← Back to All Podcasts Healthcare Has a Revenue Problem, But It’s Really a Decision Problem In this episode, Angelica Landers, Healthcare Executive & Growth Strategist, discusses how healthcare has a revenue problem, but it’s really a decision problem. Highlights of this episode include: Before a hospital or healthcare organization launches a new service line, what financial questions should leadership answer first How to determine whether the service is actually worth offering Will the service actually make money? How to determine whether your payer mix can support a service line or business model before you invest significant capital into it How healthcare organizations can build stronger relationships with their payers to improve reimbursement and resolve issues What a true service line profitability analysis looks like What the financial and operational questions you want answered before you ever get to the purchase price When a healthcare organization is trying to grow, how do to decide whether to build internally, acquire another organization, or partner with someone else Subscribe Today! Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Angelica Landers. Angie is a healthcare executive and growth strategist with more than 18 years of experience working at the intersection of healthcare operations, sales, M&A, revenue cycle, technology, and startup growth. Her experience spans provider organizations, MSOs, DSOs, digital health, telehealth, healthcare technology, and high-growth startups. She has directed 58 concurrent M&A integrations, managed revenue cycle operations generating up to $45 million in monthly collections, sold more than $500 million in managed services agreements, and built scalable operating models for healthcare organizations navigating growth and transformation. Angie brings a unique perspective that connects the financial decision to the operational reality behind it. Her work includes acquisition strategy and integration, revenue cycle transformation, payer and reimbursement strategy, healthcare commercialization, P&L and financial analysis, operational scalability, strategic partnerships, and startup growth. Through Alleviate Strategy & Solutions, Angie advises healthcare executives, investors, founders, and growth-stage organizations on the systems behind performance, helping them make better decisions about growth, acquisitions, technology, operations, and revenue. In this episode, we’re discussing: Healthcare has a revenue problem, but it’s really a decision problem. Welcome, and thank you for joining us, Angie. Angelica Landers: Thank you for having me, Kelly. I’m so excited to be here today. Kelly: Yeah, we’re excited to have you. Well, let’s go ahead and jump in. So, healthcare finance isn’t just about collecting the money. It’s about making better decisions before the service ever happens. Before a hospital or healthcare organization launches a new service line, what financial questions should leadership answer first, and how do you determine whether the service is actually worth offering? Angelica: When everyone first proposes this question, everyone automatically assumes demand or growth equals revenue. And when everyone assumes this, before everyone can get their answers out, the CFO walks in and asks the most difficult question, but I would say the most correct question. Will this service actually make money, given our payer mix, our cost structure, and our referral patterns? Or, in just the shorthand question, is this a profitable demand? Will we make money, or our ROI off of implementing this new service? So, a service line can have strong community need, excellent clinical outcomes. Your neighbor practices might be doing this, and you might have heard of their uplift in revenue. You might have heard of their growing patient population. But are those transferable to your practice is the question. Before launching any new service, leadership must determine whether the opportunity creates that sustainable economic value within their practice. So, the goal is not simply to generate revenue. The goal is to generate revenue that exceeds the cost of care. By the time a claim reaches your billing department, leadership has to make these decisions beforehand that determine whether that claim is profitable or payable. So many healthcare organizations, to start with demand is great, but we should also look at margin. Kelly: Right. No, I mean, I love what you said. I wrote it down. Will the service actually make money? It’s a great question. Angelica: Yeah. Kelly: So how do you determine whether your payer mix can support a service line or business model before you invest significant capital into it? Angelica: Yeah, so I would start with the obvious question, is there really a revenue opportunity? There’s a series of analyses and just questions that leadership should go through, grouped together with their committee, their investors, and really go through each variable of economic value. So, starting with, obviously, what service to offer? Everyone is being innovative in the healthcare industry. Within tech, the startup rise of telehealth, value-based care, I mean, all of this brings different payment models, different strategies, different positions you can bring to your practice. But the key question here is, does this service create strategic and financial value, again, to your unique situation? Not every clinical service creates that economic value. Some services just generate direct profit. They create downstream referrals, straighten payer relationships, even support other strategic growths. So, looking at just the variable of, ‘How much does this service make by revenue position?’ isn’t the entire story. Leadership should evaluate community need, of course, competitors’ offerings, strategic alignment. But a service with moderate demand and strong reimbursement may outperform a high-demand service with weak reimbursement. I would say look at both the economical value and also the community need and demand that comes with it. Kelly: That makes a lot of sense. And I think the bottom line that I kept– and the word I kept hearing over and over again was value. So that’s definitely key. So beyond negotiating the contract, how can healthcare organizations build stronger relationships with their payers to improve reimbursement and resolve issues? Angelica: So, payer collaboration does not end after a payer contract is executed. It’s just the beginning. Your payer contract director should not be the only one talking to your payers. This is a collaboration between RCM, your payer contracting department, and really with a dotted line to finance through RCM. Within each contract, you are assigned a provider relations advocate, which is the bridge between your practice and the insurance company. Many organizations only contact payers when there’s claims denying or, obviously, when contract negotiations are up for renewal. But high-performing organizations treat payers as strategic partners. You can contact your provider relations advocate when there’s prior authorization problems, when there’s an increase to your denial trends, when you’re having coverage or network access issues. But they can also help you leverage strategies that you’ve never heard of, like good-faith appeals, payout negotiations. They can also help you while you’re transitioning through billing companies, or also help you with provider education when you’re dealing with referrals and orders coming from or referring providers. When problems occur, there’s always a relationship in place. And that’s why it’s smarter to do this early on in the contracting phase. The best reimbursement strategy is often operational excellence, not aggressive contract negotiation. Kelly: Yeah, and I mean, those relationships are key there. It makes a lot of sense. So, healthcare leaders often know their revenue. But do they really know what it costs to deliver that revenue? What does a true service line profitability analysis look like? Angelica: So, this is referred to as a cost analysis. The main question we ask when performing this analysis is, how much does each service actually cost to deliver? Only after understanding this margin should expansion decisions be made within leadership. One of the most dangerous questions in healthcare is: what’s our revenue, or where is it coming from, or what is that profit margin? Without asking what is our cost per unit of care, we’re not really understanding that profit margin just yet. Many organizations obviously know their charges, their collections, their net revenue, but they’re not doing the deeper analysis of cost. So, cost per patient, cost per visit, cost per procedure. A true service level profitability analysis includes revenue, direct cost, indirect cost, and even deeper dives into those fees of those indirect costs that ultimately get calculated into the cost of care. Cost analysis also includes what volume is required to break even. So how many patients, study visits, or procedures are required before we start losing money? Also, we would like to include in that analysis what is required to generate that profit margin. So, it’s not so much if we schedule it, but do we have the staff, the tools to render that service? And all of that is included in that indirect cost that we perform during that cost analysis. Kelly: Yeah, that sounds like a pretty important process. I know that the profit margin is really important. So, Angie, when you’re evaluating a healthcare acquisition, what are the financial and operational questions you wan
