As we bid farewell to 2024 and step into the new year, it's the perfect time to reflect on the past year and prepare for what lies ahead in 2025. In this article, we examine five significant takeaways from 2024, weighing their impact on the healthcare industry and offering valuable lessons for the future. Explore the key trends, challenges, and opportunities shaping 2025, and gain valuable information to navigate the coming year.
These denials created significant challenges for organizations in 2024, impacting both revenue and operational costs. Hospitals that navigated this challenge analyzed the root causes and implemented strategic solutions, healthcare providers were able to safeguard their financial health and maintain stability. Effectively managing operational expenses and addressing these trends proved essential for navigating the complexities of healthcare finance.
Last year, many hospital financial teams struggled with managing the impact of lesser of charge hits. These adjustments significantly affected hospitals' financial performance and reimbursement rates. Hospitals that effectively combated this adopted advanced solutions and specialized tools that provided insights into billing practices and contract management, hospitals were able to navigate these challenges more effectively. With expert support, they enhanced revenue, improved patient care, and maintained long-term financial stability.
The Change Healthcare cyberattack exposed significant vulnerabilities in healthcare data management and financial operations. This incident highlighted the critical need for proactive cybersecurity strategies. By adopting strong security measures, preparing for volume fluctuations from an operational and staffing standpoint, and prioritizing continuous improvement, healthcare organizations can build resilience and turn risks into opportunities for growth.
We saw an increase in discreet ER downgrades impacting hospital reimbursements throughout 2024. Unlike traditional downgrades, where the ER level on the remit is lower than on the claim, discreet downgrades occur when the ER levels match but reimbursement is calculated using lower negotiated rates and charges. This led to reduced payments for hospitals, requiring significant effort to recover lost revenue. It highlighted the need to address these downgrades effectively to maintain financial stability.
We observed that small account balances, often overlooked, contributed up to 0.5% of net revenue when managed efficiently in bulk. By incorporating these balances into a hospital’s revenue strategy, organizations achieved greater consistency and stability in an otherwise unpredictable revenue cycle.
Over the years, we have witnessed a consistent rise in denial rates. Denials will increase in 2025, but identifying which denials is key to staying ahead of the game. For example, if prior authorization denials begin to decrease, what impact will that have on your hospital? It is important to consider that many payors are publicly traded companies that are focused on margin attainment. This raises the question of whether other types of denials might see an increase to offset any reduction in prior authorization denials.
We've seen prior authorization denials increase steadily over the last 3-5 years. In the latter half of 2024, we also experienced a surge in media coverage. This increased media attention has already influenced the future trajectory of the industry. It's possible that we'll continue to see updated payor regulations, leading to hospitals becoming more diligent in their practices with handling denials.
Extended time to pay is becoming a top concern with payor denials, making it crucial to analyze its impact on hospitals and identify affected products or regions. Any increases in payment delays will likely stem from new factors that require close monitoring. Looking into things like products, regions, services and more can give hospitals a better understanding of what's driving the delay in days-to-pay.
Price transparency regulations are a topic to be perpetually aware of and with the new estimated allowed amount, the impact on hospital charges and negotiated rates is an essential consideration. We will likely see the narrowing of the distribution of rates or adjusting net revenue payments received from payors. You need to have a strategy for negotiations, and working with an experienced partner like PMMC can help you thrive.
In terms of overall hospital financial health, the past few years have been challenging due to rising costs. While we anticipate this trend to slow down, with inflation rates stabilizing, hospital margins will remain razor thin. It raises questions about the potential compression of margins and the likelihood of increased merger and acquisitions activity, as private equity firms are becoming more involved in healthcare. Additionally, contract rate negotiations and the availability of resources within hospitals are central factors to consider in navigating the financial landscape.
Analyzing past trends provides valuable insights to help healthcare organizations anticipate challenges and prepare for 2025. By identifying patterns, and addressing issues like payor terminations, denials, and payment delays, organizations can ensure financial stability and operational efficiency in an ever-evolving healthcare landscape.