Experts have extolled ways of beefing up hospitals' balance sheets, from cutting expenses to eliminating variation in work systems. But what about improving the revenue cycle itself to add millions to the bottom line?

Allegiance Health, Jackson, Mich., has found ways to add value financially through everything from getting bills out the door faster, to tightening up processes. All told, those efforts translate to about a $4 million boost annually, says Margaret Garen, revenue cycle executive director. "One thing hospitals make the mistake of doing is looking at just cutting costs," she says. "And really and truly, you can boost that bottom line so much by looking at your revenue cycle and tightening up that whole foundation and infrastructure."

In a 2004 study, the Healthcare Financial Management Association found that hospitals typically lose about 1 percent of their revenue because of inaccuracies in the charge master or charge capture process. Some common breakdowns include poor communication between departments or claims that are denied because an insurer didn't give an OK before the treatment, says Bruce Lemon, managing director, Huron Healthcare.

Hospitals can avoid those pitfalls by strengthening processes at the front of the revenue cycle, such as preregistration and insurance verification, and by more clearly defining goals and responsibilities in the billing department. In-house experts or consultants can help pinpoint problems, but it has to be done in a comprehensive way, with clearly defined goals and plans to revisit and track metrics at least every couple of weeks.

"Did you ever play that game Whac-A-Mole? If you focus just on one, you may nail that particular problem, whether it's your bad-debt leakage or whatever it may be, and you concentrate too much energy and resources on that one particular problem," he says. "Chances are, another area that isn't getting the same type of attention is going to deteriorate."

Allegiance Health brought in an outside expert to help get bills out and cash in more quickly. Their solutions included monitoring registration and billing better, improving the accuracy of clinical documentation (which, alone, has translated to $14 million in added revenue since April 2010), and getting qualification for a discounted drug program for low-income patients.

Hospitals shouldn't get too caught up in just chasing after past denials. Otherwise, they may lose sight of improving claims that are getting sent out in the present, says Kelley Blair, vice president of professional services for Craneware, a vendor of revenue-cycle management. "It's really about being proactive up front and understanding the services that they're providing." she says.