Managing the Impact of Seasonality on the Healthcare Revenue Cycle

by | Published on Apr 10, 2019 | Medical Billing

Impact of Seasonality on the Healthcare Revenue Cycle
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An increasing number of healthcare organizations have moved from in-house medical billing or revenue cycle management (RCM) to medical billing outsourcing. Technological advancements and changing government regulations are the key factors driving the trend to seek expert assistance for RCM. Outsourcing takes care of everything from registration and insurance eligibility verification to claim submission and payment collection, helping client organizations optimize resource use and maximize reimbursement.  However, medical billing companies and healthcare providers should note that seasonality has significant impact on hospital and practice revenue.

Revenue Cycle Intelligence recently reported on a study by consulting firm Crowe which found that winter, spring, summer, and fall brought about changes in hospital revenue cycle performance. Financial metrics of 1,000 hospitals across 45 states was analyzed, including 605 hospitals in Medicaid expansion states and 409 hospitals in non-expansion states. The key findings of the study are as follows:

  • In January (51.3 days), days in accounts receivable (A/R) were generally at the highest industry average for the year but showed a downward trend throughout the calendar year. Other trends in the first quarter:
    – Hospital revenue cycle performance was also affected by 7.8% higher-than-average initial claim denials and outpatient revenue per case that was 4 percent below the average.
  • April to June 2018 witnessed more stable volume and net revenue, though final claims denials and bad debt transfers significantly increased by the end of the quarter. In June, final denials and bad debt transfers were 18.5% and 8.9% higher than average, respectively.
  • From July to September (the third quarter of the calendar year), hospital revenue cycle performance sank. Gross revenue generally improved and there were some variations in final denials and bad debt transfers. From August to September, outpatient volume decreased significantly. In 2018, outpatient volume fell by 6.4 percent during this period compared to the previous year.
  • From October to December, hospital revenue cycle performance was generally positive. Outpatient net revenue per case showed an upward trend and inpatient net revenue per case was 8.9% greater than the average for the year. Other trends in the last quarter:
  • Initial and final claim denials were generally lower, but still unstable as both denial types considerably increased in October before falling closer to the yearly average by December.
  • Days in A/R was also at the lowest industry average (48.5 days), and bad debt transfers increased by 22.1 percent compared to the yearly average.

Hospital finance teams often assert that fluctuations in revenue cycle performance and net revenue are due to factors such as end-of-calendar-year benefit enrollment, summer physician specialty conferences, flu season, and the number of Medicare payments in a month. The Crowe report notes that while there is no evidence to support this, the study showed they may have some standing.

Besides hospitals, practices are also impacted by seasonality. A September 2018 Physicians Practice report discussed these changes and how they affect revenue:

  • End of summer may see a rise in patient volume and revenue after clinicians who were on vacation, return.
  • When the end of the year approaches, patients may want to move forward with procedures (where deductibles apply), which they had put off for financial reasons.
  • While profits will increase, practice schedules will be strained and pressures will increase due to increase in patient volume in the fall.
  • Revenues are likely to decrease once the fall rush is over, and patients once more opt to postpone care as deductibles reset.

What is the solution? As some of these seasonal trends are predictable, healthcare organizations can plan ahead and reduce the stress of slower periods. To account for the impact of seasonality on hospital revenue cycle performance, Crowe recommends that hospitals:

  • Adopt quarterly or rolling budgets to adjust more easily to anticipated changes.
  • Projecting net revenue performance – this will enable health system operators to adapt resource needs, diagnostic equipment usage and other cost drivers that affect already thin operating margins.
  • Build more autonomous functions into the revenue cycle to deal with ebbs and flows of exceptions without the need to adjust their workforce.
  • Consider budgeting improvements sooner rather than later.

The Physicians Practice report also offers ideas to help practices manage the predictable periods of high and low demand:

  • Plan well in advance and communicate early to make the most of year-end, as well as manage volume better by encouraging patients to book services as early as they can. This will also help patients maximize their health benefits.
  • Notify patients via social media, newsletters, or the practice website that physician schedules will be busier in the fall.
  • Enforce a proper policy about staff vacations long before the holiday season.
  • Pay more attention to collections in the fall and set aside reserves for the slower January-February season.
  • Tackle strategic projects in the less busy first part of the year.
  • Recall patients who are overdue for preventive services in January and February, when the practice is slow.
  • Plan how to smooth out utilization the next summer

As the Crowe analysis points out, the impact of seasonality is likely will become more extreme as consumerism and out-of-pocket payments continue to increase. As healthcare providers take steps to manage seasonal fluctuations in volume and income, an experienced medical billing company can ensure dedicated support to eliminate billing hassles.

Julie Clements

Julie Clements, OSI’s Vice President of Operations, brings a diverse background in healthcare staffing and a robust six-year tenure as the Director of Sales and Marketing at a prestigious 4-star resort.

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