LUMINA Insights Blog

Updated: December 6, 2021

There are many mechanisms healthcare organizations can use to accelerate their financial recovery efforts post-COVID-19. 

When examining these mechanisms, financial leaders' questions often boil down to two essential concerns: How effective is it? And how long will it take for us to see results?

The revenue cycle lands at the top of the heap when it comes to quick but highly effective ways to accelerate revenue. It also plays a critical role in improving the patient experience and health of populations while reducing the cost of care. 

By improving revenue cycle efficiencies, healthcare financial leaders can gain a vital "quick win" in their financial recovery timeline.

I recently taught a 2-day HFMA seminar on Revenue Cycle Essentials and KPIs (key performance indicators). Here, I’ll summarize the challenges revenue cycle leaders are experiencing today, as well as key factors for success. 

The new CMS 2021 Physician Fee Schedule (PFS) went into effect on January 1, 2021. Most of the final rule consists of expected policy refinements, but the regulations do include some significant changes that will impact medical practice productivity, strategy and revenue.

To take full advantage of the new fee schedule, physicians and medical practice leaders should focus on three immediate priorities:

COVID-19 has decimated fee-for-service (FFS) revenue. To stay in the game, healthcare providers can use a chess-inspired strategy to rebuild the revenue cycle while preparing for value-based care.

The COVID-19 pandemic has triggered major financial losses for hospitals, health systems and medical groups. Healthcare organizations now face the double challenge of rebuilding FFS revenue while continuing to transition toward value-based payment.

While U.S. providers have suffered profound financial losses because of COVID-19, health insurance companies have actually benefited from the pandemic. Providers require effective strategies to achieve a more equitable balance.

Healthcare utilization has dropped sharply as a result of COVID-19, causing most hospitals to experience a major drop in revenue and margin. But for most commercial payers, lower utilization has slashed claims expenses and created a  huge financial windfall.

For example, United  Healthcare’s net income doubled during the first  wave of the pandemic, jumping from $3.3 billion  (2019 Q2) to $6.6 billion (2020 Q2).^a 

Although these market dynamics clearly seem unfair to providers, there is no reason  that providers should simply accept the status  quo. As they struggle to recover financially from COVID-19, hospitals and health systems should  not hesitate to look to insurers to share their  excessive surpluses. 

Right now, the biggest potential opportunities for providers are in contracting with insurers. Financial leaders should focus on three broad areas where they should seek to renegotiate existing contracts and lay the groundwork  for beneficial new partnerships. 

As their organizations make major adjustments to operations, healthcare leaders should be prepared for increased levels of workplace conflict. Fortunately, taking the right approach can turn a conflict into an impetus for positive change.

Healthcare organizations are experiencing change at a rapid pace as technological innovations and alternative payment models greatly impact operations — and people. As a leader, you can expect these changes to create workplace conflict. But you also should be assured that you can manage this conflict, and make it a productive rather than disruptive force, by using the following approaches.

Risk stratification is an effective short-term strategy for providers seeking to negotiate risk contracts from a position of strength.

To gain leverage in risk-based contracting, healthcare finance leaders require a means to identify the true cost of care at the patient level based on actual care services and supplies delivered. But most organizations are years away from possessing such a capability, so their finance leaders require an interim solution to help them gain an advantage in their contract negotiations with payers.

Value-based care (VCB) requires a keen focus on the Triple Aim: achieving better quality and patient outcomes while bending the cost curve. This is not done in silos; VBC is a team sport that requires collaboration across providers in all settings of care, from the doctor’s office in the ambulatory setting to the hospital to the post-acute setting, including effective transitions from one setting to the next. Coordinating care across the continuum and across all settings is key.

Facing growing pressure from insurers to assume more financial risk, healthcare providers are exploring ways to better manage cost and utilization through risk-based contracts.

Unfortunately, most organizations tend to focus more on the contract itself and fail to give adequate attention to planning out what they will do once the agreement is signed.

Effective contract negotiation and execution depend on the same set of capabilities. To succeed in risk-based contracting, providers need to build an infrastructure that supports every dimension of risk management—from risk modeling and contract design to population health strategy.

Here are four elements that will be instrumental to building this infrastructure.

On Sept. 20, I had the honor of presenting to a standing-room-only crowd at Becker’s Hospital Review 4th Annual Health IT + Revenue Cycle Conference in Chicago. I spoke about how clinical and finance leaders need a data-driven value model to plan the scale and pace of investments into a population health strategy and to move confidently into value-based contracting.

Most healthcare leaders understand the importance of population health and building the most optimal strategy to position their organizations for success in value-based care. Building the tools to manage patient populations is key to improving outcomes while bending the cost curve in American healthcare.