New and lingering implications of COVID-19 continue to arise for both patients and providers. Hospital operating margins continue to decrease month after month as costs for labor and supplies continue to skyrocket. The consulting firm Kaufman Hall reported October’s median operating margin to be 3.2%, a 12% decrease from September, while labor expenses rose 2.7% in the same time period. Compared to pre-pandemic levels, labor expense has increased by nearly 15% while full-time equivalents (FTEs) per adjusted occupied bed decreased by 4%, indicating that the rise in labor expense is associated with the demand for higher salaries, not more FTEs[1].
Hospital leaders are looking for solutions to avoid drastic measures like rationing care but are facing double-digit labor budget increases and challenges competing for talent on a national scale.
Breaking Down the Issue: The Great Resignation is Causing More Than Just Labor Shortages
Salary Expectations are Higher Than Ever
Critical healthcare positions are becoming increasingly vacant and harder to fill. The healthcare industry overall is still nearly 500,000 jobs short of pre-pandemic averages while wages have increased 10% from pre-pandemic levels and continue to rise[2].
According to a recent report on frontline healthcare workers published by KFF and The Washington Post, more than half of healthcare workers say their employer is “falling short” when it comes to providing additional pay for employees working in high-risk situations and 30% of frontline workers say that have considered leaving healthcare because of the pandemic[3].
It was hard to find skilled staff at reasonable pay even prior to the pandemic, and now it is getting close to impossible. “There is a supply and demand challenge where staff are in short supply and health systems are almost forced to offer hiring bonus and retention packages so they can care for patients,” explained Barbara Tapscott, former Vice President of Revenue Management for Geisinger Health System.
Providers are Competing For Talent On a National Scale
With remote work becoming the new normal, employees are no longer restricted to regional employment options and are now able to consider remote positions across the country to find the highest wage. Jason Driskell, Vice President of Revenue Cycle for Lakeland Regional Health System, identified his top challenge as labor shortage and the subsequent inflation of average hourly wage. Someone can work remotely for a hospital system in California paying $32 per hour while living in Florida where the salary for the same position could be $14 per hour.
The virtualization of positions like administrative roles and revenue cycle management functions requires a significant shift in talent acquisition and operational strategies. Can you successfully onboard new employees in a remote environment? What compliance policy updates are needed to ensure information is secure outside of the business office? What productivity expectations need to be put in place and how will those be monitored?
Treat the Cause, Not the Symptoms, to Improve Long-term Outcomes
“We are planning on zero increases in Medicaid reimbursement, 2% overall for Medicare and 2%–3% for commercial payors. Rates aren’t at a level to handle inflationary cost on the expense side for labor, supplies and purchased services. We’re going to struggle,” explained the Chief Financial Officer of a large Southeastern health system. Just as we are redefining “normal” as a society nearly two years into this pandemic, healthcare leaders must also reexamine traditional operating models and evaluate creative solutions to push forward against the headwinds of the current market.
- Rethink outdated operating models that may be limiting your talent pool. Innovation is a significant factor in what attracts some of the most sophisticated talent. Tech-savvy candidates could consider typical revenue cycle processes archaic and unappealing. Environments and positions that offer opportunities to work with robotic process automation, artificial intelligence, and other technology that feel innovative are more likely to attract top-quality talent.
Driskell identified a perceived shift in patient’s desire for face-to-face customer service where more patients prefer a safer digital interaction when possible. “Everyone wants to do everything with their phone now, so we’ve got to get there,” explained Driskell. Even patient-facing roles like the registration teams may be able to improve efficiency with greater patient self-service tools and the potential to conduct registration work remotely by connecting with patients digitally. - Think like a process engineer to increase productivity. Analyze current administrative, non-clinical tasks to identify what can be done more efficiently or what can be eliminated from the process altogether. This approach requires a willingness to step back and objectively evaluate the way something may have been done for 30 years. “Our process engineers team up with our revenue cycle operators to challenge the status quo and create the most effective and efficient solutions. An operator might say, ‘Hey, I want to automate steps 1, 2, 3, 4.’ But our process engineers might come back and say, ‘Actually, if we did steps 1, 4, 3 then step 2 could be eliminated altogether,” explained Katie Allatt, Vice President of Automation and Innovation at Ensemble.
- Seek economies of scale. Tapscott expects to see an acceleration of consolidation within the healthcare industry as smaller facilities struggle with access to capital for critical technology investments and infrastructure improvements. Standalone facilities may need to partner with larger health systems or consider private equity investments to make necessary investments or improve operational performance. Another option for hospitals is to cooperate with other systems even in their competitive market to share best practices and innovate together in a co-opetition model.
- Make sure you aren’t overspending. Analyze your expenses and the costs associated with your vendors and processes to ensure there are no areas of opportunity to reduce costs internally. Inflation is taking a toll on the supply chain, but are you evaluating opportunities for vendor consolidation or cost reduction in administrative functions? Ensemble’s operators find three common sources of cost reduction opportunity in the revenue cycle:
- The most obvious – avoid denials. Ensure upstream workflows are optimal to billing clean claims to prevent costly denial appeals and rework downstream.
- Make sure your vendors are working for you. Do you have the best rate negotiated? How often are you auditing each vendor’s performance to ensure they are delivering on service level agreements and contracted outcomes? Are you confident they are charging appropriately?
- Put people in the right positions. Ensure you have the right staff in the right functions to appropriately support workflows and achieve optimal outcomes. Ensemble’s operators often see Case Management operated as a shared role with Utilization Review which leads to denials for medical necessity, untimely review of patient status and delays in billing for patient status corrections.
- The most obvious – avoid denials. Ensure upstream workflows are optimal to billing clean claims to prevent costly denial appeals and rework downstream.
- Make sure you’re getting paid what you’re owed. Now more than ever it is critical to ensure revenue is protected and human errors aren’t causing costly mistakes. How confident are you that your claims reflect the complete level of care delivered to each patient? Are you keeping up with the thousands of payor updates to prevent erroneous denials or underpayments? Ensemble’s team of revenue cycle operators find anywhere from five to 15% of net patient revenue missed due to inefficient process, outdated workflows, or insufficient expertise to identify and appeal payment discrepancies. At a time when expenses are growing at such a rapid rate, providers cannot afford to leave any amount of revenue on the table.
- Let someone else do the legwork. The clinical staffing shortage is straining hospital leaders and talent management departments, so offset that burden by strategically outsourcing functions like revenue cycle management to a partner capable of delivering the exact talent needed to improve revenue yield at a reduced cost. “I think it’s important that we take stock of what we’re good at, and what we’re not good at, and, at the end of the day, historically, most large non-profit systems have a really difficult time managing RCM services,” said John Starcher, President and CEO of Bon Secours Mercy Health.
The value in this approach requires thinking beyond traditional revenue cycle siloes of billing and collections. Managing various vendors to perform separate back-office functions can be burdensome and not cost effective. Instead, reimagine the revenue cycle as an interdependent department capable of making or breaking your bottom line. Find a partner who can effectively manage process and supplement your technology from patient engagement all the way through to complete account resolution.
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Resources:
[1] https://www.kaufmanhall.com/sites/default/files/2021-11/nov.-2021-national-hospital-flash-report_final.pdf
[2] https://www.nytimes.com/2021/11/05/business/economy/october-2021-jobs-report.html
[3] https://www.kff.org/coronavirus-covid-19/poll-finding/kff-washington-post-health-care-workers/
