An astonishing 84% of health systems cite lower reimbursement from payers as a top cause of low operational margins, according to a report published by the Healthcare Financial Management Association (HFMA) and Eliciting Insights, a healthcare strategy and market research company.
A similar percentage (82%) of CFOs said payer denials have increased significantly since pre-pandemic levels, and higher labor costs are the biggest drivers of margin pressure, according to 96% of CFOs.
Most systems are looking at traditional cost reduction methods such as reducing labor costs, optimizing supply chain, and delaying technology implementations. The report finds health systems are paring back on capital and real estate investments (40%), reducing less profitable service lines (32%), and outsource revenue cycle roles (26%).
“Recovering from the pandemic, we have seen a slight overall improvement in average operating margins over the past three years,” said HFMA Chief Partnership Executive Todd Nelson, FHFMA, MBA. “However, this study validates that there are many health systems still struggling to find a positive margin. While health plans are modestly increasing reimbursement, they are also ratcheting up prior authorization requirements and denials, which raises the overall cost to collect for health systems.”
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