At the Margins

The secret to 7.6 percentage point margin growth? Invest in your revenue cycle.

by Rachel Matthews and Robin Brand

Editor's note: This blog post was updated on November 20, 2019.

While many health systems hope to accelerate growth through new revenue streams, recent Advisory Board modeling suggests a renewed focus in revenue cycle can lift hospital margins to the tune of 7.6 percentage points.

Your first look at our 2019 revenue cycle benchmarks

Substantial improvement no matter the starting point

Our model assumes a theoretical 350-bed, $350 million net patient revenue facility that reports a 2.5% operating margin. Using the recently released 2019 hospital revenue cycle benchmarks, our analysis estimates the cost of revenue leakage across four key revenue cycle metrics: denial write-offs, bad debt, cost to collect, and contract yield. After calculating the cost of poor performance, we modeled the financial impact of lifting your facility's performance to the 50th, 75th, or 90th percentile.

As the above graphic indicates, health systems stand to capture significant margin benefits no matter the starting point. If you're an organization who performs in the median percentile for these four critical metrics, moving to the 75th percentile would boost your total margin by 7.6 percentage points. In contrast, an improvement from the 75th to the 90th percentile achieves a 6.3 percentage point improvement.

CFOs resume additional oversight

As providers grow to recognize the margin improvement opportunity, CFOs and CROs are turning their attention back to the revenue cycle.

While previous trends suggested executives were divesting oversight of these functions to VPs or directors, health system respondents who participated in this year's survey indicated increased C-suite oversight across all revenue cycle functions. In the absence of growth from traditional components of the business (new revenue streams, for example), it seems CFOs are turning to revenue cycle as a lever for organizational growth.

The bottom line (no pun intended)

Our 2019 benchmarking data confirms the power underlying strong revenue cycle performance, suggesting hospitals can achieve substantial margin lift just by focusing on tools and staff they already have in place.

Want to learn more?

Revenue Cycle Advancement Center members can view our recent 60-minute webinar analyzing this year's data.

Members can also access results via our online tool, the Hospital Revenue Cycle Benchmark Generator. The tool offers percentile breakdowns of more than 80 different metrics that span the breadth of the revenue cycle. If you submitted data to our survey, you'll be able to view your organization's data in the tool alongside the national benchmarks. Metrics can be viewed by clicking the menu on the left side of the screen. To customize a cohort, click the "modify cohort" menu item inside the tool, located above the chart panel.

What patients want along their financial journey

Follow the patient financial journey, from pre-care through billing and collections. Learn a patient's questions and fears that arise at each step, and what tools and support your revenue cycle program must proactively provide.

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