Companies essentially have two levers they can adjust when it comes to their financial performance — revenue and expenses. Bringing more money in the door or spending less money are what makes a company profitable or not. For companies in the healthcare industry, dealing with the coronavirus pandemic for the past several months and for well into the future, cutting expenses, unfortunately, is the lever that has the best chance of helping providers stay afloat. And the results of a recent survey reveal that the providers understand their new reality all too well.
It will take up to a year for the volume of patient visits to return to pre-COVID levels, which means that the amount of revenue being generated will not increase fast enough to bolster the finances of hospitals and healthcare organizations, according to the results of a survey conducted by The Chartis Group (https://www.chartis.com/financial-recovery-survey).
Companies that indicated they are planning to continue to cut their expenses are not planning on making small cuts either. Nearly half of the respondents said they are planning to cut their expenses by at least 10%. And 55% of those companies are aiming to cut their expenses in the next six months. Hospitals and healthcare facilities are already stretched incredibly thin because of the coronavirus pandemic, and these changes are going to only further strain those limited resources moving forward.
Among the likely areas where providers will be making cuts are staffing levels, executive compensation, and renegotiating contracts with their vendor-partners.
Another way that providers are seeking to reduce their operating expenses is by optimizing their revenue cycle operations. In fact, this was the most popular response among respondents when asked what cost reduction strategy are included in their plans moving forward.
Revenue cycle encompasses a number of different components, including insurance reimbursement, co-pays, and bad debt collections. By being more efficient in this area of their businesses, providers can improve their revenues and reduce their expenses at the same time. A majority of providers also plan on addressing workforce and labor management levels and improving their supply chain to help minimize expenses.
Providers that look at outsourcing their bad debt collection to a third-party agency can address both the revenue and expense levers at the same time. It is the very definition of a win-win scenario for them. One of the barriers that providers indicated would keep them from delaying or derailing the successful execution of their plans was a lack of bandwidth and resources, which is another area where collection agencies can step in to help.
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