Revenue Cycle Management for Children’s Hospitals: Unique Challenges and Best Practices

Approximately 2 million children are admitted to the hospital every year in the U.S., accounting for 40% of all pediatric healthcare expenditures nationally. Many are high-acuity, complex patients with extended lengths of stay — and, as a result, larger medical bills. Although healthcare revenue cycle management (RCM) is complex and complicated for all types of hospitals and health systems, children’s hospitals, in particular, experience a myriad of unique challenges that can negatively affect their bottom line.

Gaps in registration, eligibility, and the financial clearance processes, payer mix, staffing, and the high-stress environment all result in a higher percentage of denials, write-offs, and revenue loss than in general hospitals.

Plus, children’s hospitals already operate under razor-thin profit margins, with low patient volumes, increased costs during COVID-19, and a lack of funding, which have made it even more difficult for them to recoup lost revenue.

While patient experience and HCAHPS scores are essential for all healthcare organizations, in children’s hospitals, they take precedence over making sure the demographic and insurance information is accurate. The challenge for RCM leaders within children’s hospitals, therefore, is how to optimize their revenue cycles and drive efficiency — without losing the human touch.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

RCM Challenges for Children’s Hospitals

From registration and pre-authorization to billing and collections, children’s hospitals have a host of unique challenges that general hospitals don’t have to contend with at the same level.

Emotions run high

When adults walk into the emergency department (ED) or inpatient department to be admitted for a test or surgery, for example, there’s no doubt they’re worried and anxious.

Yet, any parent knows that when it’s your child, there’s an entirely new level of anxiety that comes into play. When a parent has a premature baby in the NICU, a child with a genetic condition or cancer, or a child who is sick or injured, they have a whole host of what-if thoughts and emotions.

“Getting their child in to be evaluated, see a doctor, and get care is emergent and top of mind, while filling out forms and providing insurance information feels like an obstacle that only stalls the process,” said Dana Hunter, associate director of revenue cycle operations at AKASA, who has spent her career in the pediatric revenue cycle.

The registrars in children’s hospitals are constantly looking for ways to strike a delicate balance between getting the information they need and being empathetic and compassionate.

The role of the registrars in a children’s hospital is more akin to patient advocates and counselors.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Lack of demographic and insurance information

When adults go to the hospital, chances are good that they have their insurance card in hand or at least have an understanding of their own insurance coverage. Yet when a parent rushes out the door with a sick kid, there’s no time to think, and frequently their ID and insurance card are left behind.

Also, the adult bringing a child in for care is frequently a caretaker, a sibling, or a grandparent who doesn’t have custody. If the parents are divorced, one parent may not have the child’s insurance card.

Revenue cycle leaders at children’s hospitals must also contend with the fact that the guarantor isn’t the patient, which makes the financial clearance and billing process much more complicated and prone to errors and gaps.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Children are treated regardless of insurance coverage

When an uninsured adult seeks care at the emergency room for a non-emergency situation, the person won’t be treated.

In children’s hospitals, however, care is delivered very differently. Not only is it much more challenging to evaluate a child and determine what’s wrong, but babies and children can’t communicate their symptoms. It doesn’t matter whether the child is insured or not, the hospital will provide care.

As a result, registration errors, gaps in demographic information, and lack of pre-authorization are common.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Write-offs

As a result of the challenges children’s hospitals face with getting all of the required demographic and insurance information, the revenue cycle team has to do more work on the back-end to gather the required information, bill the insurance company, and send out the claim. Often, they find themselves behind on billing.

While children’s hospitals may do outreach to the patients in an attempt to get the correct information or collect payment, they’re not likely to make an aggressive effort.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

What’s more, if a sick child is in the hospital for several months or longer, the hospital isn’t likely to send a bill or aggressively pursue payment while the child is undergoing treatment. Many hospitals write off a significant amount of claims as bad debt or as a courtesy write-off — as much as 40 to 50% of uncollected services are written off in children’s hospitals, according to Hunter.

Staff allocation

Since caring for the pediatric population requires extreme empathy and sensitivity to the families’ needs, children’s hospitals allocate a higher percentage of staff to the front end of the revenue cycle to interact with patients. Since write-offs are so common, fewer staff are typically devoted to middle and back-end revenue cycle operations.

