How to Establish a Proactive Revenue Cycle Strategy

A strong revenue cycle is vital for long-term financial sustainability since the revenue cycle influences all parts of a practice. To maximize revenue and improve processes, healthcare practices are adopting a proactive strategy to strengthen their revenue cycle. The strategy involves adopting measures to optimize each stage of the revenue cycle and, rather than waiting for issues to arise, proactively identifying vulnerabilities and taking preemptive actions to address them.

By implementing a proactive revenue strategy, healthcare practices will be able to prepare for a healthier revenue cycle while keeping the synergy of people, processes, and technology at the forefront of operations. But practices need to define goals, understand industry benchmarks, and create performance reviews to execute a proactive revenue cycle strategy successfully.

Define Goals and Establish KPIs

When building a proactive revenue cycle strategy, begin by defining goals and establishing key performance indicators (KPIs). Practices should analyze last year's metrics and conduct a thorough analysis. This meaningful data will help identify problem areas and trends and establish a baseline to measure progress.

As the practice shifts gears to outlining the goals for the practice, focus on the most critical areas, and provide clear direction for staff. The most important goals will be unique to every practice, but it is important to avoid creating a whirlwind by drafting too many goals. It is recommended to keep goals simple and achievable. Goals should begin with a verb to focus the mind on being proactive.

Once goals are established, monitoring several KPIs is vital to keeping a constant pulse check on revenue cycle strength. KPIs allow practices to provide direction and focus, monitor financial health, improve forecasting, measure progress, and identify issues and opportunities. They should be objective, measurable, and able to show a trend or comparison over time. Common KPIs tracked when building a proactive revenue cycle strategy include days in accounts receivable (A/R), aging periods, unapplied credits, revenue per visit, and collections ratio.

Industry Benchmarking

Once the KPIs are initiated, it is time to implement best practices for a proactive review of A/R with a strategic lens. Begin by defining the data needed to create the KPIs and describe the analysis needed to track them. Data serves as a powerful tool for identifying areas of concern and trends, enabling practices to establish a baseline and measure progress. However, it is crucial to be aware of any missing data and take steps to understand the reasons behind its absence. Practices also need to find ways to obtain the missing data moving forward.

Once practices collect the necessary data, leaders should compare data to industry benchmarks and historical performance. By evaluating one’s performance against industry standards and incorporating best practices, practices can assess their current standing and desired level of performance.

Additionally, tracking historical performance can provide valuable insight into progress and trends over time.

To organize the data, statistics, and trends, it is recommended to create an easy-to-understand visual. The visibility, accessibility, and readability of visual aids will help leaders to communicate the data and share key findings within a practice. Whether practices use an Excel sheet or leverage their system’s built-in reporting, it is important to ensure both leaders and staff have access to these visuals to maintain alignment.

Creating Performance Reviews

The last step to implementing a successful proactive A/R strategy is to set intervals for regular performance reviews. Regularly monitoring the practice's financial performance is crucial to stay aware of its overall health. These reviews will help practices monitor progress, identify bottlenecks, and implement corrective actions in a timely manner. Through continuous monitoring, one can detect revenue cycle issues early and take proactive steps to mitigate them.

Once all goals are complete, KPIs are outlined, and a proactive A/R strategy is implemented, consider using a checklist with tasks, target dates, and responsible parties defined to ensure everyone is aligned and accountable. Keep this list visible so everyone at the practice can see the progress and identify any productivity gaps to help adjust responsibilities and target dates to meet practice-wide goals.

Proactive revenue cycle strategies are essential for healthcare practices to enhance their financial health in today's dynamic healthcare landscape. While excellent patient care should always remain a clinic's overarching goal, improving financial health and the understanding of where the practice stands is critical. As leaders continue to navigate the challenges of the revenue cycle, proactive strategies will be instrumental in helping you achieve long-term financial success.