Hospital Revenue Cycle IT Budgets to Take a Hit After COVID-19

Hospital Revenue Cycle IT

A new analysis uncovers hospital projections over the next 12 months, including plans for revenue cycle IT budgets and payer mix changes.

More hospitals and health systems are planning to decrease revenue cycle IT budgets over the next 12 months, as leaders manage payer mix and other changes post-pandemic, according to a new analysis.

Provider executives were five times more likely to decrease revenue cycle IT budgets compared to last year, the analysis performed by Guidehouse Center for Health Insights found. Additionally, about half as many executives plan to increase revenue cycle IT budgets versus the last three years.

Overall, just 35 percent of executives surveyed by the Healthcare Financial Management Association (HFMA) for the analysis said they plan to increase revenue cycle IT budgets over the next 12 months and 27 percent said they plan to cut the budget.

HFMA surveyed more than 150 chief financial officers and revenue cycle executives at hospitals and health systems.

The findings are remarkably different from a survey conducted in late spring that found very few healthcare CFOs (12 percent) planned to reduce or defer spending on the digital transformation of their financial systems.

At that time, COVID-19 was negatively impacting hospital and health system margin, which plummeted to a historic low at the start of the pandemic when providers shutdown elective services to stop the spread of the virus. Margins have since improved, but hospital financial recovery is still a challenge and will likely remain so over the next year.

Provider executives expect payer mix to shift after the COVID-19 pandemic. The Guidehouse analysis found that over 70 percent of executives anticipate an increase in both self-pay and Medicaid patients and a decrease in commercial reimbursement.

With expected commercial payer revenue losses, hospitals and health systems will have to tighten the purse strings in order to remain financially stable in the aftermath of the pandemic.

“With health system margins primarily driven by elective services, the pandemic is gravely impacting provider revenue streams and payer mix,” Timothy E. Kinney, a Guidehouse partner, said in the analysis. “As our economy labors post-pandemic, insured patients will struggle to shoulder greater cost sharing through high-deductible plans coupled with volatile unemployment rates. Healthcare leaders need to closely evaluate their payer mix and develop winning consumer experience strategies to overcome a slow recovery in patient volumes and an uptick in self-pay and Medicaid enrollees.”

Provider executives plan to do that by decreasing revenue cycle costs and increasing economies of scale, the new analysis showed.

Collaboration with external entities, including vendor partnerships (37 percent) and outsourcing (32 percent), were the most cited strategies for achieving those goals, according to the analysis. Additionally, 27 percent of executives said they plan to leverage advanced health IT, including robotic process automation.

Meanwhile, hospital and health system growth, both organic and non-organic, will take a backseat over the next 12 months, the analysis also found. Just 16 percent of executives anticipate employing more providers and practices through organic growth and only 7 percent expect to grow through acquisitions.

Hospitals and health systems will also reduce revenue cycle costs through more remote work.

The analysis showed that almost 90 percent of hospitals and health systems have shifted to remote work arrangements during the pandemic. Of those organizations, nearly half (48 percent) plan to continue remote work.

Few provider executives (12 percent) anticipate a return to pre-pandemic work arrangements for revenue cycle staff.

“As the revenue cycle workforce goes remote and budgets tighten, health system leaders are evaluating strategic investments in vendor partnerships and outsourced services,” said Mary Beth Briscoe, FHFMA, FACHE, CPA, MBA, CMRP, a senior advisor to Guidehouse who formerly served as a health system CFO and HFMA national board chair. “While digital technologies will be a necessity post-COVID-19, they must be methodically selected to ensure they are unlocking long-term performance improvement opportunities.”

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