Healthcare Revenue Cycle: Five Keys to Financial Sustainability

Healthcare Revenue Cycle:
Five Keys to Financial Sustainability
Marlowe Dazley
Todd Halprin

© 2020 Health Catalyst
Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
Healthcare Revenue Cycle
From billing and collections to completing
a payment within the revenue cycle, the
process to identify a patient, provide care,
and then collect that revenue has come a
long way from its traditional approach of
billing, coding, then collecting.

Robust healthcare revenue cycle
strategies include detailed
information from multiple
departments within an
organization because
every department impacts
the revenue cycle, which
means leaders at every
level need up-to-date data to
understand high-level and
nuanced financial performance.

The traditional approach to revenue
cycle is a time-consuming payment
process that usually involves lengthy
interactions between providers,
hospital staff, and payers, resulting in
delays in payment.
Health system leaders have realized
that it’s time to change this antiquated
method and take a more
comprehensive approach to
healthcare revenue cycle
management.

Many hospitals and health systems
already survive on thin operating
margins with many operating at a
loss and relying on cash reserves to
sustain operations.
Additionally, experts estimate an
even bigger decrease because of
lost volume and revenue due to
COVID-19.

For health systems to financially
survive—and eventually thrive—in
the new normal, they need to
rethink their revenue cycle
strategy, including the role that
data plays in driving changes that
lead to long-term financial health.

Traditional Healthcare Revenue Cycle
Management Best Practices Fall Short
With additional cost pressures from
COVID-19 (e.g., halted elective
procedures, ICU resource
consumption, and furloughs), hospital
leaders are under more pressure to cut
costs and sustain revenue.

Along with financial challenges,
COVID-19 has also presented
opportunities for health systems to
improve their revenue cycle strategy.
To achieve financial viability in the
short term, health systems should
leverage data and analytics to identify
immediate opportunities for change.

Quantifying and understanding the
root cause of denials or controllable
loss is now essential.
This includes revenue that is written
off from services rendered but
eventually denied due to breakdowns
in the revenue cycle.
Other opportunities include the
identification of late charges, missed
charges, or undocumented supplies or
procedures resulting in lost revenue.

Strategically and accurately setting prices
is a critical piece of the revenue cycle,
requiring detailed data and analytics, that
has far-reaching effects on health system
revenue, reimbursements, contract rates
with payers, and predicting financial needs
for the future (e.g., forecasting bad debt).

Five Healthcare Revenue Cycle Best
Practices Yield Higher Revenue
Despite facing a new healthcare landscape
with the COVID-19 pandemic, some
healthcare leaders still rely on historical
methods to manage and improve revenue
cycle performance.
While these practices have worked
in the past and still offer value, they
fail to fully maximize revenue cycle
performance in a time when health
systems need to react quickly
to survive financially.

To adapt to the new healthcare changes
and achieve optimal revenue cycle
performance, health systems can follow
five best practices:
1. Identify and Measure the Right Metrics
2. Define Clear Lines of Accountability
3. Create Consistent Workflows
4. Define Key Performance Indicators
5. Understand the Right Metrics at
the Right Place at the Right Time

#1: Identify and Measure the Right Metrics
The first step to revenue cycle optimization is
understanding what to measure.
Whether finance teams choose to measure
revenue capture or uncollectable accounts,
identifying and tracking the right metric is the
foundation of short- and long-term success.
The revenue cycle is a complex process full
of moving parts, making it difficult to measure
every step or handoff throughout the lifecycle
of a claim (Figure 1).

#1: Identify and Measure the Right Metrics
Figure 1. The lifecycle of a claim.

#2: Define Clear Lines of Accountability
Precise measurement allows clear lines
of accountability.
Clear lines of accountability along
with clear reporting structures enable
leaders to understand who is responsible
for which specific metric, and therefore,
responsible for driving the performance
of that metric.

Identifying and measuring the right
metrics also makes the health system
accountable to itself.
With an accurate baseline of metrics,
revenue cycle teams can measure the
success of new interventions, make
changes accordingly, and report back to
leadership, showing accountability for
the resources allotted.

The ability to quickly measure the
effectiveness of new processes is
especially helpful in a volatile market
when health systems are trying new
interventions to grow and improve the
patient experience.

#3: Create Consistent Workflows
Established, standardized workflows
create a uniform, disciplined approach to
any process within the revenue cycle.
The workflow should look the same
throughout the revenue cycle process,
no matter the point of access.
Ensuring workflows are well-documented
and teams are following the workflows
correctly are critical components of
effective handoffs throughout the
revenue cycle journey.

#3: Create Consistent Workflows
One cohesive, agreed-upon approach also
allows revenue cycle leaders to more
effectively train staff and help them understand
the process at a higher level.
Understanding the revenue cycle goals at a
high level, and how each person’s role fits
within the big picture, empowers leaders
systemwide to consider the complete revenue
cycle in the decision-making process.

