How well-staffed is your medical practice when it comes to revenue cycle management (RCM) talent? The answer may have a greater impact on your practice’s financial health, operational efficiency, and quality of care than you realize.
Currently, 53% of medical practices report difficulty finding highly skilled workers across all job categories, with medical coders and billing being some of the hardest positions to fill. These RCM staffing challenges aren’t just a short-term inconvenience—they also have long-term implications.
When medical practices strike the right balance, they can improve revenue capture, increase efficiency, and deliver higher-quality care. But when they fall short, the hidden costs start to add up. Let’s examine the importance of right-sizing your RCM staff and reveal 16 hidden costs that could be harming your practice’s financial and operational health.
What’s worse: Overstaffing or understaffing your RCM function?
Believe it or not, overstaffing, understaffing and inappropriate staffing all increase costs and decrease margins.
Understaffed practices will work their RCM staff harder, which can lead to exorbitant overtime costs, higher turnover levels, and lower margins. Overstaffed practices will spend too much on salaries and benefits. Plus, having too much RCM staff creates inefficiencies, which in turn erodes margins.
Add it up: 16 hidden costs of inadequate RCM staffing
What’s the real cost of inappropriate RCM staffing levels? Let’s break it down by financial, operational, and patient care costs.
Hidden financial costs
1. Higher salaries and benefits
The most obvious cost of maintaining a staff of RCM professionals are salaries and benefits, which eat up 49% of all medical practice costs. What’s more, salaries for RCM staff experienced their largest year-to-year increase across the board from 2023-24. Additionally, many practices’ top RCM talent is getting lured away by competing practices that offer richer benefits packages, including more PTO, benefits, and professional development opportunities.
2. Increased denials
Sixty percent of medical practices say their claim denial rates are on the rise. Poorly staffed practices run the risk of incomplete or incorrect data collection, coding errors, and pre-authorization problems, causing denials to spike and creating cash flow issues. Plus, practices spend an average of $25 per claim to rework claims, a cost that adds up fast. Looking to reduce denials? Try these tips.
3. Lack of appropriate follow-up
Understaffed practices are leaving money on the table by not following up appropriately on denials and prior authorizations. About two-thirds of denied claims are never appealed, but 50% of appealed denials are ultimately paid. Additionally, over 80% of prior authorization appeals succeed, yet 48% of practices say they don’t have sufficient staff time or resources to appeal adverse decisions.
4. Delayed reimbursement
Inappropriate staffing levels and a lack of collaboration between front-end and back-end RCM professionals can lead to multiple problems, including insufficient eligibility checks and delayed claims processing. As a result, cash flow is affected and practices must wait longer to receive payment.
5. Increased Days in A/R
Delayed reimbursement directly impacts your Days in A/R, which is a measure of how efficiently your RCM staff operates. By right-sizing your RCM team, your practice can potentially generate a large one-time surge in cash flow by moving your Days in A/R below the industry benchmark of 30-40 days.
6. Decreased patient collections
The rise of self-pay patients and high-deductible health plans puts more pressure on practices to educate patients about their financial responsibility. Additionally, understaffed practices will struggle to estimate patient responsibility pre-visit and follow up with late patients quickly. Additionally, providing adequate assistance to patients who are struggling to pay leads to uncollectible balances and increased write-offs. Learn why increasing net collection rates will boost your practice’s revenue.
7. Higher risk for penalties
Outdated processes or inadequate training can lead to non-compliance with industry regulations such as the No Surprises Act, HIPAA and the False Claim Act. Violations in either of these areas can result in substantial financial penalties for medical practices.
8. Missed Opportunities
An inefficient RCM function will cause extra work for everyone in your practice. This costs money in the short-term and brings enormous long-term consequences, causing you to fall behind the competition in terms of revenue, innovation, and patient care.
Hidden operational costs
1. Higher overtime costs
When billing, coding, and other RCM staffers must work late repeatedly, it creates numerous challenges for practices. Overtime hours typically come at a higher pay rate than normal hours. But even if all your employees are salaried, repeated overtime will create billing errors, rework, fatigue, burnout, and ultimately – turnover.
2. Soaring employer turnover rates
The current turnover rate for clinical support staff is 33.33%. Additionally, 16% of medical practices say retention is their biggest staffing hurdle. Excessive workloads and stressful environments are two reasons why top RCM staffers head for the exits. Turnover is extremely costly, consuming about 50% of each RCM role’s individual salary.
3. Lack of employee productivity
Fifty-six percent of practices say staffing is their biggest productivity roadblock. By tracking activity-based metrics (ABMs) like claims processed per hours, claims coded per hours, clean claim rate, and error rate, practices can get a full picture of their staff’s current productivity and seek ways to improve it, which may include staffing up or outsourcing key RCM roles.
4. Sagging Employee Morale
Poor RCM staffing erodes employee satisfaction. The signs of this sometimes-hidden expense include the departure of experienced staff, missed performance goals, and resistance to workflow changes. Increased grumbling and “back-room” conversations are also symptoms of sagging morale.
5. Increased administrative burdens
Broken workflows and inefficient processes strain staff resources, creating two unfortunate byproducts: less focus on patient care and an increased risk for staff burnout. According to the CDC and AMA, 46% of all healthcare workers report suffering burnout, up 36% from years past. What’s worse, burnout increases the likelihood of errors by 60% according to HHS.
Hidden patient care costs
1. Delays in patient care
A lack of RCM staff will trickle down throughout the entire practice. The biggest threat is at the front desk, where inadequate staffing forces patients to wait longer at check-in and create additional delays throughout their care journey.
2. Higher patient churn rate
Eligibility mistakes and a lack of transparency about out-of-pocket costs further exacerbate patients. So, too, do surprise bills received months after an office visit. Proper RCM staffing can help solve these problems before patients start searching for another practice.
3. Increased reputational risks
Word of mouth—both in-person and online—can make or break a medical practice’s bottom line. When poorly staffed practices develop a reputation for poor customer service, confusing bills, inadequate claims processing, and communication issues, it erodes the practice’s reputation and creates an unfortunate downward spiral.
Avoid the costs: Right-size your RCM staff today
In an era of razor-thin margins, it’s time for medical practices to focus on the one area that will bring the biggest impact: RCM staffing. If you’re wondering where to begin, start by reviewing our 4-Step Guide to Right-Sizing Your RCM Staff.
You’ll learn the top Key Performance Indicators (KPIs) and Activity Based Metrics (ABMs) to track, get guidance on how to evaluate your practice’s unique needs, and uncover the formula for getting your staff size just right. You’ll also get insight into whether outsourcing RCM functions might benefit your practice.
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