By Floyd Lawson, Chief Operating Officer, Hollis Cobb
When healthcare organizations are looking to improve financial performance, one of the first places they turn is operating expenses. Where can we reduce costs? Can we renegotiate vendor contracts? Can we accomplish the same work with fewer resources?
Those are fair questions. Every CFO has a responsibility to manage expenses. But I’ve always believed you have to look at both sides of the equation.
Cost to collect is calculated by dividing revenue-cycle expenses by the dollars collected. We spend a lot of time talking about the numerator, what it costs to operate. But what about the denominator? What about the revenue we’re actually bringing in?
Consider an organization collecting $100 million annually at a 3% cost to collect. That’s $3 million in operating expenses. Reducing those expenses by 1% saves $30,000. Improving collections by 1%, on the other hand, generates another $1 million before any additional expenses or adjustments.
Now, those are simplified numbers, and improving collections isn’t always easy. But they illustrate why we need to look beyond cost reduction. There’s often a much greater financial opportunity in recovering revenue that’s being missed than in finding another small reduction in operating expenses. The question is how you get there.
I’ve seen organizations with similar technology, comparable resources and nearly identical cost-to-collect ratios achieve very different results. In my experience, the difference comes down to execution.
Technology Creates Opportunity. Execution Creates Value.
I often use an analogy when talking about technology. You and I can both have beautiful Ferraris sitting in our driveways. Same equipment, same capabilities. But how we operate those vehicles could be very different. Revenue-cycle technology works much the same way.
Today, any quality revenue-cycle partner should have a strong technology platform. That’s an expectation. What matters is whether the organization has the experience to get the most out of it.
Take patient payments: Online portals, text messaging, email communications and interactive voice response (IVR) systems allow patients to resolve straightforward balances without speaking to a representative. Someone can make a payment at ten o’clock at night rather than waiting until business hours. That convenience benefits the patient, and it also reduces the staff time required to process routine transactions. If we can handle a portion of the business without requiring a full-time employee to work every account, we’ve created efficiency that helps control costs.
That said, not every account belongs in an automated workflow: Some patients have questions about their insurance, some need help understanding a bill, others simply prefer talking to a person.
We have to know where technology makes sense and where we need an experienced person involved. That’s how you get the value out of the investment.
The Revenue Opportunity Hidden in Better Conversations
One thing I’ve learned over the years is that you can tell a lot about a revenue-cycle operation by listening to how its people communicate with patients.
I remember listening to a call where a patient was trying to provide information about both primary and secondary insurance coverage. The representative was so focused on following the process that they weren’t really hearing what the patient was saying. That’s a missed opportunity, and it can have a real financial impact.
We see situations where accounts have been placed for bad-debt recovery even though an insurance balance was never properly resolved. If a representative simply treats that account as a patient balance and starts asking for payment, they may never discover that additional insurance coverage was available or that a claim should have been handled differently.
An experienced representative knows to ask the right questions. What insurance did the patient have at the time of service? Was there secondary coverage? Was the claim processed correctly? And just as importantly, they know to listen to the answers.
That’s why I put so much emphasis on training and subject-matter expertise. We want our people to recognize these situations, understand the options available and work toward a one-call resolution whenever possible.
There’s a financial benefit to resolving an account correctly the first time. It reduces repeat calls, unnecessary follow-up and time spent working an account that should have been handled differently from the beginning.
And we need to remember who we’re representing. The patient doesn’t necessarily distinguish between the hospital and its revenue-cycle partner. How we communicate and handle their concerns reflects on that hospital. That’s part of delivering quality service, and it’s something we can’t afford to overlook.
Sustainable Performance Requires Continuous Improvement
Good execution doesn’t stop with the individual account. You also have to pay attention to what those accounts are telling you about the larger operation. I can give you an example.
We started hearing the same complaint from patients: “I never received my statement.” You can treat each of those calls as an isolated situation. Explain the balance, send another statement and move on. But when you hear the same thing repeatedly, you need to ask why.
In this particular situation, we discovered that statements weren’t being sent at a certain stage of the hospital’s billing process. Patients weren’t necessarily ignoring their bills. In some cases, they hadn’t received them. That’s information a revenue-cycle partner should be bringing back to the client.
Our managers listen to calls. Our insurance teams identify trends. We look at historical account information and discuss what we’re seeing. If multiple accounts have a common issue, we need to understand whether there’s something in the process that should be corrected.
Otherwise, we’re working around the same problem over and over again, and that costs money. Every avoidable call, repeated billing issue or unnecessary escalation takes time and resources. When you identify the cause and correct it, you’re improving the operation instead of simply finding a less expensive way to handle the problem.
I often say that no hospital wants to spend its time managing a vendor. They want someone who understands the business, communicates what they’re seeing and helps make the operation better.
The Execution Advantage
There’s a phrase I’ve used with our teams for years: “One band, one sound.” It comes from the movie Drumline, and I think it describes what makes an organization successful.
You can have talented people in every department. You can have excellent technology, strong processes and all the right resources. But if everybody is operating independently, you’re not going to get the same result as an organization where people are working together.
Our technology teams have to understand what operations needs. Our managers must recognize what their people are hearing from patients. Our training teams have to prepare employees to handle those conversations. And our client relationships must be built on communication and trust.
I’ve been fortunate to work with some outstanding people throughout my career, and I give them a great deal of credit for the success we’ve enjoyed. They’re the ones having those patient conversations, identifying problems and finding ways to improve how the work gets done.
People also need to care about what they’re doing. They have to want to ask the right questions, listen and do the job well. You can’t replace that with a technology platform.
Healthcare organizations will always need to manage costs. That’s not going to change. But I would encourage finance leaders to look beyond the expense side of the equation and ask what their revenue-cycle operation is actually delivering:
- Are we resolving accounts effectively?
- Are we finding revenue opportunities that might otherwise be missed?
- Are we making it easier for patients to do business with us?
- Are we identifying problems before they become recurring expenses?
Those are the things that tell you whether an operation is truly performing.
Because at the end of the day, it’s not just about what you spend. It’s about how well you execute.