#4: Define Key Performance Indicators
Revenue cycle leaders need to
comprehend that data and metrics
don’t equate to information.
Data and metrics are the building
blocks to reach meaningful
information, but a crucial in-between
step is developing key performance
indicators (KPIs).
KPIs play a valuable role in helping
staff identify the data that will drive
decision making.

Leaders should choose KPIs according to
relevancy and organizational goals and apply
KPIs where they can affect real change.
Another essential part of the KPI development
phase is developing indicators for each
process at the functional level, not just
at a high level.

KPIs need to target metrics that will help
solve problems and drive change within
the workflow.
KPIs should drive most important
organizational decisions, so leaders
should review them regularly and
choose wisely.

#5: Understand the Right Metrics at the Right Place at the Right Time
Leaders can drive real change when
they can access the right metrics.
For example, a chief financial officer
might be more interested in overall
strategic metrics instead of operational
measures, such as bill edits or late-
charge metrics.
But a VP or director-level leader wants
to consider more granular, detailed data
while making financial decisions.

#5: Understand the Right Metrics at the Right Place at the Right Time
Production measures and overturned
denial metrics could be significant
operational insights to a manager who
can drive change in that area.
In this way, establishing the needed
metrics for the targeted role means
actionable information surfaces to the
person who has the power to change it.

Actionable Data: The Linchpin for Comprehensive
Healthcare Revenue Cycle Strategy
As the uncertain future of healthcare delivery
continues to affect revenue cycle management,
health systems need safeguards to ensure their
financial well-being.
Data and analytics provide critical insights to
financially survive COVID-19 and future
operational challenges, pushing aside the
outdated billing, coding, and collections
approach that fails to include key departments
that impact the healthcare revenue cycle.

Actionable Data: The Linchpin for Comprehensive
Healthcare Revenue Cycle Strategy
Data and analytics are the lifeline for
successful, sustainable revenue cycle
management, but optimization can’t stop there.
Tracking the right metrics, promoting
accountability, creating consistent workflows,
and identifying the right KPIs—all based on
the right data—are necessary for health
systems to optimize revenue cycle and
achieve higher profit margins.
With the right processes that turn data into
action, leaders can focus on achieving the
optimum revenue cycle model.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

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Health Catalyst Editors

Marlowe Dazley is Senior Vice President and Managing Director at Health Catalyst,
responsible for financial advisory services providing strategic financial management
expertise and consulting for healthcare payers and providers. Prior to joining Health
Catalyst, Marlowe lead PNC Bank’s healthcare consulting division. Mr. Dazley has 30
years of healthcare experience in various organizations, including the office of the U.S.
Surgeon General, managed care operations, finance, administration, and consulting.
He has worked as a healthcare consultant since 1996, for Ernst & Young in the Los Angeles healthcare
consulting practice, Phase 2 Consulting and Premier. Marlowe has participated in numerous strategic
planning engagements, mergers and acquisitions and performance improvement initiatives and has led
numerous financial turnarounds for clients across the country specializing in healthcare strategy,
revenue cycle improvement and financial operations initiatives. Mr. Dazley received a dual Master of
Business Administration and Master of Health Services Administration from the University of Utah. He is
a member of the Healthcare Financial Management Association and has performed numerous speaking
engagements at local regional, and national levels for HFMA including HFMA’s Annual National Institute.
In addition, he delivers numerous addresses to the University Health System Consortium, State Hospital
Associations, hospital boards and medical staff and various other industry leaders.
Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Marlowe Dazley

Todd Halpin is a Senior Vice President at Health Catalyst responsible for co-leading the
Financial Advisory Services team. Mr. Halpin has over 25 years of healthcare financial
transformation experience, where he specializes in hospital financial operations and
revenue cycle process improvement. Mr. Halpin has extensive experience working with
many not-for-profit, teaching, and public health care delivery systems throughout the
country. Mr. Halpin’s experience includes various hospital financial turnarounds, revenue
cycle process optimization projects, strategic planning, and other cost reduction initiatives. Mr. Halpin
received his M.B.A. from the University of Utah and is a Certified Public Accountant in the State of Utah.
He is a member of the American Institute of Certified Public Accountants, the Utah Association of
Certified Public Accountants, American College of Healthcare Executives, and the Healthcare Financial
Management Association.
Marlowe Dazley

Health Catalyst is a mission-driven data warehousing, analytics and outcomes-improvement
company that helps healthcare organizations of all sizes improve clinical, financial, and operational
outcomes needed to improve population health and accountable care. Our proven enterprise data
warehouse (EDW) and analytics platform helps improve quality, add efficiency and lower costs in
support of more than 65 million patients for organizations ranging from the largest US health system
to forward-thinking physician practices.
Health Catalyst was recently named as the leader in the enterprise healthcare BI market in
improvement by KLAS, and has received numerous best-place-to work awards including Modern
Healthcare in 2013, 2014, and 2015, as well as other recognitions such as “Best Place to work for
Millenials, and a “Best Perks for Women.”

Healthcare Revenue Cycle: Five Keys to Financial Sustainability

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