Hospitals’ operating margins have decreased by 38.7% since 2015. One main cause explains this decline: expenses are growing at a faster rate than revenues.

How can healthcare providers mitigate the adverse effects of declining profits? One method is to install new revenue cycle management tools like patient financing.

Want to know more about decreasing healthcare margins and what you can do to boost revenues now? Keep reading.

Healthcare Expenses are Growing Faster than Revenues
According to the study by Navigant, there are 4 reasons for decreasing hospital profits.

  1. Lower demand for surgery and inpatient admissions
  2. Poor collection rates for private accounts in non-ACA states
  3. Less coverage from Medicare after budget cuts
  4. Health insurance isn’t delivering on value-based contracts

The Affordable Care Act initially benefited healthcare providers. Yet reductions in policy updates led to accumulations of bad debt from patients with denied Medicaid coverage.

Meanwhile, the introduction of new hospital technologies and payment solutions are driving expenses through the roof. These innovations include:

  • Implementation of electronic health records
  • Pay-for-performance and accountable care initiatives
  • Value-based health insurance contracts

Experts have also referenced shortages in nursing staff leading to increased pay demands, specialty drug prices, and reformed retirement fund costs as contributors to dwindling margins.

All these factors have added up to produce more expenses than healthcare revenues can cover. In fact, 60% of hospitals are projected to have negative margins by 2025.

How Patient Financing Can Help
While policy reform is needed to undo the majority of the damage, there is something administrators can do to rescue revenues now.

Patient financing can help mitigate declining healthcare margins. Hospitals that implement a medical lending strategy reduced bad debt and improved patient and employee satisfaction.