Increase Your Hospital Reimbursement Rates – Despite Declining National Numbers

To maximize your organization’s reimbursement rate in revenue cycle management, you should be familiar with the average rates across the country as well as the factors which can influence these numbers.     

Hospitals work hard to increase their average reimbursement rates.
September 6, 2017

As any hospital executive knows, the anticipated price of a procedure is not always the amount that a hospital receives once the account is settled. In fact, an increasing amount of data is revealing that the average reimbursement rate for an organization is more likely to be much lower, and dropping.

According to a December 2016 report by the American Hospital Association, reimbursements paid by Medicare and Medicaid in 2015 were $57.8 billion less than the cost of treating beneficiaries under those plans. And healthcare organizations run into similar problems when filing claims with private insurers. But with a little bit of intentionality and planning, you can reverse this trend in your own healthcare organization. 

By cutting ineffective practices and increasing efficiency, your revenue cycle management department can help ensure that your organization is able to maximize its own reimbursements, despite low national numbers. 

Strategies for Increasing Hospital Reimbursement Rates

There are a number of factors that contribute to low reimbursement rates in any healthcare organizations. One of the major causes is missing deadlines or making errors when submitting claims, something that is especially problematic for high-volume departments.   

To maximize reimbursements, organizations need to increase efficiency. Sondra Akrin, vice president of Revenue Cycle Transformation at Hayes Management Consulting, told Becker's Hospital Review that groups should focus on eliminating revenue loss and leakage.   

"Start by looking at write-offs for denials that you couldn't appeal because a process failed (i.e. timely filing) or you were missing critical data (i.e. authorization)," Akrin said. "These write-offs are essentially lost revenue and drive down your collection efficiency. By focusing on refining processes and ensuring appropriate upfront data collection can prevent or minimize the loss of revenue."

You should also consider outsourcing some or all of your revenue cycle management process.This can be especially beneficial for specialized claims, such as those involving workers' compensation and motor vehicle accidents, which take up a lot of your team's time but only represent a small part of your organization's revenue.

Working with a partner like PROMEDICAL can help to simplify your revenue cycle management process, allowing your staff members to focus their time and attention on efficiently handling the standard claims that have a larger impact on your bottom line.  

Hospital RCM staff need to focus on increasing efficiency to improve reimbursement rates. Hospital RCM staff need to focus on increasing efficiency to improve reimbursement rates.

Average Hospital Reimbursement Rates

Working to maximize reimbursements is particularly important given that new data reveals consistently low rates across the U.S.  

Though the American Academy of Family Physicians estimated the average rate of reimbursement in the U.S. to be between 35 to 40 percent, RelayHealth Financial's 2017 Revenue Cycle Index put the rate for hospitals much lower.  

According to the data used by RelayHealth Financial, which was initially compiled by McKesson, the average hospital reimbursement rates for large, medium and small organizations are as follow:

Large Hospitals

  • Midwest: 29.88 percent
  • Pacific: 27.51 percent
  • South Central: 27.14 percent
  • Mountain: 25.36 percent
  • Northeast: 25.31 percent
  • Southeast: 24.48 percent
  • Northern Plains: 21.43 percent
  • Southern Plains: 20.97 percent

Medium Hospitals

  • Northern Plains: 30.89 percent
  • Midwest: 30.24 percent
  • Northeast: 29.41 percent
  • Pacific: 28.01 percent
  • Mountain: 26 percent
  • South Central: 25.52 percent
  • Southern Plains: 24.11 percent
  • Southeast: 23.22 percent

Small Hospitals

  • Midwest: 36.98 percent
  • Northern Plains: 35.51 percent
  • Mountain: 32.94 percent
  • Northeast: 32.84 percent
  • Southeast: 31.36 percent
  • Southern Plains: 30.06 percent
  • Pacific: 26.91 percent
  • South Central: 25.34 percent

As the data illustrates, the average reimbursement rates for hospitals, while low across the board, appear to decrease as the size of the organization increases. This is likely due to the fact that, as the number of claims rises, it exacerbates the challenges that an RCM department faces.  

Whatever the size of your organization, increasing the efficiency of your RCM processes and outsourcing practices when necessary will help to ensure that you stay ahead of the curve.