Report: Hospitals facing diminished reserves, mounting reimbursement challenges

Declining cash reserves, compounded by the rising number of denials and reimbursement delays, are leaving hospitals financially strapped, according to a report from Syntellis Performance Solutions and the American Hospital Association (AHA).

After sampling over 1,300 U.S. hospitals and health systems, Syntellis and the AHA found that health systems had a median of 173 days cash on hand in January 2022, but that number decreased by 28% to 124 in June 2023. The data also showed that overall unrestricted cash and investments decreased by 6.5% in the same period for the median health system.

This decrease in cash reserves has been exacerbated by significant cost increases in multiple expense categories, according to the report.

“Maintenance expenses had the biggest increase, jumping 89.8% over a 19-month period as many organizations worked to address facility maintenance needs deferred during the COVID-19 pandemic,” says the report.

Syntellis and the AHA found that the following also occurred in hospitals between January 2022 and July 2023:

• Utility expenses increased by 35%
• Professional fee expenses increased by 33%
• Drug expenses increased by 29.8%
• Labor expenses increased by 24%

They also found that, along with these rising expenses, hospitals are also facing an increasing number of denials from both Medicare Advantage (MA) and commercial payers.

“The percent change in overall revenue reductions related to MA denials jumped 55.7% for the median hospital from January 2022 to July 2023, while denial-related revenue reductions from commercial payers rose 20.2% over the same period,” according to the report.

The data in the report on how much denials have increased relative to net patient service revenue (NPSR) was similar. For MA, denial-related revenue reductions per NPSR for the median hospital jumped 63.3% in the 19-month period. For commercial payers, the metric increased by 20%.

In addition to the increased number of denials, hospitals are also experiencing “wide fluctuations” in accounts receivable (AR) from month to month, according to Syntellis and the AHA’s findings. These AR fluctuations, due in part to delays and unreliable reimbursement practices by payers, reflect recent unpredictable payments, according to the report.

Revenue integrity professionals must do their best to maximize their organization’s cash reserves. Take proactive steps to prevent reimbursement delays, decrease denial rates, and stabilize AR from month to month.