Net Revenue Data Swings Continue to Challenge Hospital CFOs

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Using data gathered by the Crowe Revenue Cycle Analytics (Crowe RCA) software, Crowe analyses revealed that net revenue per case, a key hospital financial metric, has major swings depending on payer class. The Crowe report, “’My Net Revenue Is Stable’ – Said No Hospital CFO, Ever,” provides supporting analyses of these findings.

Crowe is a public accounting, consulting and technology firm with offices around the world. The Crowe RCA solution captures every patient financial transaction in more than 1,000 hospitals nationwide. In this report, Crowe analyzed a portfolio spanning 45 states comprising 622 hospitals within Medicaid expansion states and 389 hospitals in nonexpansion states.

Comparing January through September of 2017 to the same period in 2018, inpatient care volume increased 0.6 percent and outpatient care volume increased 2.4 percent. Overall, the net revenue per case also trended 1.6 percent higher for inpatient care and 5.5 percent for outpatient care. According to Brian Sanderson, managing principal of Crowe healthcare services, although the increase in net revenue appears to be good news for hospitals, the underlying trends shown in the data cause some concern.

For example, when broken into payer groups, the metric of net revenue per case exhibited much larger volatility:

  • Medicare-paid net revenue per case increased more than 4 percent.
  • Net revenue per case paid by commercial managed care, which includes most standard health insurance plans, increased by 3.8 percent.
  • Medicaid-paid net revenue per case has dropped precipitously – down nearly 7 percent for inpatient and down more than 1 percent for outpatient for an overall decrease of 3.8 percent. Regulatory changes (for example, changes to Disproportionate Share Hospital payments and 340B Drug Pricing Program benefits) tied to the Medicaid population also will compromise hospitals that treat a greater percentage of Medicaid recipients.
  • Self-paid net revenue per case, which typically represents the most challenging payments for hospitals to collect, increased by more than 14 percent. This increase may be tied to improvements hospitals have made in their overall revenue cycle collection processes.
  • The net revenue per case of “other” payers, composed of third-party liability, workers’ compensation and other nontraditional pay groups, also increased by nearly 15 percent.
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Payer mix shifts also continued, with Medicare managed care, self-pay and “other” payers increasing by 1.6 percent for inpatient and 1.1 percent for outpatient overall. According to the report, these payer classes have a lower net realization overall, and challenge finance leadership’s ability to forecast net revenue, as seasonality and patient engagement vary by facility.

“As many health systems expand their portfolio of services to include more outpatient facilities, insurance products and other ancillary investments, stability of hospital-based net revenue becomes more important to financial decisions,” said Sanderson. “Unfortunately, instability appears to be the current trend, forcing many CFOs of not-for-profit healthcare systems to study operations and budget them on a monthly or quarterly financial performance basis, in the same manner that their peers in for-profit organizations do.”