Health care’s 2025 revenue cycle imperative: Reduce administrative waste

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“How can I stay financially viable?” It’s the question that will continue to keep C-suite leaders up at night during 2025.

It’s understandable as the financial pressures associated with current macro-economic trends are not likely to change in the near future. New year, same story—the cost to collect will continue to increase while reimbursements decline.

Given that so much of the high costs associated with running a healthcare business remains outside of the organization’s control, financial leaders will have to consider how they can impact the one area that is in their control in 2025: reducing administrative waste, especially as it relates to revenue cycle and collecting monies owed for the services they render.

The reality is that current stats related to U.S. administrative waste in healthcare are abysmal, equating to about 30% of total spending waste. In response, healthcare organizations are prioritizing adoption of AI and automation to improve the outlook. This is a step in the right direction, but many, unfortunately, are leaving money on the table because they lack visibility into human generated data.

In contrast to the limitations of common data—the basic data housed in EHRs, practice management and clearinghouse systems such as denials and claims status—human-generated data allows revenue cycle leaders to understand why medical claims are not paid on the first pass, drill down into all the activity involved in getting a claim paid, as well as measure the productivity and effectiveness of staff.

Knowledge of exactly where the breakdown occurred in the revenue cycle that required human intervention for claims adjudication allows healthcare organizations to quickly diagnose how to fix the problem. Organizations that achieve this kind of visibility into daily work effort will be armed with the information needed support three proven strategies for improving bottom-line impact in 2025.

1. Reducing the number of “touches” it takes to get a claim paid

Healthcare organizations aiming to claw back margin in the new year must focus on reducing the number of “human touches” required to get a claim paid. Many financial leaders do not have visibility into the amount of people involved, the total work effort it takes to get reimbursed and where breakdowns may be occurring. Across millions of human touches related to collecting on insurance claims within MedEvolve’s database, we find that upwards of 50% of touches are wasted on a consistent basis—and every touch negatively impacts margin.

What does this mean for provider organizations? Reeling in that waste can mean hundreds of thousands, if not millions, of dollars that can be recouped to improve margin in 2025. Two key foundations for future success are to have the data that tells you the effectiveness of your people in the jobs they are performing and rapid intelligence on where in the revenue cycle the problem occurred which many times is a combination of people and process breakdowns along with the gaps or misuse of technology.

In addition, financial clearance automation can help financial leaders improve a key metric for reducing waste going forward: zero-touch rates, the percentage of claims that get paid without human intervention. Also referred to as pre-registration, improving the financial clearance process ensures all the necessary patient information, insurance and the financial requirements based on the service is collected prior to the visit so claims flow smoothly through the revenue cycle process. This minimizes costly back-end denials which drive labor costs up and reimbursement down, eroding margin in an industry that can’t afford it.

2. Improving labor capacity, effectiveness and overall workflow efficiency

To improve labor costs, many provider organizations are looking to offshore resources. But the reality is that financial leaders must be able to measure every touch staff is taking to process claims (onshore and offshore) to truly understand the impact of administrative waste in revenue cycle and to know whether they are staffed correctly.

All too often, the first answer to resolving lags in reimbursement is to throw more bodies at perceived problems. That’s why the first step should be focused on gaining visibility into where changes are happening in the revenue cycle and what humans are doing to impact that change. It’s entirely possible that simple tweaks to existing processes could double daily productivity and improve first pass resolution rate, providing a notable impact on the bottom line.

On any given day, 80-90% of open claims do not require any work yet legacy workflow solutions are incapable of identifying and carving out those claims. One way to improve staff efficiency and effectiveness is to prioritize the claims that need attention and measure the effectiveness of staff once they take action on a claim. Workflow automation tools guide billing staff towards work that has the most ROI, ensuring the most productive use of time and effort.

3. Leveraging data for process improvement

Oftentimes, healthcare leaders rely on costly consulting projects to uncover opportunities for process improvements. A typical revenue cycle consulting project consists of months of employee evaluations, cost concentration studies, process identification and efficiency studies after which the organization still must implement the recommendations. However, consulting firms are still limited to the common data housed within legacy systems.

With access to the human generated data through a combination of workflow automation and generative AI, healthcare leaders can determine when and wherechanges are occurring in the revenue cycle and understand the true status of claims, the action taken by staff and the team’s ability to positively impact the AR balance.

Once provider organizations have visibility into the innerworkings of staff productivity and effectiveness, they can identify where waste occurs, conduct a root-cause analysis and improve processes. Effective intelligence solutions drill down into every step taken by revenue cycle staff and then apply analytics across the data to show revenue cycle leaders opportunities for improvement. In addition, prescriptive analytics data can be used to recommend the most effective courses of action in real time to improve outcomes.

Reducing administrative waste in 2025 and beyond

Effective Intelligence solutions built on automation and generative AI can help to overcome data shortfalls that exist in today’s healthcare organizations and provide the visibility into the daily work effort needed to reduce administrative waste and improve labor capacity. Workflow automationsolutions that measure every touch in the claim adjudication process provide a superior data set that can be leveraged in the maturing generative AI world where prediction, machine learning and automation is critical for the continuous need for margin improvement.

Forward-thinking organizations understand the need to improve staff productivity and minimize dependence on labor, especially within revenue cycle processes. Consequently, success going forward will also be marked by infrastructures that support automation and smarter workflows.

Helping staff become more effective and identifying in real time where the problems are occurring in the complex revenue cycle is one important step towards financial viability for healthcare organizations in 2025.

Matt Seefeld is the CCO of MedEvolve