Healthcare Revenue Cycle Management: Lowering Costs and Increasing Profitability

In a recent industry survey, 90% of medical practitioners said operating expenses were higher last year than the previous year.1 The increase was 11.1%.2 In fact, many practice leaders said the costs are outpacing revenues.2

Increasing costs are coming at a time when practices continue to see payment cuts. In 2025, the Centers for Medicaid and Medicare Services (CMS) reduced the physician payment schedule by almost three percent (2.83%) which further lowers the average physician disbursement by 2.93%.3

Rising expenses and payment reductions directly affect the bottom line. Forty-one percent of practice leaders cite cost containment as a top priority.4 Medical practices must balance reduced payments and increased costs to improve healthcare revenue cycle management (RCM).

Why are medical practice costs increasing?

Like every other U.S. business, healthcare organizations are feeling the effects of inflation. Labor and administrative costs are primary contributors to increased spending among medical practices. In addition, tariffs are driving up expenses for medical supplies and pharmaceuticals, as well as technology.  

• Medical practices are facing continuing labor shortages.
  Retirement, burnout and lower enrollments in medical institutions and training will continue to reduce the number of healthcare workers in the coming years. Global human resources consulting firm Mercer predicts a shortage of 100,000 critical healthcare workers by 2028.5
  
  
• Tariffs are increasing medical supply costs.
  The U.S. imports more than 70% of its medical supplies from 10 countries. A recent survey of healthcare vendors predicted reciprocal tariffs would increase the cost of medical and pharmaceutical supplies by 15%-20%, including vaccines and injectables.6 Suppliers and vendors are increasing prices or passing down tariff surcharges to customers to offset additional costs.
  
  
• Cybersecurity is costly.
  Because medical practices manage large volumes of sensitive data, including patient identification and treatment information as well as payment details, these organizations are popular targets for fraud. The healthcare industry experiences two to three times more cyberattacks than other sectors, with organizations typically allocating 7% of their annual budgets to cybersecurity.7
  
  
• Investments in expensive medical technologies shave margins.
  Medical technologies such as electronic health record (EHR) and imaging systems, surgical equipment and custom telehealth tools modernize practices and offer long-term advantages. But they require significant capital outlays, depreciate annually and directly impact healthcare revenue cycle management.
  
  
• Administrative complexity is persistent.
  The U.S. has one of the most complex healthcare systems in the world. Multiple insurers and systems, as well as reduced staff and shifting regulatory requirements reduce efficiency and increase costs. Administrative costs now account for as much as 40% of practice spending.8

What are effective cost control strategies for medical practices in 2026?

Healthcare employers are focusing on a series of long-term strategies to address areas of increased cost. When these organizations prioritize AI-driven hiring, group purchasing and automated accounts receivable solutions, they can achieve more predictable expenses and improved operational efficiency.

• Adopt AI-based hiring and retention strategies.
  Integrating artificial intelligence will help employers fill open roles and address employee attrition. For example, 62% of healthcare employers will use AI for recruiting.9 With predictive matching, employers can vet candidates based on verified skills and preferences instead of keywords. Existing employees and gig workers will benefit from the flexibility to choose shifts using mobile apps.
  
  
• Streamline supply costs with group purchasing and automation.
  Group purchasing organizations (GPOs) negotiate better prices for supplies and equipment which enables smaller practices to benefit from bulk purchasing discounts typically reserved for larger networks. In addition, practices are increasingly adopting inventory management software to monitor usage patterns and avoid ordering too much or waste.  These systems help ensure critical supplies are always available while minimizing excess stock and associated carrying costs.
  
  Organizations are also diversifying their supplier base to reduce the risk of disruptions and price volatility. Establishing relationships with multiple vendors enables practices to compare pricing, maintain supply continuity and respond more flexibly to changing market conditions. Furthermore, automating supply ordering through integrated EHR or practice management platforms streamlines procurement and reduces administrative burden, freeing staff to focus on patient care.
  
  
• Reduce accounts receivable days to improve liquidity.
  Delayed payments are among the leading causes of revenue shortfalls. RCM decisionmakers responding to a recent survey of hospitals and health systems, cited denials and overdue payments as barriers to profitability.10
  • Prior authorization denial rates for most organizations were 6%-9% and in the double digits for those with 10,000+ discharges.
    
    
  • Almost 50% of practices wait six to eight weeks for payment.
    
    
  • Medicaid often takes more than six months to pay.
    
    
  • The collection cost is usually 2%-10% of the total amount.
    
    
  The solution to balancing costs and reimbursements is to expedite accounts receivable for faster cash conversion. Automated AR solutions accelerate and optimize the entire receivables process, delivering faster collections and fewer follow-up delays for improved healthcare revenue cycle management.
  
  An automated AR suite that integrates AI can also provide straight-through processing (STP) across all payment channels, aggregating electronic and check payments regardless of location, type or channel. This reduces unnecessary deductions, cuts labor costs and better manages payment relationships. Artificial intelligence capabilities increase STP and quicken the application of cash to the balance sheet. Integrating all payment data into a central repository with a dashboard gives providers visibility into the entire A/R lifecycle.
  
  For best practice revenue cycle management the American Medical Association offers key performance indicators and recommended goals. These include data collection, coding accuracy and productivity, denial volumes and appeals, as well as days in A/R.11

AI, automation and best practice revenue cycle management helps medical organizations streamline staffing, reduce supply expenses and accelerate payment cycles. These strategies contribute to greater financial stability.

You can master healthcare revenue cycle management.

Recognized among the best banks in the Southeast, Synovus has the expertise to help corporations transform accounts receivable to increase revenue. For more information on our A/R services, complete a short form and a Synovus Treasury & Payment Solutions Consultant will contact you with more details. You can also stop by one of our local branches.