the health strategist
institute for strategic health transformation
& digital technology
Joaquim Cardoso MSc.
Chief Research and Strategy Officer (CRSO),
Chief Editor and Senior Advisor
November 17, 2023
This is an Executive Summary of the report “Hospital Vitals — Financial and Operational Trends — Q2 23”, published by Syntellis, on November 2023.
Executive Summary
The nation’s hospitals and health systems are caught in a vise of declining cash reserves and rising reimbursement delays and denials from healthcare payers, including commercial and Medicare Advantage plans.
Hospitals and health systems are left increasingly financially strapped as a result.
Diminishing cash reserves mean these critical healthcare organizations are less equipped to navigate sudden market shifts and disruptions — which is especially concerning more than three years after the onset of a once-in-a-generation pandemic that underscored the need to prepare for any uncertainty.
The median health systemsaw cash reserves — measured as days cash on hand — drop 28% from 173 in January 2022 to 124 in June 2023.
Rapidly rising expenses across the board exacerbated the declines in cash reserves.
Increasing denials and other administrative delays from healthcare payers compounded financial pressures on U.S. hospitals and health systems.
These trends highlight underlying issues as some major healthcare payers face congressional inquiries and federal court lawsuits challenging questionable denial practices, including allegations that one payer used computer algorithms to deny claims en masse without proper medical review.4
As payers deny more claims, hospitals are increasingly not reimbursed for medically necessary care provided to patients.
They must take larger revenue reductions to account for those lost reimbursements from commercial payers and Medicare Advantage plans, which cover more than 31 million Americans and make up about half of all Medicare beneficiaries. The challenges will only worsen as Medicare Advantage enrollment continues to grow.
In addition to mounting delays and denials, hospitals and health systems have experienced significant volatility in accounts receivable — the amount of money owed to them for services already rendered.
A recent American Hospital Association (AHA) member survey found that 50% of hospitals and health systems reported having more than $100 million in unpaid claims that were more than six months old.6
Variations in accounts receivable reflect unpredictable payments for hospital services, including restrictive priorauthorization requirements and other reimbursement delays from commercial and Medicare Advantage plans.
Accounts receivable from commercial plans fluctuated on a month-to-month basis by as much as $14,200 for every $1 million of net patient service revenue (NPSR) from January 2022 to June 2023.
As cash reserves decline, hospitals have little cushion to absorb such volatility, resulting in cash flow constraints that can jeopardize hospitals’ ability to maintain access to care.
Infographic (other issues)
Conclusion
The latest data highlight the persistent challenges that hospitals and health systems face in having the financial resources needed to maintain access to care for their patients, and to be prepared for the next crisis that may arise at any time.
Combatting inappropriate payer delays and denials costs these vital organizations valuable time and resources.
Payer denials can cost U.S. hospitals and physicians more than $1.5 billion a month, and can contribute to clinician and workforce burnout.
As a case in point, a recent survey by the American Medical Association found that physicians and their staff spend an average 14 hours per week just completing prior authorization requests — time that could be better spent providing patient care.
American Hospital Association research shows that more than 80% of physicians say burdensome insurance company policies interfere with their ability to practice medicine.
These issues compound reimbursement challenges from Medicare fee-for-service and Medicaid, which chronically underpay hospitals relative to the total cost of care.
Taken together, a lack of proper and prompt reimbursement has both upstream impacts on hospitals’ cash flow as well as downstream impacts on patient care.
Such challenges will only worsen unless regulatory agencies conduct greater oversight of problematic payer practices and address other administrative hurdles that further strain hospital resources, deplete cash reserves, and inhibit medically necessary care.
https://www.syntellis.com/resource/9846/thank-you
