Within the healthcare industry, the financial landscape is shifting and evolving, driven in large part by ongoing changes in both public and private payment. U.S. physicians and hospitals are facing considerable impacts on their healthcare reimbursement, healthcare finance thought leaders say, due to a number of factors, including the significant impact of consumerism in healthcare, increasingly thin operating margins, declining reimbursement rates, as well as changing reimbursement models. At the same time, healthcare finance leaders also are faced with ongoing uncertainty about the fate of the Affordable Care Act (ACA), which has provided health insurance coverage for millions of Americans.
The ongoing shift from fee-for-service reimbursement models to value-based care payment models is fundamentally changing care delivery and payment, and this evolving payment landscape challenges finance leaders to rethink their revenue cycle management (RCM) strategies.
Traditionally when you’ve looked at RCM and how you manage it, it’s truly been a management of denials and management of efficiencies in the process, and as we start to move into a value-based care environment, we’re changing that paradigm. We’re starting to look at, first, what produces the best outcomes, and with those outcomes, what kind of reimbursements can we get. So, the importance that you place on certain aspects of the revenue cycle has shifted dramatically,” notes Jim Akimchuk, principal advisor and revenue cycle practice leader at the Naperville, Ill.-based Impact Advisors.
The volume of a healthcare organization’s business within value-based reimbursement models also will impact the organization’s RCM strategy, adds Angela Capretto, principal advisor at Impact Advisors. “Other areas are going to be impacted obviously—data analytics is going to become an important component supporting value-based care and tying clinical outcomes to financial performance. RCM leaders will need to focus on the gathering of data elements and doing the basic groundwork to gather information and make sure that it is collected in the most efficient way possible.”
As patient care organizations begin to move into value-based care and payment models, finance and RCM leaders need a plan to facilitate a transition away from fee-for-service reimbursement structures. “That may start with an assessment around the major levers of patient care and around the data analytics capabilities, patient engagement and patient billing methods,” Capretto notes.
Moving forward, healthcare finance leaders will need to focus on several key areas to make the successful transition to value-based care and to effectively navigate the current financial landscape. “Data analytics and the ability to measure quality metrics to measure whether the organization is moving the meter, as well as pulling in financial metrics to allow RCM to track progress and provide transparency into capabilities,” will be critical, Capretto notes. “You need to know which private and government payers are providing financial incentives that can help enable you to focus on one area more than another, as it relates to risk and knowing which providers could give financial penalties if you miss quality and cost benchmarks,” she says.
Improved patient engagement and patient billing methods play a key role in the successful transition to value-based reimbursement models, she notes. “Organizations should explore using applications to reach patients beyond the bedside, so the patient feels engaged. An example could be notification via patient portal of an annual mammogram that is due and more options for the patient to pay their bills. As you go deeper into revenue cycle, improved patient billing methods, in a value-based reimbursement structure, really requires you to understand the propensity to pay for patient liability balances.”
Increasing Focus on the Patient Financial Experience
The past decade has seen a shift in healthcare revenue sources as patient financial responsibility has increased. It’s estimated that patients now account for 30 percent of healthcare revenue on the back end. According to human resources consultant Aon Hewitt, out-of-pocket spending for people even with employer-provided health insurance has increased by more than 50 percent since 2010. The National Center for Health Statistics estimates that nearly 40 percent of healthcare consumers are on high-deductible plans.
These trends—high-deductible health plans and more financial responsibility shifting to patients—as well as the rise of consumerism are having a significant impact on revenue cycle leaders’ strategy, many experts say. As consumers, patients can shop around for the best deals for most products and services in other industries and that expectation is shifting to healthcare. This puts pressure on healthcare organization leaders to provide more visibility into the billing process and upfront price transparency; to make the overall process of receiving and paying for care more personalized and consumer-centric.
In a survey from consulting firm Navigant and the Healthcare Financial Management Association (HFMA), 81 percent of healthcare executives said they believe the increase in consumer responsibility for costs will continue to affect their organizations. And, executives from health systems and larger hospitals believe their organizations will be more heavily impacted by consumer self-pay, the research revealed.
Healthcare finance leaders are challenged to rethink their approach to patient billing and collections in order to enhance patients’ financial experience and improve financial performance.
