Why is revenue cycle automation the need of the hour?

The US healthcare industry wastes about $266 billion annually due to administrative complexity, the largest source of health system waste. In addition, US healthcare organizations lose approximately $125 billion in revenue each year due to poor billing practices. 

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Not all administrative costs are wasteful, but the US spends far more on healthcare administration than other high-income countries.

As the margins shrink, diagnosis and treatment turn more complex, and as patient volume increases, healthcare providers are under intense pressure to improve financial results while providing the best patient care.

This is where revenue cycle automation is making a real impact on financial performance through technology integration and AI. Let’s find out how.

What’s Driving the Push Toward Healthcare Revenue Management Automation

The surge in healthcare revenue management is driven by several practical reasons, such as the following:

1. Shortage in talented workforce: Based on an American College of Healthcare Executives research, staffing and resource allocation have become increasingly difficult, with labor shortages affecting 83% of healthcare leaders across the revenue cycle. Furthermore, appointing, training, and retaining an in-house team adds to the expenses.
   
   
2. Changing regulations and compliance laws: The rules and guidelines of HIPAA and other regulatory frameworks evolve and multiply frequently. Tracking and adhering to these changes become nearly impossible for healthcare providers between patient care and claim reimbursements.
   
   
3. Delay in reimbursing claim amount: Due to inefficiencies in medical billing, payment posting, and compliance, insurance companies are delaying claim reimbursement by 45-60 days. 

All these factors have pushed hospital management and physicians to prioritize revenue cycle automation, AI, and machine learning, which is why 72% of Guidehouse survey respondents identified healthcare revenue management technology as their top priority in the next 12 months.

How Revenue Cycle Automation Improves Financial Results in Healthcare?

Here’s how advanced analytics can fundamentally transform how healthcare systems generate and collect revenue:

1. Submit Clean Claims and Improve Cash Flow

A provider’s financial performance starts with how accurately their claims are filed. AI and process automation can catch errors in diagnosis and procedure codes before claims reach payers.

Suppose a moderately sized hospital submits 1000 claims on average per month. Even if 15% of these claims get denied due to preventable errors, that’s 150 claims needing rework. And if each claim rework costs $25, automation can potentially save $3750 per month.

2. Cut Down Operational Costs

With automation and AI, health system admins handle routine tasks like patient and payer verification, medical coding, documentation, credentialing and contracting, payment posting, risk adjustment and assessment, and even IT security. 

Working with software solutions allows them ample time to focus on high-value activities, such as patient care, denial resolution, and revenue optimization strategies. This shift could increase department productivity without adding headcount.

3. Prevent Denial Ratio Proactively

Automated solutions can validate eligibility, ensure compliance with insurers’ rules, and check benefit limits and authorization requirements in real time. This proactive approach can decrease denial rates by up to 95%.

When denials do occur, automated workflows expedite reappeals by tracking and managing payer responses and required procedures.

4. Get Real-Time Financial Visibility

Financial leaders within the healthcare system need not wait till the month's end to get a clearer picture of their performance. Real-time performance metrics and HEDIS show exactly where performance excelled and where revenue leaked. 

Administrative managers can identify which insurance companies delayed payment, which procedure codes were denied the most, which compliance codes were not followed, and which staff or doctors need additional training.  

Healthcare Revenue Cycle Management: Areas That Can be Automated

Modern healthcare revenue cycle management providers, such as HOM, can automate virtually every step of the revenue cycle, right from credentialing and patient scheduling to final payment collection.

Here’s a look at key functions and how they benefit from revenue cycle automation:
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Takeaway

Insurance providers’ complexities are growing, staff bandwidth is shrinking, and margins are tighter than they were a decade ago. The healthcare system is under tremendous pressure.

Transformation will not happen overnight, but results will appear quickly: most practices can see a substantial improvement within 30 to 60 days of automating medical revenue cycle management. And within six months, the financial benefits may exceed the investment.