Three of the top revenue cycle management challenges are Medicare and Medicaid payments, claims denial and value-based payments.Medicare and Medicaid Payments: Complicated payment reforms, shrinking reimbursements and government mandates contribute to the delay and denial of payments for services covered by Medicare and Medicaid. Medicare and Medicaid represent an ever-increasing segment of the population and timely and adequate payment from these organizations rank as a top issue for healthcare practitioners. The Centers for Medicare & Medicaid Services (CMS) have significantly increased provider education tools including on demand webinars and other resources.Claim Denials: Some healthcare organizations say 25% of their claims are denied. Some for a technicality such as a missing signature on a medical chart, an incorrect spelling or inconsistent data entry. Sixty percent of healthcare organizations did not see a revenue impact, from the recent implementation of ICD-10 but 34% reported they did in a recent post ICD-10 survey. Continue to monitor your denial trends so patterns can be triaged and treated early on from the cause vs. the symptom. Also note while you are able to submit a valid diagnosis code from the right family and receive potential payment, you may not see the same after October 1, 2016, because coding to the correct level of specificity will be required.Value-Based Payments: ACA brought in the transition from fee-for-service to value-based payment model. The intent is to improve the quality of healthcare services being provided to patients so healthcare providers are paid based on the value of care they deliver instead of being paid for the number of patients’ visits or tests ordered. This means healthcare practices need to reconcile the new payment model with the traditional fee-for-service environment changing analytics and metrics to ensure payments cover costs.In addition, the U.S. Department of Health and Human Services (HHS) announced that by the end of 2016, 30% of Medicare reimbursements will be linked to the “quality or value” of services and 50% by the end of 2018. Penalties for not improving data quality include a docking of 2% of Medicare reimbursements.The 90-Day Grace PeriodAnother factor impacting revenue cycle management is the eighty-five percent of patients that received an advance premium tax credit via the ACA rules. They are eligible for a 90-day grace period to pay their outstanding premiums before insurers can drop their coverage. This rule applies to all consumers that purchased subsidized coverage through the Affordable Care Act’s (ACA) health insurance marketplace. It has the potential to be a problem not only to track patients in this situation but in the delay of payments. Identify if your patient is up to date on their premium payment as part of your registration process.
When prospective healthcare staffing businesses compare factoring fees to bank lending rates, factoring almost always seems more expensive. Oftentimes, factoring prospects annualize the percentage charged by factors, extrapolating three percent per month to an interest rate of 36 percent per year. In the world of healthcare staffing financing, this scenario is like comparing apples to oranges.When comparing a bank loan with invoice factoring, it’s important to keep a few things in mind:
A factor does not loan money like a bank does. Rather, a healthcare staffing accounts receivable factor purchases invoices at a discounted rate. Factoring is a form of short-term funding, so a discount rate should not be converted to an interest rate. For example, some firms offer a two percent discount (2% for net 10) for quick payment. In a year, there are roughly 36 10-day periods. Using the annualized percentage parallel, that comes out to 72% “interest.” Are these companies really paying 72% for quick payment? No, and healthcare staffing factoring companies don’t earn 36% interest either.
Moreover, a factor is continuously advancing and collecting funds, compared to a bank that provides the money only one time, the day that the loan is received. An accounts receivable factor has the ability to grow as its clients grow. Once a company uses the funds from a bank loan or exceeds its credit limit, there’s little room for it to grow.
Banks approve business loans or lines of credit based on a company’s historical operating and financial performance, a factor’s main criteria is the creditworthiness of a prospect’s customers. Banks tend to shy away from business owners who are just starting up, going through seasonal growth, have bad personal credit or have too much concentration of their sales with one or two customers. Many factors are able to look past the above criteria because their decisions are based off of a prospect’s customers’ ability to pay. So it’s very possible for a business that has creditworthy customers to work with a healthcare staffing factoring company even though they have been previously turned down for a traditional bank loan.
The loan process with a bank is time-consuming and cumbersome, and it could take weeks or even months to receive the loan proceeds. Whereas a factoring firm’s application and approval process can take less than a week, and factors have an ongoing ability to approve additional lines of credit quickly.
Oftentimes, a bank loan requires collateral in addition to a company’s accounts receivable. The only collateral that a factor requires is the company’s accounts receivable. A bank will most likely require business owners to personally guarantee the loan as well, and factoring companies won’t always require a personal guarantee to advance money.
Taking out a business loan creates debt on a company’s balance sheet, and credit ratings go down because of loan limitations. On the other hand, healthcare staffing funding through a factor increases credit ratings by creating better cash flow and helping the company pay their bills promptly.
Whereas banks only loan money, there are a multitude of services that factoring companies provide their clients in addition to ongoing funding. Some of these supplementary services include: posting payments, dispersing reports, handling collections and reviewing credit for their customers’ clients.
When looking at the big picture, entrepreneurs have to weigh the costs of factoring against not having immediate cash. More often than not, the decision comes down to either selling the accounts receivable or putting up with crippling cash flow problems and missed sales opportunities.