Revenue Improvement in Healthcare: 5 Vital Roles of Financial Planning and Analysis

As a seasoned healthcare financial executive with over 35 years of experience, I understand the intricacies of healthcare finance. Financial planning and analysis (FP&A) can be a game-changer when it comes to identifying opportunities to improve revenue. When those outside of the finance department first hear about financial planning and analysis, the first thought is usually that the organization is entering another round of cost cutting. While this is one key element of an effective FP&A program, it is not the only element. A well-functioning FP&A team will also look for opportunities to improve revenue.

Margins are shrinking rapidly and cost cutting alone will not solve the profitability challenges faced by healthcare providers. To be truly effective, FP&A teams must also focus on opportunities to improve revenue. Today we will look at five areas where FP&A teams may be able to help identify revenue improvement opportunities.

1. Revenue Cycle Improvement

When assessing opportunities to improve revenue, the revenue cycle is the first place to look. The revenue cycle begins when the patient first arrives, continues through when the patient leaves and a bill is ultimately generated for the services rendered, and concludes when the claim is paid by the responsible party. Revenue cycle management is difficult because many staff from many departments provide information that is used to generate a bill and receive payment for the services that were provided.

The FP&A team typically has access to all the healthcare providers revenue cycle information. Your FP&A team plays a pivotal role in analyzing this comprehensive set of data. They can provide insight into how well the revenue cycle is functioning. By partnering with clinicians and operations staff, the FP&A team can help identify opportunities to:

• Improve the quality of billing information being entered into the billing system.
• Identify claims processing problems that lead to underpayments or denials.
• Identify areas where payers are incorrectly reimbursing claims.

The FP&A team can provide insights into the financial health of your organization’s revenue cycle. By partnering with clinicians and operations staff, the FP&A team can help improve revenue capture.

2. Identify Growth Opportunities

Financial Planning and Analysis teams often have access to market information. When the FP&A team identifies high performing departments, they can also review market information to determine if a growth strategy should be considered. FP&A teams use historical revenue information to determine if a service may improve its revenue through market growth. They use the financial information they have derived to confirm if market expansion in a particular area makes sense. FP&A teams also can help identify those services that feel like growth opportunities but may not be as profitable as executives may believe.

3. Estimate the Impact of Process Improvement Activities

Healthcare is filled with uncertainty. While process improvement is critical in reducing costs and improving the overall operations of the organization, healthcare providers must ensure that they are also improving revenue. FP&A specialists use scenario planning to model potential financial outcomes of revenue improvement activities. These teams help identify opportunities to improve revenue, quantify the amount of the expected increase, and monitor progress toward achieving the goal. This proactive approach allows you to prepare for the unexpected, minimize risks, and seize opportunities as they arise.

4. Performance Metrics and KPIs

To drive revenue improvement, you must define and track performance metrics and key performance indicators (KPIs). Your FP&A team can help you set measurable targets and regularly monitor progress. By aligning your financial goals with KPIs, you can identify services where actual revenue is underperforming expected revenue and create service level specific revenue improvement plans.

5. Framework for Accountability

The healthcare industry is evolving. Investing in the right financial technology tools and systems can streamline processes, improve decision-making, and enhance revenue. Further, the tools the FP&A team develops should also provide a framework for individual accountability. The adage “what does not get measured does not get done” impacts healthcare organizations just like companies in every other industry. Without accountability, successful implementation of revenue improvement strategies will falter.

Conclusion

Financial planning and analysis teams are indispensable for revenue improvement in healthcare. With the expertise of your FP&A team, you can harness the power of these five areas to lead your organization to financial success. In a dynamic industry like healthcare finance, staying ahead of the competition is vital. By incorporating these five essential revenue improvement strategies, you can position yourself as a leader in helping your organization improve financial performance. So, invest wisely in your financial planning and analysis efforts, and watch your healthcare organization achieve its revenue improvement goals.

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