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The Importance of Healthcare Revenue Forecasting

On 14th Mar 2019
healthcare revenue forecasting

The Importance of Healthcare Revenue Forecasting

Revenue forecasting is probably the last thing on a healthcare provider’s mind, especially given the number of administrative tasks that take time and attention away from patient care. However, nothing could be more important to practice survival and growth than knowing future revenue. In order to pay employees, invest in patient care and plan for the future, healthcare facilities must be able to forecast the timing, quantity and source of revenue. When the right healthcare revenue forecasting system is put in place, suddenly the unknown becomes a known projection and budgeting is based on real numbers instead of approximations.

Why forecasting matters:

An article in Forbes magazine put it succinctly; “Revenue and growth calculations are going to be vital for determining what you can afford to do, and showing you what you need to do to get where you want to be.”

That, in a nutshell, is why revenue forecasting is so important. It is the basis of all financial functions in a healthcare facility; budgeting, expenses, expansion, staffing, products and services. Without knowing what you can afford to do, you run the risk of either not doing the things you need to do to thrive or doing too much and threatening financial stability.

When a forecast gives you an educated picture of your financial status for the coming year, you can take the steps necessary to solidify and/or improve it:

  • Are healthcare underpayments and denials sapping revenue and creating the need for a specific strategy?

  • Are certain payers taking too long to pay and in noncompliance with contracts, according to your healthcare contract management profile?

  • Do you need to cut costs?

  • Do you need to ramp up patient volume to address projected declines in revenue during certain times of the year by promoting wellness checks, pre-college/summer camp vaccinations, etc.?

  • Do you need to assess staffing costs?

  • Can you plan to invest in new technology, medical devices, infrastructure and facilities?

Projections will give you the facts you need to answer these questions. It will also give you the insights you need, month by month, to stay on budget and see if any line item is moving away from projections. Healthcare Revenue forecasting doesn’t just give you knowledge, it gives you the power of control.  

An article in Doctor’s Digest said that for many healthcare facilities, “…much of their revenue is just what’s left over at the end of the month.” That is an untenable way to operate a business, especially given the vagaries of quality metrics, delayed and healthcare denials caused by payors, and the uncertainties of Medicaid and Medicare policies that change every week. Without rock solid technology behind the facility, those variances can sweep away revenue like a creeping tide.

On the other hand, the right healthcare contract management software, including a revenue forecasting tool can regularly and consistently deliver gross-to-net expected reimbursement forecasting. The best healthcare contract management systems include expected net revenue on newly billed claims, net revenue forecasting on payer underpayments and expected recovery amounts. Once implemented, it quickly becomes the most important tool in your administrative tool box.

The nuts and bolts of effective revenue forecasting

Revenue forecasting allows you to see the forest for the trees because it provides clarity and actionable data that increases revenue. When you have a roadmap of expected income, you can immediately see variances. That allows you to appeal them quickly and get the reimbursement you rightly deserve. Due to multi-channel transactions and variances within pricing and payer contracting, providers often struggle to properly manage data and determine reasonable and supportable revenue forecasting. With customized payer calculators, it is possible to net down each claim by payer for each service immediately after the claim is billed. 

The best healthcare contract management systems with a revenue forecasting tool deliver the following:

  • Expected net revenue on newly billed claims

  • Net revenue forecasting on healthcare underpayments

    • The value of each underpayment

    • Anticipated amount of revenue to be recovered

  • Better denial management with Identification of denied claims

    • Forecasts revenue associated with each denial

    • Forecast timeframe to expect full payment

It should also review all accounts receivable issues by payer plan, visit type, physician and facility:

  • Expected net revenue within 30, 45, or 60 days

    • Billed with no payer activity

    • On appealed claims

  • Outstanding healthcare denials and underpayments that have not been reviewed

  • Outstanding “aged” patient responsibility

An essential component of any revenue forecasting tool is a customized payer calculator. Given the fact that the average practice contracts with numerous third-party payers, Medicare and Medicaid, and each has its own contract terms, a customized payer calculator is indispensable. Without it, tracking payments, healthcare underpayments and denials management can be like the Wild West; bits and pieces of payments fly everywhere, old denials are buried underneath the pile of paperwork, and there’s no telling how many dollars are sneaking out of Dodge.

A customized payer calculator brings that uncertainty under control by modeling and managing payer contracts. It will automatically boost net patient revenue as it identifies and overturns underpayments and erroneous denials. It’s the best way to get control over the wide variances of multiple payer contracts.  

Thomas Jefferson said, “Never spend your money before you have it.” That philosophy lies at the root of revenue forecasting. When you can estimate the amount and timing of revenue, you can plan for investment and growth. Without that foresight, you may end up with a financial house built on sand. Protect your work and integrate strong revenue forecasting systems in your practice so that you control revenue and use it to your, and your patients’, benefit.
healthcare revenue forecasting
Image Recovered from www.doctorsdigest.net

Revenue forecasting should include determining where your money is coming from, not just how much.

Revenue Masters healthcare contract management software includes revenue forecasting with expected net revenue on newly billed claims, payer underpayments, and denied claims. Once the collector reviews and appeals the denial, we forecast the revenue associated with each denial and the timeliness to expect full payment.

Contact us today to find out how you can start accurately forecasting expected net revenue and collecting 100% of your claims.