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Ext. PublicationSuccess Story: Examining Revenue Sustainability for a Health System
Transaction Advisory Services
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The Client
Our client was the management team of a large health system operating nine medical facilities, including hospitals, surgery centers and an imaging center, in a major U.S. city. The system provides a wide range of patient care services, including those tied to complex billing and reimbursement scenarios such as letters of protection (LOP).
The Challenge
Understanding revenue recognition and cash flows in health care is complex. Collections often depend heavily on the specific services provided, the accuracy of claim submissions and timeliness of payor reimbursements.
Our client needed a clearer picture of its revenue cycle, including how historical billing patterns translated into actual cash collections. With revenue coming from a variety of sources, such as insurance companies, patients and legal settlements, management wanted to assess the overall quality of revenue and gain confidence in future cash flow estimates.
The Process
Weaver’s transaction advisory services team worked closely with the client to gain a strong understanding of its revenue cycle management, revenue recognition policies and accounting methods. Our approach involved a multifaceted analysis:
- Cash collections analysis: We conducted a detailed review of historical billing and collection data, correlating charges with related collections by date of service. This allowed us to build “collection waterfalls” segmented by service, payor and location, revealing how revenue was collected over time.
- Future collection estimates: Using these collection waterfalls, we estimated future collections based on historical collection rates and the natural passage of time.
- Revenue cash proofs: Weaver performed revenue cash proofs by reconciling reported revenue to actual bank statement deposits, helping confirm its accuracy and our reliance on the historical billing and collection data.
- LOP arrangement understanding: Our team collaborated with management to understand the intricacies of the LOP arrangements, including relationships with funding sponsors. This was crucial to accurately incorporating these services into our overall quality of revenue analysis.
The Deliverables
Weaver provided the client with a data-driven, forward-looking analysis of cash collections across multiple facilities and service lines. Key deliverables included:
- In-depth insights: A detailed understanding of historical cash collection trends and the factors influencing them across different services, payors and locations
- Future collection projections: Data-supported estimates of future collections to provide more informed financial planning and forecasting
- Revenue cycle optimization opportunities: A clearer view of existing revenue recognition processes, highlighting areas for potential refinement within the broader revenue cycle
Equipped with Weaver’s detailed analysis, the health system’s management team gained clearer insight into complex revenue streams and strengthened their foundation for future planning.
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