Five Solutions to Key Accounting Challenges Hospitals Face in the New Normal

March 11, 2021 | Article

The COVID-19 pandemic has created many new challenges for hospitals to manage and exacerbated existing complexities. A few examples are:

Regulatory compliance: Additional funding from the government, provider relief funds and the Paycheck Protection Program all create new accounting to track and report. This takes time and triggers new compliance requirements.

Telemedicine and telehealth: The increased use of these services creates a new area of complexity and compliance in terms of billing and coding. Additionally, government and payment systems haven’t kept up with this, and Medicare and many insurance payers still haven’t updated their terms to adequately support this increased use in the long term. Further, certain segments of the population don’t have adequate access to technology to obtain telehealth services.

New competition: With this increased acceptance of telehealth and telemedicine, outside organizations can take advantage, creating new ways of delivering services that will compete with traditional hospitals. Hospitals must be innovative about delivering care in the new normal while at the same time looking for opportunities to use this same technology to expand their own footprint.

Revenue and receivables: This area is already highly complex for hospitals. There’s a variety of payers and methods of being paid, and there’s a primary and secondary payer option in most cases. Trying to monitor and manage the receivable functions, estimate the collectability of receivables, or even generate the receivable amount expected to be paid are challenging tasks.

Financial reporting: Many hospitals have hundreds to thousands of visits on a weekly basis. There are different payers, types of services, billing codes, billing rates and reimbursement rates. With the difficulty of monitoring and forecasting collectability, it’s hard to get good information to perform financial reporting.

Higher deductible plans: Insurance payers have moved to higher deductible plans, so patients must pay more out of pocket. It’s difficult to determine the individual’s ability to pay and how much hospitals will be able to collect.

Cancelled or deferred services: Social distancing immediately led to cancelled and deferred services, which shut down revenue for virtually all healthcare organizations aside from critical care and COVID-related care. To preserve cash, organizations identified opportunities to take out debt, strengthen their balance sheets and develop greater liquidity.

COVID-related expenses: Much of the supplemental funding received by healthcare providers requires the separate identification and documentation of COVID-related expenses as well as lost revenues. This has been a challenge as guidance from governmental entities continues to change, making it difficult for providers to make prudent financial decisions and to meet documentation requirements to avoid payback.

Take Action to Strengthen Accounting Strategies Today

Hospital accounting has inherent complexity, and forecasting is distinctly challenging right now. However, you can take action to strengthen your accounting processes and operations for greater stability and efficiency. For the highest impact, try one (or all) of the following:

1. Use real-time data analytics.

Implement daily and during-the-day business analytics and intelligence data to catch anomalies faster and make more timely decisions. Data analytics platforms push relevant data to you, making it easier to manage accounting functions, financial reporting and close processes, and even operations. However, many organizations still rely primarily on Excel. A data-driven approach can help you manage and improve costs and operations without sacrificing patient experience.

Data in accounting: Use data analytics to identify potential fraud risks and other anomalies. Build protocols within the program to flag specific or unusual items, such as transactions above a certain threshold. Catching these closer to real-time is more efficient and actionable than seeing them when you’re closing the books.

Data in operations: Monitor operational analytics during the day to identify issues as they arise and improve staff productivity and resource utilization. Timely data means you can align staff to the day’s volume and make quick adjustments as needed. Being able to flex your staff in this way is ideal for cost management. 

Data analytics help you make real-time decisions to optimize operations, costs and more. Healthcare analytics consulting can enhance your strategy.

2. Perform internal audits (and single audits).

Use the internal audit function in a risk-based manner, assessing where the key risks are and identifying where a hospital audit can be valuable in understanding and addressing those risks. In general, health systems are focusing on compliance in areas like revenue cycle. Is it functioning appropriately? Are you maximizing the amount you can get for services performed? Are you following the rules? These are critical questions right now.

Operational efficiency is another key area to audit, and this is an example where you could apply a data analytics strategy. Data analytics can also help identify potential anomalies or inefficiencies in disbursements and payroll.

COVID-19 has also impacted Single Audit compliance, and certain organizations will have to perform a single audit for this year. These audits are meant to ensure compliance with the rules of federal awards and grants.

Additionally, with the risks introduced by COVID-19, health information and human resources are top areas of concern to audit for compliance. Though some healthcare organization employees might rotate remote and on-site work, the vast majority of the workforce has to come to work every day, and they are on the front line.

3. Review and redesign processes.

Perform a process review for those that seem inefficient and outdated, especially if you’re considering implementing a new technology. Simply fixing a process can have dramatic results and could even preserve enough cash to pay for the desired technology.

First, assess what you want to accomplish and where you can make improvements. For example, many organizations follow time-consuming monthly closing processes that involve going through individual accounts and analyzing them to close the book monthly. Take a hard look at this process:

  • What are the critical things you need to do to close the books?
  • Are there routine tasks that could require less time and analysis?
  • How might you streamline those?

Monthly reports don’t demand the precision that year-end financial statements do. You can save time spent by reducing the precision where possible. Once you’ve established your new process, the next step might be to mechanize the reporting process to reduce manual work.

4. Recast your expectations.

Revisit your budget, vet it for relevance against the dramatic change imposed by the COVID-19 pandemic, and cast a new net. Even though some don’t believe budgeting is possible right now because the traditional annual budget you created likely isn’t accurate anymore, it’s time to reforecast—again and again. Reforecast on a routine basis so you can be more flexible and respond to current conditions. As you budget, plan for multiple potential scenarios like:

  • If you’re at your highest volume, what actions do you need to take to manage?
  • If you’re at your lowest volume, what steps do you take to reduce costs?
  • Take this strategy of rolling forecasts with you beyond the crisis. Greater flexibility and responsiveness are always beneficial.

5. Adapt early and often.

Finally, identify impactful changes you can make to improve profitability and stay viable. There are opportunities to reduce costs and improve efficiency by:

  • Analyzing your service line to identify services with low returns and redesigning or eliminating them.
  • Assessing the necessity of your brick and mortar locations as telehealth and telemedicine reach greater acceptance.
  • Considering technology investments to enable more remote work and greater telehealth capabilities.
  • Identifying opportunities where outsourcing would fill a need or gap, make a function more advanced and efficient, and reduce costs.


Improving processes in health systems management can remove kinks in your organization and make way for strength, innovation and growth.

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