In children’s hospitals, the priority is the patient experience, so getting registration right often falls to the wayside.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Staff shortages

The environment within children’s hospitals and the work itself can take a toll on staff who are trying to balance registration tasks with providing emotional support to parents and making sure kids are comfortable — even if it is outside of their job descriptions.

Looking out at a waiting room full of sick, crying kids every day is loud, chaotic, and stressful. Also, for those in the back billing office, it’s heartbreaking to read some of the notes on the claims that come across their desk.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

As a result of high levels of stress and burnout, there’s a high turnover rate in children’s hospitals.

Different metrics

In general hospitals, the registrars are held to metrics such as accuracy and completed charts. While this is true for children’s hospitals as well, patient satisfaction as a metric is just as important. Not only is it the humane thing to do, but one poor Google review or negative comment from a parent on Facebook can also affect their bottom line.

Patient experience is more important to children’s hospitals than any other type of facility.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Also, while revenue cycle leaders hold their teams accountable for metrics like days in A/R, there’s a heavier focus on resolving high-dollar insurance accounts and providing financial assistance and help with Medicaid applications.

Unique payer mix

Many freestanding children’s hospitals have a high reliance on Medicaid, worth about 50% of the payer mix. According to a recent study in JAMA Pediatrics, of 200,000 admissions for children in 15 children’s hospitals in the U.S., 35% resulted in underpayment, and it was more prevalent for public payers (51%) than private payers (18%).

Hospitals are often caring for families that can’t pay, and so the only payment they will receive is what the insurance company will cover.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Plus, those hospitals that have a higher Medicare managed care mix also have increased paperwork, pre-certification, and pre-authorization processes, plus increased denials and appeals.

Therefore, not only do children’s hospitals have to work to get reimbursed for every dollar, but they also have to rely on philanthropy to make up for lost revenue.

COVID-19 challenges

Children’s hospitals have also faced unique challenges as a result of the pandemic.

In the beginning, shelter-in-place orders, kids spending more time at home, preventative measures like masks, and lower rates of illness and injuries meant that patient volumes and surgeries declined. Plus, many families avoided the hospitals out of fear of exposure.

Children’s hospitals also had increased costs associated with PPE, screening and testing, and keeping patients, staff, and visitors safe. While these challenges were shared by general hospitals, children’s hospitals received less federal relief and “hot spot” funding.

How Children’s Hospitals Can Optimize RCM

From the moment a family walks into a children’s hospital with a sick or injured child, operational best practices go right out the window.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

Nevertheless, with the small operating margins and revenue losses that children’s hospitals are faced with, optimizing the revenue cycle is still necessary.

Ensure accuracy on the front end

Although the patient is not the guarantor, children’s hospitals must get as much information upfront about both the child and the policyholder to ensure accurate, complete claims and less work on the back-end to put the pieces together to get reimbursed.

Build a relationship with families

When children’s hospitals are trying to collect payment, showing empathy and sensitivity is vital. Instead of calling a family about their outstanding balance, they should first ask to confirm that they have the right insurance information on file so that it can get paid by the insurance company. Also important is to provide consistency for the family, so the same person from the billing office should make the calls every time.

Employ automation with a human touch

Staff in the middle and back-end of the revenue cycle often have to tackle inpatient notifications, retroactive prior authorization, claim status checks, and appeals and denials. If organizations integrated automation, it would free their staff to focus on more detailed and complex revenue cycle matters, and also allow registrars to focus more on patients and patient experience.

Since children’s hospitals are more likely to track down the demographic and insurance information on the back-end in an effort to avoid immediately sending a bill to the patient, automation can alleviate some of that burden.

Automation handles tasks that don’t require a human, so that health systems’ staff can devote more of their time, attention, and human touch to their patients.
~ Dana Hunter, Associate Director of Revenue Cycle Operations at AKASA

AKASA has developed Unified Automation®, an RCM solution that creates an automation process suited for the unique needs of children’s hospitals and optimized according to their standard operating procedures — without additional workflows, systems, or complexities to manage. Unified Automation combines machine learning with human judgment and subject matter expertise to provide robust and resilient automation. By using an expert-in-the-loop process, the technology triages any edge cases or outliers to a revenue cycle expert. That expert solves the problem, teaching the AI what to do the next time.

Schedule a demo to learn how AKASA can help your organization.