Healthcare entities face many challenges, including tightened budgets, staffing shortages, and navigating regulatory standards. Often, the most crucial goal is to deliver quality patient care. Healthcare CFOs must balance multiple investment needs and objectives for the long term.
This requires thoughtful, cadenced capital allocation planning. Data analytics is a powerful tool for optimizing RCM strategies and enhancing financial performance, operational efficiency, and patient satisfaction.
RCM Optimization
As healthcare practices shift from the traditional fee-for-service model to a value-based care approach, the need for efficiency and accuracy in revenue cycle management increases. RCM optimizes every aspect of the financial process that a medical practice uses to bill for services provided to patients.
This includes patient registration, insurance verification, charge capture and coding, claims submission, payment posting, denials management, and reporting and analysis. Practical data analytics tools can identify inefficiencies, resulting in savings in both time and money.
Implementing data validation processes and establishing governance protocols for these tools helps ensure that their full potential is realized. Whether the focus is on improving cash flow or reducing risk to the organization, healthcare transaction advisory firms offer a range of solutions to improve operational efficiency.
Examples include a variety of lousy debt solutions, including primary, secondary, and debt purchase solutions that leverage an experienced healthcare-focused team. They also help identify new high-leverage opportunities for improvement.
Value-Based Care
Value-based care models align physician, patient, and payer incentives toward improving outcomes at lower costs. These models are critical to the transition to a sustainable healthcare system.
Healthcare organizations focusing on Value-Based Care are incentivized to improve quality, affordability, and access by meeting specific goals that can lead to bonuses or penalties from Medicare, commercial health insurers, or others.
In addition to financial incentives, these performance-based arrangements can enhance a physician’s sense of purpose, mission, and professionalism by rewarding them for achieving desired results rather than simply providing services.
This model also decreases the number of payments and paperwork with each treatment visit compared to fee-for-service models, decreasing costs for payers and administrative overhead for providers. Identifying and integrating strategic adjacencies with the right technology, operational, and care model integrations is critical to successful value capture.
This requires careful sequencing to avoid burdening management, employees, and patients and triggering talent departures post-close.
Optimal Capital Allocation
As the healthcare sector moves beyond the COVID-19 pandemic, many providers and payers will face amplified market pressures. Revamping capital allocation processes can help them better manage and mitigate these challenges.
Many healthcare organizations need more accurate data to prioritize and fund projects effectively. This includes cost data and a clear understanding of how costs relate to outcomes. An effective capital budgeting process based on decision analysis can ensure the best return on investment (ROI).
This requires defining evaluation criteria, classifying proposals by area of investment, determining project costs, rating proposals concerning the individual criteria, setting priority weights for the criteria, and ranking proposals by benefit-cost ratio.
Activity-based costing, an accounting tool that allocates expenses incurred through providing goods and services, can shed light on inefficiencies and unlock excess capacity. It can also help improve profitability by enabling a more accurate view of contribution margins.
Lastly, identifying an optimal capital structure, which consists of a mixture of debt and equity that minimizes the weighted average cost of capital (WACC) while maximizing market value, is critical for long-term success.
IT Strategy
Healthcare organizations are still primarily siloed by specialty departments and discrete services. Changing to the value agenda requires a fundamental shift away from this, with clinicians organized into integrated practice units (IPUs) around particular medical conditions.
These teams combine clinical and nonclinical personnel to deliver the full range of services needed by a patient with that condition. To make this work, providers must understand the actual costs of conditions. With cost accounting, knowing how to improve processes and redesign care is possible.
Clinicians and administrators fight over arbitrary cuts without understanding the relationship between costs and outcomes. With proper cost data, these battles will cease. Despite noble mission statements, most healthcare organizations need help to achieve the value agenda.
They will continue to do so, but those progressing rapidly will reap huge benefits—even if regulatory change is slow. This will be particularly true as IPUs’ results improve, attracting more volume and fueling a virtuous cycle that drives even more rapid improvement.
