Unemployment and the Revenue Cycle

One of my partners, Doug Dean, sent me this link which shows how unemployment has spread across the country from January 2007 through November 2008. Take a look, it’s like a growing shadow over the United States.

Health care executives, particularly Chief Financial Officers, have been grappling with the financial impact of rising unemployment, increasing patient deductibles and co-payments and people electing to either under-insure or go bare. The trend to high deductible health plans and the take-up of those plans by the middle class lead to increased levels of bad debts even before the dramatic rise in unemployment.

As health care systems close the books on 2009, we can can expect significant increases in hospital bad debts and charity. Hospital leaders need to:

  • Re-evaluate financial models used to determine contractual allowances, and provisions for bed debts and charity. Larger systems are using “look back” analyses to test the adequacy of these provisions. In many cases, CFOs are finding that these models need adjustment as the estimates when compared to experience are materially different.
  • Monitor demographic changes closely and consider the impact of plant closings, reductions-in-force and furloughs on the revenue cycle. CFO’s should make sure that changes in the environment are considered in their estimates.
  • Evaluate and make process improvements within the revenue cycle to make sure that every dollar available is collected to support clinical operations. The use of process improvement tools and techniques, which are being used increasingly by operations and nursing officers, are critical to this effort.
  • Increase the effectiveness and use of point-of-service collection efforts.
  • Give careful consideration to consolidating back offices and using outsourcing to cut revenue cycle operating costs (the “cost to collect”).

Now more than ever, CFOs need to insure that their organizations are using best in class revenue cycle management and techniques. Excellent patient care depends on it.

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