Preserving Profitability: Why Financial Redundancy is Vital in Healthcare

The events of the first half of 2024 have highlighted a crucial lesson. No healthcare system is immune to cyberattacks. These attacks impact patient care and can lead to significant financial consequences, including class action lawsuits and fines from HIPAA and the Securities and Exchange Commission (SEC).

However, an often overlooked impact of a cyberattack is its effect on the revenue cycle. A recent study by American Hospital Association revealed that a cybersecurity breach at a clearinghouse resulted in a daily revenue loss of nearly $1 million for 60% of affected hospitals.

While hospitals have contingency plans for events like power outages and extreme weather—backup generators, secondary chillers, and fiber for internet coverage—they can often overlook vulnerabilities in the revenue cycle.

Financial redundancy is essential to maintaining operations after an attack. This article discusses the concept of financial redundancy in RCM and recommends proactive measures for hospitals and revenue cycle management/clearing house partners.

Five Costs of Revenue Cycle Management Downtime

1. Inability to submit claims or receive payments: Outages can disrupt revenue streams, impacting the financial stability of healthcare providers. In these cases, providers may need to rely on cash reserves. Implementing a multi-cloud infrastructure can help mitigate this risk by diversifying data storage and reducing the likelihood of a single point of failure.
2. Failure to process insurance eligibility or authorization requirements: This can delay patient care, introduce unnecessary reimbursement risk, and lead to a backlog of administrative tasks. Managing the issue may require extending payment terms with payers and providers. Establishing hybrid deployments that combine on-premises and cloud-based solutions provides additional resilience and flexibility in revenue cycle data management.
3. Unable to calculate costs and coverage for pharmaceuticals: This situation impacts drug pricing and patient billing, potentially leading to higher costs and treatment delays. In response, providers may revert to paper processing, resorting to labor-intensive manual processes that overburden an already limited staff. Continuous monitoring of systems can ensure early detection and rapid response to any issues, thereby minimizing downtime.
4. Interruption in checking insurance coverage: Patients often face uncertainty about their coverage, leading to potential delays in treatment. To address this issue, providers may consider adopting a secondary/backup clearinghouse strategy. It is essential to maintain comprehensive backup systems that store data securely and can be accessed quickly in the event of a system failure or data breach.
5. Incident Command/Crisis Response Resources: A fragmented approach to incident response can exacerbate the crisis, leading to inefficient handling of the situation. Ensuring redundancy in planning through multi-cloud infrastructure, hybrid deployments, continuous monitoring, and comprehensive backup systems further strengthens the ability to manage such crises effectively.

Healthcare systems that prioritize financial redundancy can avoid last-resort options and significantly reduce the impact of disruptions on cash flow, patient care, and staff well-being. Financial redundancy ensures that hospital expenses are maintained, allowing staff to be paid and operations to continue, which helps maintain morale and operational readiness. It also supports cash flow maintenance to promote smooth financial operations and avoid disruptions to service delivery.

Additionally, it safeguards supply chain management by ensuring that medical supplies and pharmaceuticals remain available without interruption. Furthermore, financial redundancy provides a buffer against unexpected financial shocks, allowing the organization to sustain essential services without compromising quality or affordability. By implementing financial redundancy, healthcare organizations can protect critical functions, ensure continuity of care, and maintain stability even during financial system failures. This proactive approach not only increases resilience but also fosters trust among patients, staff, and stakeholders, ensuring the long-term viability of healthcare operations.

Photo: CreativaImages, Getty Images

Greg Surla is the senior vice president and chief information security officer at FinThrive. With over 30 years of experience, he has worked in a diverse range of industries including software, government, manufacturing, and more. Greg is highly skilled in Security Architecture, Business Continuity Planning, Penetration Testing, Business Intelligence, Governance and Regulatory Compliance, and Threat/Vulnerability Management.

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