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The Reimbursement Battle: What's A CFO To Do?

Analysis  |  By Marie DeFreitas  
   June 03, 2024

A few specific inpatient and outpatient services in particular are feeling the effects of lower reimbursements leaving CFOs to strategize. 

Lower payer reimbursements have had a big effect on inpatient and outpatient services—but there are ten that are taking the cake.

Recent data from Strata Decision Technology analyzed the cost of care across inpatient and outpatient facilities and narrowed in on rate changes seen between 2021 and 2023. It found that there are certain services that had an operating gap that spanned between an eye-opening -12.1% and -42.9%.

How did we get here?

The report, published by the AHA, explains that underpayments from Medicare and Medicaid totaled nearly $130 billion in 2022, and Medicare paid just 82 cents for every dollar hospitals spent caring for patients. This is resulting in a shortfall of almost $100 billion.

What’s worse news for CFOs though is that those cumulative underpayments in the second half of the last decade increased 40% compared to the first half, and that’s even after adjusting for inflation.

Medicare and Medicaid aren’t the only payer types facing intense reimbursement challenges; payers across the industry have seen a steady decline below costs for reimbursements.

What do the numbers show?

Here are ten services where the reimbursement rates don’t cover the costs of providing care across inpatient and outpatient settings:

Inpatient services

  • Behavioral health: -34.3% below cost
  • Nephrology: -34.1%
  • Burns and wounds: -24.1%
  • Pulmonology: -19.4%
  • Infectious disease: -15.3%

Outpatient services

  • Burns and wounds: -42.9% below cost
  • Nephrology: -32.3%
  • Behavioral health: -31.7%
  • Pulmonology: -17.5%
  • Infectious disease: -12.1%

What’s the CFO Gameplan?

Rising costs and lower reimbursements are spelling “stress” for CFOs, and while viable solutions can seem elusive, they’re not impossible.

Bill Pack, CFO at Conway Regional Health System and a HealthLeaders CFO Exchange member, recently shared some of his top strategies for battling these prevalent issues in his own health system.

Outside of exploring all cost reduction avenues and negotiating a fair partnership with a payer, Pack points to two other important strategies that he deploys: diversification of services and utilization management and efficiency improvements.

“We are also expanding and adding services that include higher-reimbursed procedures or specialties to offset the lower margins of resource-intensive services,” Pack said.

“We are implementing utilization management processes to ensure that resources are used efficiently,” Pack says. “We are also identifying areas for improvement in care delivery, which lowers costs and improves patient care.”


Marie DeFreitas is the finance editor for HealthLeaders.


High medical costs coupled with low payer reimbursements are hitting health systems

CFOs need to develop focused strategies to combat these two big issues

Conway Regional Health System CFO Bill Pack shares insight on his main strategies

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