Chief financial officers (CFOs) are under increasing pressure to meet cash flow targets in the coming years, according to Knowtion Health's report, "Race for Cash: Pivoting Your Denials Strategy for a New Era."
The report, based on a survey of over 75 CFOs, reveals that hospitals are focused on rebuilding their cash reserves and profitability post-pandemic by cutting costs and boosting revenue through service line management. However, these efforts are constrained by payment vulnerabilities, including high denial rates, underpayments, complex payment processes, and resource shortages.
Although 82 percent of the surveyed hospital CFOs are optimistic about their organizations' current direction, significant financial challenges are on the horizon. Nearly 63 percent anticipate major obstacles in securing long-term capital funding. The pressure to meet cash flow targets is expected to intensify over the next three years, with 78 percent of respondents predicting an increased emphasis on financial health.
Denial rates have surged in the post-pandemic era, with 57 percent of CFOs reporting average denial rates exceeding 10 percent in 2023, and 20 percent experiencing rates over 13 percent.
In response, organizations are prioritizing cash flow and accounts receivable aging, with CFOs stressing the importance of closely monitoring denial rates. Managing these rates has become increasingly complex, necessitating better data insights and more flexible denial management strategies. The report emphasizes that effective denial prevention requires understanding trends, identifying root causes, and implementing efficient processes.
"The industry needs improved systems to manage denials, with technology projects in revenue cycle management ranked as high priorities," the report states. The adoption of artificial intelligence (AI) in denials management is expected to grow, with 81 percent of survey respondents planning to integrate AI within the next three years.
However, staffing challenges remain, particularly in skilled labor for denial management and payer relations. Some organizations are addressing these gaps by rotating job duties to prevent burnout or outsourcing specialized roles.
To enhance financial stability, the report recommends better alignment between CFOs and revenue cycle leaders, ensuring a unified approach to adapting to reimbursement changes and leveraging AI for profitability and cash flow.
Additionally, CFOs should focus on optimizing operations and addressing skill gaps through upskilling, cross-training, and incorporating supportive technology. Outsourcing for specialized expertise is also advised.
Healthcare CFOs are encouraged to reassess the return on investment (ROI) for technology and services, emphasizing the importance of efficiency in workflows, appeals, claim edits, and root-cause analysis. Prioritizing claims based on payer behavior is also critical.
This report comes as hospitals face rising costs driven by inflation, prescription drug spending, and increased behavioral health utilization, according to PwC's Health Research Institute (HRI). In response, healthcare CFOs are shifting financial planning priorities and focusing on value-based care, addressing reimbursement challenges, and leveraging AI and automation to manage cost increases, changing payer mixes, and staffing issues amid high turnover rates.
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