H.R.1 and the Revenue Cycle: What’s at Stake
How to build the revenue cycle and compliance processes today that will keep your margins secure tomorrow.
As healthcare leaders size up H.R.1, one message bears repeating: the cost of inaction will be steep. The legislation is expected to squeeze hospital margins by double digits, forcing revenue cycle teams to shore up every potential weak point—from eligibility verification and denial management to compliance oversight—before the pressure hits. Knowing where the risks lie and where to focus action will be critical for protecting every dollar of earned revenue under H.R.1.
Understanding the Core Changes
H.R.1 tightens Medicaid eligibility, putting hospital operations to the test with higher administrative burdens, shorter timelines, and increased risk of uncompensated care.
- Shorter eligibility cycles: Redeterminations move from annual to six-month intervals, doubling the administrative workload to maintain active coverage.
- Reduced retroactive coverage: The allowable backdating period shrinks from three months to one, limiting reimbursement opportunities for patients without verified eligibility at the time of service.
- Work requirements: Expanded mandates add verification and reporting burdens. Missed compliance can cause mid-month coverage lapses, triggering coordination of benefits (COB) shifts.
These changes have predictable consequences. Past experience with the Affordable Care Act (ACA) shows that when administrative requirements increase, eligible people often lose coverage simply because they miss verification deadlines, a problem known as “procedural dropout.” This creates coverage churn, with patients cycling in and out of eligibility, complicating revenue cycle operations and increasing financial risk for provider organizations.
The First Line of Revenue Defense
At most organizations, Medicaid eligibility is outsourced, making disciplined vendor management and seamless handoffs critical for capturing revenue. About 30% of hospital admissions come through emergency departments, where proactive eligibility checks are rarely feasible. That still leaves 70% of admissions open to intervention. Every touchpoint outside the ER is thus an opportunity to reduce risk and speed up cash flow.
Key levers for front-end success include:
Specific and enforceable service level agreements (SLAs). Replace vague commitments with concrete timelines for starting and completing eligibility determinations to minimize lag time between patient contact and coverage confirmation. The faster verification occurs, the sooner billing can be confirmed.
Seamless handoffs. Front-end staff must transfer potential Medicaid cases immediately to verification vendors. Any delay in this process extends the vulnerability window and increases financial risk.
Active vendor oversight. With 15–25% of provider revenue passing through third-party vendors, organizations need strong vendor management frameworks. Monthly performance reviews, collection tracking, and process monitoring should be standard, not aspirational.
“Twenty-five percent of your cash is collected by somebody else, and if all you did was sign a contract with them and hope that you're going to get good service, that's not a strategy for success.”
Revenue Cycle Levers
Evaluating your revenue cycle before H.R.1 ramps up can uncover quick wins and protect margins before the new pressures hit. Focus on areas where improvements reliably move the needle:
Denial management. If fatal denials average around 5%, there’s room to get them down to 2%. Even with H.R.1 headwinds nudging rates back toward 3%, these gains can deliver meaningful margin impact.
Days in accounts receivable (AR). This directly impacts cash flow. Even in the days of low interest, AR velocity matters. What used to feel “low priority” at today’s rates can make the difference in having cash on hand to weather the storm. Improving AR through tighter billing and proactive collections puts more cash in the bank.
Pricing strategy review. “Lesser of” contract clauses can silently shave 3–5% off net revenue when prices fall below contracted rates. Regular audits of pricing strategies can ensure every dollar your organization is entitled to makes it to the bottom line.
Scenario Planning for Revenue Resilience
Leaders should develop scenario models reflecting potential revenue impacts ranging from 2% to 10%, calibrated to factors like Medicaid expansion population and payer mix. These models should guide both immediate tactics and longer-term strategies.
A balanced financial plan typically targets 60% from cost management, 30% from revenue optimization, and 10% from strategic growth or partnerships, recognizing that cost-cutting alone is insufficient and potentially counterproductive if it undermines care quality or workforce stability.
Revenue optimization acts as a force multiplier in this equation. Each percentage point of revenue protected can ease pressure on cost reductions, preserving operational capacity and clinical capabilities. In tight-margin environments, this becomes significant.
Compliance Under Pressure
Shortened eligibility timeframes also create heightened compliance risk. More frequent redeterminations mean more documentation requirements and tighter processing windows. Each verification failure means not only potential bad debt but also regulatory exposure.
Organizations should shore up compliance infrastructure to accommodate this increased complexity. Documentation protocols must support six-month redetermination cycles rather than annual ones. Quality assurance processes should be enhanced to catch eligibility gaps before they turn into denied claims or uncompensated care.
The new environment will be less forgiving of administrative errors, making strong compliance programs necessary risk management tools.
Strategic Recommendations
The right approach today can turn H.R.1 challenges into opportunities for stronger financial performance tomorrow. Here’s what to do now:
Assess the revenue cycle end-to-end. Establish clear performance baselines across key metrics including denial rates, AR days, and pricing optimization opportunities. Understanding the current state is the first step to improvement planning.
Implement rigorous vendor management protocols. Set firm expectations, monitor performance regularly, and hold partners accountable. Given the significant revenue collection role vendors play, organizations can’t afford passive contract management.
Improve front-end eligibility processes. Focus on proactive verification for the 70% of admissions where advance determination is possible, using workflow redesign, staff training, and technology, where appropriate, to limit risk and improve collections.
Model financial impact. Build realistic H.R.1 impact scenarios specific to organizational circumstances, and use these models to guide both immediate actions and longer-term strategic planning.
Reinforce compliance infrastructure. Streamline processes to handle higher administrative demands and compressed timelines to help stay audit-ready.
Final Thoughts
H.R.1 marks a big change in Medicaid eligibility administration with direct implications for revenue cycle performance, and each month without a plan risks lost reimbursement and weaker cash flow.
“My big advice to clients is: don't wait. Organizations need to focus time and attention on the revenue cycle and payer strategy side to drive top-line revenue. Those are the force multipliers that will separate the organizations who are just getting by versus those who emerge from this crisis better off than they were before.”
Decisions made today will shape organizational resilience in the months and years ahead. By improving processes now, organizations can absorb H.R.1’s impact with less disruption and come out stronger across the revenue cycle.
