Why a central billing office and other RCM best practices help rural hospitals achieve positive operating margins

While the pandemic may be in the rear-view mirror, the healthcare industry is only beginning to understand the true financial impact on today’s small, rural hospitals, many of which continue to operate ‘in the red.’ An April 2024 research brief from the American Hospital Association (AHA) found that approximately half (48%) of rural hospitals consistently experienced negative operating margins from patient services prior to and during the pandemic. Authors of this brief point out that while provider relief funds offered some support, these funds also masked long-standing financial challenges that many rural hospitals face.

Interestingly, a small minority (12%) of rural hospitals consistently experienced positive operating margins. What do these hospitals have in common, according to the research brief? Consider the following:

• Larger average bed size

• Lower average length of stay

• Lower operating expenses

• More likely to be affiliated with systems

• More likely to be for-profit

• Smaller share of Medicare and Medicaid patient discharges

One factor that’s not listed above? Strong revenue cycle management (RCM) processes that include a central billing office (CBO). Efficient and effective RCM workflows—particularly those that support CBO medical billing—promote organizational resilience that, in turn, enables rural hospitals and critical access hospitals (CAH) to navigate times of financial uncertainty with greater ease.

CBO Medical Billing

Rural hospitals with positive operating margins are those that leverage a CBO to manage the entire billing and collections process for all services rendered by the organization. Why? A CBO at a hospital—including one that’s managed internally or one that’s outsourced to an RCM partner—oversees the billing and collections process more efficiently and identifies opportunities to increase revenue. CBO in medical billing also reduces administrative costs and promote regulatory compliance leading to fewer denials, penalties, and recoupments.

“The ability to partner with a Revenue Cycle Management company allows for facilities to positively impact their bottom line by streamlining processes, ensuring regulatory billing compliance, improving cash flow, and refining reporting and analytics” advises Jeneisa Sudbrink, COO of InlandRCM and a veteran of the industry.

RCM best practices in rural hospitals

While authors of the AHA research brief didn’t examine RCM specifically, had they done so, they would have likely found the following additional five characteristics of rural hospitals and CAHs with positive operating margins:

1. Streamlined provider credentialing and enrollment. Rural hospitals with positive operating margins know how important it is in terms of provider recruitment and retention to create an excellent onboarding experience. They also know it’s important in terms of preventing write-offs and scheduling delays, both of which directly affect the bottom line. That these organizations, many of which are designated as CAHs, focus on streamlining provider credentialing and enrollment using a combination of well-trained specialists, automation, and technology.

2. Investments in Revenue Cycle Services. Rural hospitals with positive operating margins know that strong RCM processes are essential for financial sustainability. That’s why they allocate budget dollars to perform RCM assessments and partner with trusted advisors to promote proactive denial mitigation, front-end education, and other RCM best practices.

3. Compassionate patient self-pay collection policies. Rural hospitals with positive operating margins believe that treating patients with the utmost respect and professionalism is paramount. That’s why they engage in compassionate collections focused on empathy and world-class customer service.

4. Key performance indicator (KPI) monitoring. Organizations with positive operating margins identify and monitor medical billing and collections metrics to gain insight into overall financial health. Examples of these KPIs include days in accounts receivable, medical coding accuracy, medical coding turnaround time, denial rate, and others. These organizations also take the time to monitor the status of submitted claims, follow up with insurance companies to ensure timely payment, and keep track of what amount is paid.

5. Back-up staffing plans. During times of healthcare staffing shortages, even rural hospitals focused on staff retention may not have access to the RCM staff they need. Instead of trying to ‘make do’ with limited resources in a rural hospital or CAH, organizations with positive operating margins partner with a reputable outsource RCM vendor that can fill staffing gaps immediately to promote operational continuity.

Looking ahead

As rural hospitals and CAHs continue to look for ways to maintain positive operating margins, RCM workflows afford them many opportunities. Implementing a CBO at a hospital is one of the most obvious, but there are plenty of other avenues to consider. Learn how Inland RCM can help.