Why Investing in Revenue Cycle Management Promotes Financial Sustainability for Critical Access Hospitals

Today’s rural hospitals face unprecedented financial challenges with a whopping 50% operating in the red and approximately 20% vulnerable to closure, according to new research conducted by the Chartis Center for Rural Health. States with the highest percentage of rural hospitals operating at a loss include Kansas (89% in the red), New York and Wyoming (83% each), Vermont (75%), and Alabama (74%). What’s worse is that since 2005, 191 rural hospitals have either closed or adopted an operating model that excludes inpatient care. More than half (55%) of rural hospitals in the United States do not offer labor and delivery services, and in 10 states, more than two-thirds do not.

“The current climate makes prioritization of an efficient revenue cycle department paramount,” says Jeneisa Sudbrink, CRCE, Chief Operations Officer at InlandRCM. “These and similar statistics serve as a wake-up call for today’s rural healthcare leaders who must think about ways to promote financial sustainability. That means looking specifically at the effectiveness of revenue cycle management [RCM] within the organization.”

Improving rural hospital revenue cycle management

Effective RCM is important for all rural hospitals and especially those designated as critical access hospitals (CAH), meaning they are located either more than 35 miles from the nearest hospital or CAH (or more than 15 miles in areas with mountainous terrain or only secondary roads), have no more than 25 inpatient beds, furnish 24-hour emergency care services seven days a week, maintain an annual average length of stay of 96 hours or less per patient for acute inpatient care, and meet other CMS criteria.

Why?

When it comes to financial sustainability, there are unfortunately limited options for leaders to consider. In small communities, the ability to increase volume is nominal. For example, while larger organizations can offset Medicare Advantage denials by adding new service lines and attracting new patients, CAHs don’t have this luxury. In addition, a smaller patient base means CAHs have less bargaining power with commercial payers and Medicare Advantage, resulting in lower negotiated rates.

“What becomes most impactful is the ability to manage your own house—the revenue cycle,” says Sudbrink. “Rural healthcare leaders need to invest in their RCM function because doing so promotes revenue integrity and ensures hospitals are paid what they deserve for the services they provide.”

Fixing registration errors and omissions

Focusing on front-end revenue cycle processes is the single most important step rural healthcare leaders can take, she says. “Registration issues have a huge impact on a facility’s ability to provide services in the long term,” she explains. “Fixing these issues can drastically impact the financial landscape in a good way.”

For example, Sudbrink says many CAHs can struggle to provide enough training to staff around how to collect accurate demographic information, obtain prior authorizations, and leverage real-time eligibility tools to verify insurance benefits. Often, this is made worse by staff turnover and the need to hire staff with little healthcare experience due to a shallow labor pool in rural areas.

Collecting as much information as possible from patients when they first call or come in for an appointment is critical. “When a patient is waiting for services, there’s a different level of engagement. CAHs must leverage that engagement to benefit them,” she adds.

Promoting point-of-service collections

Staff must also be able to promote compassionate up-front patient collections, when possible. However, there is an art to doing this effectively, and staff training is paramount. In addition, when patient balances are due after services are rendered, staff must be able to explain to patients what’s owed and why. “In a CAH, the allowed amount based on the previous year’s cost report may be more than the actual charges. Patients pay a portion of the allowable which can be significant if a patient has Medicare Advantage or a commercial plan. This can be very confusing for patients.”

Prioritizing limited RCM resources

In addition to RCM staff education and training, rural healthcare leaders must know how to prioritize limited resources. “A rural health clinic visit that pays $200 isn’t as impactful as letting someone walk through the emergency room door, provide treatment, and then realize you didn’t collect their insurance information,” says Sudbrink. “It’s about being selective where you focus staff to prioritize those limited resources for the greatest value add to the CAH.”

Addressing healthcare staffing shortages

Finally, Sudbrink says leaders must be honest about staffing challenges. “In rural areas, staffing challenges are absorbed differently. It’s harder to fill the gaps. It’s more difficult to attract and retain qualified staff,” she says. “If you don’t have enough staff, you need to consider outsourcing. There are ways to approach this to avoid common challenges such as outsourcing to a company that does not understand the unique regulatory requirements and challenges of CAHs. Rural hospitals and clinics should filter the outsourcing options they consider by excluding companies that lack experience with rural healthcare.”

Looking ahead

As CAHs strive to promote financial sustainability, RCM is oftentimes an overlooked asset. Being mindful of front-end RCM processes can be a game changer. So can prioritizing workflows and partnering with an outsource RCM vendor that has experience working with critical access hospitals. Learn how InlandRCM can help.