where they are most needed.
By addressing risk management, active management participation, and opportunities for post-COVID-19 margin improvements, executives can better serve their organization and patient base and thrive in the present market.
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