Today’s financial leaders in healthcare face several challenges impacting revenue, creating the need for an intuitive platform that acts as the ‘CFO whisperer’, delivering tailored recommendations based on an organization’s specific needs. The ability to confidently calculate cash and forecast net revenue is essential to ensuring effective operations management and a healthy cash flow to ultimately deliver high-quality patient care. The evolution of industry technology allows organizations to accurately forecast revenue and derive valuable insights based on historical data and contractual agreements. Armed with these insights and recommendations for increasing revenue, organizations can successfully improve satisfaction among patients, employees, and stakeholders while delivering high-quality care.

Why net revenue?

One obstacle many practices face in revenue cycle management is that gross revenue is fake. It may as well be monopoly money. Gross revenue exists only as a proxy that's used in the interim while final net revenue is determined, which can be delayed by the insurance reimbursement process and cause confusion. However, making business decisions based on a mere proxy for actual revenue is problematic as well. It’s essential to know if the revenue cycle unit is performing well, understand timing of cash inflows to make payroll or meet debt covenants, as well as many other operational demands. The process of using both historical data and contractual agreements to forecast net revenue requires a strong and accurate model that can efficiently aggregate data and produce reports that provide financial leaders with a clear understanding of the company’s revenue outlook. Using a platform that has the ability to accurately forecast revenue helps build a bridge between revenue cycle and financial leadership, enabling a more cohesive strategy for business decisions and gives a clearer understanding of financial health.

The growing necessity of net revenue forecasting

Many strategic decisions that medical practices make are time-sensitive and are directly impacted by revenue levels and activity. It has never been more critical for organizations to have the ability to reliably forecast net revenue. Today’s practices are facing many adverse market conditions, including razor-thin margins, the threat of consolidation, and rapidly changing care needs amongst aging populations. In the current state of the industry, companies no longer have the luxury of waiting a few months down the line to look back and analyze revenue to course correct for the future. Net revenue forecasting provides opportunities to increase health organizations’ margins through more granular insights that are delivered in real-time.

Why is accurate net revenue forecasting so valuable?

According to the AHA, the median health system cash reserves fell 28% in 2022, which can be a symptom of inaccurate net revenue forecasting. When done well, forecasting delivers reliable and repeatable results that yield fine-grain measurements. Utilizing technology that can provide this creates healthier cash reserves with less time spent on manual entry, which is essential at a time when it can take practices over seven business days to complete month-end financial activities. With many teams facing staffing shortages and working to overcome limited bandwidth, it’s extremely valuable to have a precise, repeatable, and efficient process that improves operations overall.

Accurate forecasting not only helps solve cash reserve shortages, but also solvency issues, liquidity, and can prevent payroll delays, in turn limiting staff dissatisfaction. It also translates to more explainable and accurate physician compensation. Most organizations utilize net revenue forecasting as a part of the equation for activities critical to the health of operations and care delivery, so being precise is paramount to stability and satisfaction across the board. Using an intuitive and comprehensive platform for managing financial activities can produce these accurate insights and provide organizations with financial X-Ray vision.

The other key component to improving financial health, which works in tandem with precise forecasting, is the delivery of valuable insights to allow financial leaders to identify the root cause of any shortages.

To pinpoint the source of revenue shortages, information like service, location, procedure, payer contract, and other confounding factors need to be easily accessible to view the variances causing drops. Having direct access to this data and a clear view of the information is the most efficient way to directly increase revenue, and eliminate excessive time spent digging through spreadsheets or coordinating with other teams for access. No matter what an organization’s financial goals are, whether it’s auditing the past or forecasting the future, using a holistic platform that harnesses the power of historical data and contracted rates can put users on a level “paying field”.

The challenges faced by financial leaders in healthcare underscore the critical importance of accurate net revenue forecasting. In the face of rapidly changing care needs, evolving technology provides the means to not only forecast revenue accurately but also derive valuable insights into where there is room for improvement. This shift towards more sophisticated forecasting methods not only enhances financial health but also empowers healthcare organizations to make informed, strategic decisions that ultimately lead to the delivery of high-quality patient care. As a result, the growing necessity of net revenue forecasting in healthcare is a cornerstone of financial stability, operational efficiency, and the provision of optimal care in today's dynamic healthcare landscape.

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Physicians Practice | March 5, 2024