How to Combat High Healthcare Costs with Analytics
It’s no secret that U.S. healthcare spending continues to rise. In fact, CMS projects healthcare spending to rise 5.5 percent annually from 2017 to 2026 and comprise nearly 20 percent the nation’s economy in 2026. A recent study by JAMA showed the United States spends almost twice as much as other high-income countries, yet it has the same utilization rates. The difference in spending can be attributed to the price of healthcare labor and services (including pharmaceuticals) and administrative costs.
In addition to rising costs, annual hospital operating expenses are growing faster than operating revenue, causing operating margins to fall from 9.5 percent in fiscal year (FY) 2016 to 8.1 percent in 2 FY 2017. According to a Moody’s Investors Service report, operating margins are lower than they have been in a decade. Higher costs, an aging population, and lower reimbursement levels are all putting pressure on revenue growth.
What can health systems do to stay financially viable? By harnessing and analyzing data, organizations can make smarter decisions when developing new staffing models, increasing efficiencies, and reducing administrative and supply costs in support of revenue objectives. With the right data insights and analytics partner, the health system can effectively develop a revenue cycle management strategy to better control costs and achieve overall revenue goals.
We recently caught up with Tom Schaal, director of product management at MedeAnalytics, to discuss his thoughts about how health systems can leverage data to reduce administrative costs.
- Technology helps – Continuing advancements in technology can improve automation and drive increased efficiency. Now, not only do many organizations have meaningful and actionable data at their fingertips, some are able to start leveraging advanced technology to do more of the heavy lifting. Machine learning technology, for example, can unearth less obvious administrative challenges and move the needle by illuminating necessary process changes.
- Get ahead of the curve – The more work that can be done on the front end of the revenue cycle, the better. Measuring patient registration completion rates paves the way for a more streamlined collections process and mitigates the risk of denial outcomes, which are costly to payers and providers alike. By paying attention to denial root causes and fostering better communication with health plans regarding systemic denial issues, providers can reduce administrative costs considerably.
- Prioritize your initiatives – Driving down administrative costs can feel overwhelming, so organizations shouldn’t try to tackle everything all at once. With insight into the most impactful administrative challenges, the organization can better focus its time and attention. As staff aligns to a common and measurable goal, the health system can more effectively make lasting changes in the areas that affect organization the most.
- Ensure your health system is marching towards those goals – Having trustworthy data is important to reducing administrative costs. When stakeholders across various departments trust the data they use to inform strategic decisions and initiatives, they are more likely to achieve their cost-containment objectives. Additional investments in enterprise performance management software can also help ensure organizational alignment around key value areas including those geared to cut administrative spend.