Data confirms seasonality impact on hospital net revenue

Crowe is a public accounting, consulting and technology firm with offices around the world. The Crowe RCA solution captures every patient financial transaction in more than 1,000 hospitals nationwide. In this report, Crowe analyzed a portfolio spanning 45 states, including 605 hospitals within Medicaid expansion states and 409 hospitals in nonexpansion states. The metrics measured include accounts receivable (AR), denials, bad debt, credit balance and cash to expected pay.

According to Brian Sanderson, managing principal of Crowe healthcare services, finance teams often cite unsubstantiated reasons to explain month-over-month fluctuations in net revenue and revenue cycle performance. These include end-of-calendar-year benefit enrollment, summer physician specialty conferences, severity of flu seasons and the number of Medicare payments in the month. "For health system finance professionals who long suspected that seasonality affected net revenue but didn't know how much … you were correct, and the effect is material," Sanderson said.

The Crowe study examined quarterly trends:

• January-March: Average days in accounts receivable are at their highest in January at 51.3 days and then trend downward throughout the calendar year. Initial denials are 7.8 percent higher than the annual average this quarter, driven by benefit plan changes and higher outpatient volume from the previous quarter. Outpatient revenue per case is 4 percent below the annual average but climbs steadily to the end of the calendar year.
• April-June: According to the report, net revenue and volume are stable in the second quarter but final denials and bad debt transfers increase materially in June – particularly for those hospitals with a June 30 fiscal year-end. In June, final denials are 18.5 percent higher than average, and bad debt transfers are 8.9 percent higher than average.
• July-September: Outpatient volume sharply decreases in the third quarter, dropping 6.4 percent from August to September. Gross revenue generally continues to improve, with some volatility in final denials and bad debt transfers.
• October-December: Outpatient net revenue per case trends upward in the fourth quarter and inpatient net revenue per case is 8.9 percent higher than the yearly average. Denials trend slightly lower overall but are volatile, with October exhibiting a spike in both initial denials and in final denials before trending closer to the yearly average in December. Accounts receivable days are at their lowest this quarter, 1.6 percent lower than the yearly average. And bad debt transfers, likely driven by cleanup activity, spike upward to 22.1 percent higher than average.

According to Sanderson, health systems that use last fiscal year's budget as a baseline for this year's budget by dividing costs and revenue equally over 12 months are most affected by seasonality fluctuations. "Adopting quarterly or rolling budgets can allow finance teams to more easily adjust to anticipated changes, whether they are updates to managed-care contracts, new service line developments or the expected impact of seasonality," Sanderson said. "Projecting net revenue performance allows health system operators to modify resource needs, diagnostic equipment usage and other cost drivers that affect already thin operating margins. Additionally, building greater autonomous functions into the revenue cycle allows hospitals to handle ebbs and flows of exceptions without the need to adjust their workforce."

To view a video on the findings and download a copy of the report, please visit Crowe Benchmarking Report.

About Crowe Revenue Cycle Analytics (Crowe RCA) benchmarking data
More than 1,000 U.S. hospitals use the Crowe RCA solution to capture every patient transaction for purposes of automating hindsight, accounts receivable valuation and net revenue analyses. The benchmarking database spans 45 states and comprises 605 hospitals within Medicaid expansion states and 409 hospitals in nonexpansion states.

About Crowe
Crowe LLP (www.crowe.com) is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.

SOURCE Crowe LLP

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