title: Hospital financial management: what is the link between revenue cycle management, profitability, and not-for-profit hospitals' ability to grow equity?
abstract: Effective revenue cycle management--from appointment scheduling and patient registration at the front end of the revenue cycle to billing and cash collections at the back end--plays a crucial role in hospitals' efforts to improve their financial performance. Using data for 1,397 bond-issuing, not-for-profit US hospitals for 2000 to 2007, this study analyzed the relationship between hospitals' performance at managing the revenue cycle and their profitability and ability to build equity capital. Hospital-level fixed effects regression analysis was used to model four different measures of profitability and equity capital as functions of two key financial indicators of revenue cycle management--amount of patient revenue and speed of revenue collection. The results indicated that higher amounts of patient revenue in relation to a hospital's assets were associated with statistically significant increases in operating and total profit margins, free cash flow, and equity capital (p < 0.01 for all four models); that is, hospitals that generated more patient revenue per dollar of assets invested reported improved financial performance. Likewise, a statistically significant link existed between lower revenue collection periods and all four indicators of hospital financial performance (p < 0.01 for three models; p < 0.05 for one model). Hospitals that collected faster on their patient revenue reported higher profit margins and larger equity values. For revenue cycle managers, these findings represent good news: Streamlining a hospital's management of the patient revenue cycle can advance the organization's financial viability by improving profitability and enabling equity growth.
authors.affiliation: Department of Health Systems Administration, Georgetown University, Washington, DC, USA. sr468@georgetown.edu
authors.forename: Simone Rauscher
authors.initials: SR
authors.lastname: Singh
authors.forename: John
authors.initials: J
authors.lastname: Wheeler
mesh_terms: D005377:Financial Management, Hospital / Q000379:methods / Q000458:organization & administration*; D006788:Hospitals, Voluntary / Q000191:economics*; D006801:Humans; D015999:Multivariate Analysis