Financial Health Checkup: Growing Net Patient Revenue for Nonprofit Health Centers 

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Your organization may provide health services for thousands of people a year, but when was the last time your organization performed a check-up on its finances? 

Similar to how patient care can be complex, accounting within a healthcare setting can also be complex. It must consider financial reporting processes and internal controls over financial reporting (ICFR), compliance with legal and regulatory requirements (whistle-blower process), risk management, protecting assets and providing proper financial oversight, payer reimbursement, patient care financing, partial payments, and many other elements.   

Adding to that are the demands on your clinic/nonprofit to increase net patient revenue. As patient volumes have rebounded in force from the pandemic-related shutdowns, revenues have only slowly recovered. 

More Patients, Less Money 

According to a report from healthcare industry group Alvarez & Marsal on third-quarter 2021 financial using publicly available financial data from the 25 largest nonprofit health systems, net patient revenue decreased 22% from the beginning of 2019 to the second quarter of 2020 due to the COVID-19 pandemic and only then slowly began to recover.  

From the third quarter of 2019 to the third quarter of 2021, revenues were up 13%. Despite the increase, revenues are behind where they would be if they had continued growing at pre-pandemic rates. The report predicted revenues would’ve been 9% higher at the end of the third quarter of 2021 than they were because of the pandemic. 

Nonprofit health clinics rely on increasing net patient revenue to combat growing expenses. From the third quarter of 2020 to the third quarter of 2021, operating expenses increased 8% and were 14% higher for these clinics, according to the same report. 

So, what’s stopping your center from increasing net patient revenue? 

Mid-pandemic more patients sought care than when compared to the pandemic’s beginning. However, because of delayed care earlier, length of stay is longer. Between the third quarter of 2019 and 2020, nonprofit centers saw a 6% increase in length of stay and a 5% increase between the third quarter of 2020 and 2021.  

As your clinic sees more patients, and these patients stay longer, it makes growing patient net revenue difficult. To ensure your organization is making proactive decisions around net patient revenue, it needs an accounting system that can help drive informed operating decisions. 

Make Informed Decisions  

With an accounting system that’s properly equipped to handle the intricacies of healthcare accounting, decisionmakers have the necessary analytical information to influence operations.  

This preparation checklist can determine whether your accounting software is right for your organization. If you answer “no” to any of these questions, request a demo to learn how to address these concerns so you can accelerate your organization’s growth and begin working towards increasing net patient revenues. 

When it comes to accounting capabilities: 

  1. Can I easily measure the performance of a program or activity? 
  1. Can I create reports for multiple fiscal years? 
  1. Can I track and report on encumbered funds? 
  1. Can I perform allocations of indirect costs by grantors? 

When it comes to reporting capabilities: 

  1. Is my organization prepared for an audit? Does our accounting software have internal controls and an audit trail in place? 
  1. Can I easily tailor reports for each funding source? 
  1. Does our current solution incorporate nonprofit-specific accounting rules? 
    • For example: How and when to handle encumbrances, how to report for donor-restricted and unrestricted funds, etc. 
  1. Can I easily manage and report on multiple budgets? 
    • For example, Original vs. Revised, board budget, operating budget, grantor budget, forecast budget, etc. 
  1. Can I easily see how money is tracked and budgeted? 
  1. Does our current solution integrate with the other software/tools we use? 
  1. Is our accounting software designed for our organization’s needs? 

As reimbursement revenues continue to shrink, your organization needs an accounting system that drives actionable insights and influences staffing hours and supply spending. While revenues are increasing, so are operating costs. Do you know if your organization is maximizing its available resources?  

Your center needs an accounting system that handles the above accounting and reporting capabilities and can present fiscal insights in an understandable and digestible insight for external stakeholders and your board. It needs fund accounting software. Fund accounting software is designed for the nonprofit sector and accounts for intricacies that regular accounting software doesn’t account for.   

Fund accounting software built for the needs of nonprofit healthcare organizations:  

  • Allows for tracking of an unlimited number of accounts 
  • Accommodates infinite segments  
  • Grows with your organization through modular add-ons  
  • Doesn’t need to be HIPAA compliant 
  • Creates FASB- and GASB-compliant reports  
  • Makes managing and reporting on multiple grant funds simple 

Achieving Net Patient Revenue with a Fund Accounting Software  
With fund accounting software, your organization can create unlimited budgets with built-in audit records and define the reports that show how your organization achieves its mission. 

With more patients seeking care, and staying under care for longer periods, your healthcare center can stay competitive in this changing landscape by ensuring its finances are accurately reflecting the current state of operations, and by recapturing time dedicated to administrative side of healthcare accounting.  

When it comes to growing your center’s net patient revenue, minimize the resources needed to handle the operational aspect of healthcare accounting and ensure you’re doing everything you can to advocate for your center.  

Learn how your healthcare organization can better achieve net revenue through better reporting with a fund accounting. Learn more today

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Eric Oliver

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