Healthcare Connection

Identifying Weak Spots in Net Revenue

June 27, 2017

By Bryan Rector, CPA, CNRA, and Jay Sutton, FACHE, CNRA

Identifying Weak Spots in Net Revenue A smooth net revenue reporting process allows healthcare organizations to accurately assess and align operational and financial indicators to explain variations in net revenue. This ability to tell a comprehensive story about net revenue can provide leaders with actionable data as a basis for crucial operational decisions.

Unfortunately, for many organizations, having this type of insight is often far from reality. The reason? Weaknesses exist in the net revenue reporting process.

Several blind spots and pitfalls in an organization’s net revenue data analysis and reporting process can lead to a less-than-optimal net revenue function. By identifying these weak points, however, organizations can begin optimizing net revenue reporting to obtain the right data and use it to make more effective decisions.

Here are three common situations where weak spots can be found in an organization’s net revenue reporting process, along with strategies to begin addressing those weaknesses.

Not Having the Right Staff in Place

Healthcare finance, and specifically net revenue reporting, requires a team with a diverse skill set to interpret and explain net revenue within the organization. Of critical importance is having the right mix of experienced staff members working in the appropriate areas. Correct staffing has more to do with having the right skills among employees than having a certain number of employees; the number of required staff members will vary by organization.

Often an organization will have proficient staff members yet will assign tasks that are not the best match for their skill sets. Realigning staff to more effectively take advantage of employees’ skills and experience can strengthen net revenue reporting.

What ideal qualities should organizations look for when staffing a net revenue team? First, strong communication skills are essential. Employees must be able to effectively explain net revenue to others within the organization whether at a high-level perspective or at account-level detail. In addition, organizations should consider recruiting staff members with the following characteristics and experience:

  • Ambitious and high-performing
  • Self-directed, with critical thinking skills
  • Proficient with technology, especially working with large data sets
  • Experienced in accounting, finance, reimbursement, and revenue cycle operations
  • Experienced in hospital or physician operations

In addition to having the right staff in place, leadership must provide staff with the right tools and technology to succeed. Organizations also must build a culture in which team members feel comfortable challenging the status quo and modifying policies, procedures, and deliverables as the healthcare landscape and regulations continue to change.

Failing to Standardize and Automate Net Revenue Reporting

Other net revenue weak spots frequently are found in the reporting process itself. To maximize effectiveness, an organization’s net revenue reporting should be standardized, effectively tell a story, and, ideally, be automated.

To start, all stakeholders within an organization should be basing analysis about net revenue on the same set of reports. To assist with this, organizations should make sure they are using a common data source that is reconciled on a regular basis. Ultimately, the figures in all reports should tie back to the general ledger. When various departments are sending out reports that do not tie back to the general ledger, those reports do not accurately represent net revenue.

Consider a situation in which an organization’s revenue cycle department sends out a report specifying net revenue of $240 million (cash basis), while finance delivers reports with net revenue of $199 million (accrual basis, acute only). All along, however, the general ledger has net revenue as $210 million (accrual basis, acute and professional). Such variations lead to confusion and, ultimately, a lack of trust in reporting.

Alignment and open communication among departments can prevent misunderstandings and variations. Leaders make critical decisions based on net revenue reports, including major operations decisions such as those about staff reductions. Timely and reconciled reporting that tells a story that aligns with field operations gives leaders confidence that they are basing goals and decisions on accurate net revenue trends.

Finally, automation of data gathering is critical to establishing a smooth net revenue reporting process. Use of a business intelligence tool that automatically gathers data from multiple sources and quickly aggregates information will assist with efficiency of the net revenue function. This type of tool allows staff to spend more time analyzing data and looking for net revenue opportunities versus spending time simply preparing schedules.

Not Having Effective Policies and Procedures in Place

Even when an organization has the right staff doing the right jobs and delivers strong reports, another common pitfall is a lack of essential policies and procedures. Organizations need a set of well-defined procedures for net revenue reporting that establish daily, weekly, and monthly expectations. Additionally, policies and procedures should be designed to be adopted by new staff as seamlessly as possible should the organization experience turnover of relevant employees. If policies are not built-in upfront, the organization is left open to a risk of potentially misstated financials.

Optimize Net Revenue Reporting

On a daily basis, healthcare leaders make critical decisions based on net revenue information. By identifying and strengthening weak spots in the net revenue reporting process, organizations can begin to benefit from having accurate, insightful, and actionable data that paints the full picture about net revenue.

Authors
Bryan Rector
sutton-jay-150-2
Jay Sutton
Principal