Can Automation Help Your Practice?

Automation is a prevalent term in today’s medical industry, emphasizing its potential across various operational domains. Its utility extends beyond clinical applications and throughout the entire business landscape.

Automation can tackle the core operational challenges, revolutionizing your business. Rather than making incremental efficiency gains in isolated workflows, you can leverage automation to significantly enhance the efficiency of all operational facets of your organization. It can seamlessly integrate with various systems, manage fundamental and intricate workflows, and substantially reduce manual labor by up to 80%.

This transformation mirrors the evolution of the assembly line in manufacturing, notably the shift from manual assembly to automated production lines.

To determine if automation is suitable for your organization and to ensure a successful implementation, it’s essential to evaluate four critical factors that gauge your readiness for automation.

1. Headcount

To assess whether automation is a good fit for your business, evaluate the size of your revenue cycle management (RCM) team. If the team consists of 10 or more members, your organization is probably a suitable candidate for enterprise-level automation.

Examine your use cases – such as eligibility verification, claims processing, and back-office payment posting and reconciliation work. Take note of the number of employees involved in each area. This will indicate where most of the manual work is concentrated and which use cases could yield the most significant return on automation.

Be aware that manual work not only increases labor costs but also leads to a higher incidence of human error. This can result in data integrity issues, leading to an increase in non-optimized claims submissions, higher denial rates from insurance providers, and other complications. Such issues can escalate costs, increase risks, and cause further inefficiencies.

2. Revenue

Your company’s revenue is a critical factor in determining your suitability for automation. If your business generates at least $50 million – $100 million in patient services, you’ve reached the threshold where considering enterprise-grade automation becomes critical.

Why are these the magic numbers? They indicate that your organization has sufficient scale and a high volume of claims, introducing risk into your systems. This scale enables your business to adopt automation and unlock substantial profit margins.

3. Denial Rates

Claims denials pose a major challenge to health care providers. With insurers denying between 10% and 20% of the claims they receive, and 73% of providers reporting an increased rate of claims denials, it’s a systemic issue. Insurance companies often search for reasons to flag and deny payments on claims.

Approximately 63% of denied claims are recoverable, but the appeal cost per claim stands at $118.

Automation can be a valuable solution if you’re facing a denial problem. There’s no specific denial rate benchmark to reach, but if your denial rate exceeds 10%, it’s worth exploring how automation can assist. In fact, some companies have seen first-time denial rates between 40% and 50%.

If a high share of your claims is flagged or denied regardless of the payer, it indicates that your claims preparation and submission processes may need refinement. Implementing the right automation can streamline these processes, ensuring precision and scalability. This will significantly lower your claims denials, enabling you to better serve your customers and improve the efficiency and profitability of your business.

4. DSO

DSO, or days sales outstanding, refers to the time it takes from providing a service to receiving payment for it. If your DSO exceeds 30 days, it’s worth considering automation.

Many revenue leaders in the health care sector aim to keep a large percentage of their claims under 30 days. They’re constantly tracking how quickly they’re getting reimbursed because until they are, these are costs they’ve incurred but haven’t been paid for.

If claims are denied and require resubmission, it lengthens the payment process. Consequently, more claims may exceed the net 30 days.

Embracing automation is the path ahead, and you don’t need to navigate it on your own

Ninety percent of healthcare CFO and revenue cycle vice presidents are experiencing a labor shortage in their RCM department, and 50% of their RCM roles are vacant, according to the 2022 R1 RCM report. A PWC-Becker’s Hospital Review survey indicates 83% of respondents experienced labor shortages across the revenue cycle, with 44% indicating that their RCM staff was down 10-20% below steady-state levels. And 80% of revenue cycle executives said that health care RCM turnover ranges between 11% and 40%, according to Experian Health, which added that the national average for employee turnover is 3.8%. An MGMA Stat poll identifies that medical coders and billers are the most difficult to hire revenue cycle staff.

If you can’t keep up with hiring, it’s a clear indicator that automation is necessary.

With fewer people available and willing to do manual jobs, hiring will only get more difficult. Increased hiring will continue to squeeze your margins. Persisting with manual work diminishes your competitiveness due to increased errors, slower pace, and higher expenditure on low-value tasks rather than high-value opportunities.

Many companies feeling these pressures attempt to automate their processes. However, trying to establish automation internally is not a recipe for success for health care companies, as they often lack the necessary software or engineering expertise.

By the time they hire engineers, who may lack knowledge about core health care workflows and RCM, health care providers find their expected ROI compromised. Worse yet, they may be automating inefficient processes with an inadequate technology stack and team, leading to disappointment when the true benefits of automation are not realized.

However, automation is inevitable – it’s the future. With the right partner, you can harness the benefits of automation by identifying the causes of your denials, understanding how to reengineer your processes for perfection and automation readiness, and establishing feedback loops for continuous learning and improvement.

Don’t fear automation. Encourage discussions about automation within your organization. Seek a trusted advisor to conduct a formal automation analysis, guide you on where to begin your automation efforts, and help you identify how to scale and succeed with automation.

Dan Parsons, as the co-founder and chief product officer at Thoughtful, stands at the forefront of AI innovations in health care. His leadership has positioned Thoughtful as a pioneer in health care automation, revolutionizing revenue cycle management (RCM) and forging transformative partnerships with leading health care organizations.