St. Luke’s Health System, based in Boise, Idaho, has taken steps to improve its billing process to develop a personalized financial health experience that offers patients transparency, choice, and control over billing obligations while turning bad debt into consistent payments. The system’s financial leaders also are leveraging technology, such as automated segmentation and advanced analytics, to design what it calls a “holistic financial experience” that addresses each patient’s individual circumstances. These efforts have led to significant improvements in patient satisfaction and patient collections, according to Bob Mueller, vice president-revenue cycle at St. Luke’s. The health system operates eight hospitals and more than 200 medical offices in Idaho, Eastern Oregon and Northern Nevada.
When Mueller joined St. Luke’s in 2013, he recognized there was room for improvement in the organization’s billing and collection systems to better serve patients.
“We were seeing increased patient accounts, whether it’s from high deductible plans or more patients without insurance coverage, as we’re in a non-expansion state,” Mueller notes. [Editor’s note: Idaho state leaders chose not to implement Medicaid expansion under the ACA, however, Idaho voters approved on Nov. 7 a ballot initiative to expand Medicaid.]
Mueller continues, “With that growth, our infrastructure hadn’t kept up with it. We had some call center issues, both in terms of answering the phone and education of the staff in terms of addressing those accounts. We needed to take care of that. We didn’t have a robust patient portal to allow patients to have a retail experience similar to what they would have with any other billing experience.”
St. Luke’s executive leaders took steps to evaluate and survey patients about their patient financial experience, and surveys revealed that only 28 percent of patients reported they were satisfied with St. Luke’s billing process.
“We used that information to begin a path forward. We were focused on the digital strategy and the call center strategy at the same time. We began Lean improvement processes as well as training and quality improvements with the call center, so we significantly improved our abandonment rates, our calls being answered on time and also monitoring one-call resolution,” Mueller says.
At the same time, financial leaders at St. Luke’s began working with VisitPay, a technology vendor that provides a patient financial engagement platform, to implement an online bill-pay platform that leverages analytics to optimize patient payment outcomes. Through that platform, patients can set up a monthly finance plan, consolidate invoices among family members and review charges. The platform also integrates with St. Luke’s Epic patient accounting system. “It’s seamless for the patient and it’s similar to what you would experience in any online retail environment,” he notes.
The platform also monitors patient experience and behavior, he says. “Within that platform, we also have patient segmentation in terms of ability to pay and propensity to pay, so we could then begin to see those patients with higher propensity to pay—how did they behave versus others and how could we provide different options to patients. Through the platform, we also designed the limits, how far we’re willing to extend payment options, and then we let the patients select within that,” he says.
Since implementing the platform, St. Luke’s has seen breakthrough results with a 50-percent increase in patient satisfaction ratings and close to a 38-percent increase in patient payment rates over traditional billing processes. “It’s by far our most effective method of collection and has the highest patient satisfaction and the lowest cost to collect in this space,” Mueller says.
A patient with a better financial experience has higher yields, better collections and a much smaller operational footprint driven by fewer questions and concerns, healthcare finance leaders say.
“When you’re trying to balance patient loyalty, patient satisfaction and collections, you need to provide patients more options, and you’re going to yield benefits, both financially and with patient satisfaction,” Mueller attests.
The Role of IT and CIO-CFO Collaboration
In this evolving payment landscape, finance and RCM leaders also need to focus on maximizing technology to spearhead revenue cycle improvements and to improve efficiency and automation. According to Impact Advisors’ Akimchuk, many of the major RCM solutions on the market are becoming more integrated with functionalities such as financial counseling and real-time eligibility capabilities. “However, none of them are at a point where they can stand up and say, ‘We have your total package.’”
Technology gaps still persist in this area, as a recent survey by Black Book Research found that more than one-quarter of U.S. hospitals do not have a viable, effective RCM solution in place. And, of those hospitals, 82 percent said they anticipate making value-based reimbursement decisions next year without an advanced software implementation or outsourced partner.
Research from Navigant and HFMA found that healthcare CFOs and RCM executives forecast more moderate IT investments to improve revenue cycle performance and a continued focus on IT—revenue integrity in particular—to drive revenue improvements. However, many healthcare organizations continue to struggle to optimize revenue cycle-related electronic health record (EHR) functions and to address consumer self-pay.
There is a need for clinical, finance and IT leaders to effectively collaborate, at a strategic level, to better leverage IT to support revenue cycle performance, especially around EHR optimization, industry leaders say. “There is a need to all truly be on the same page and to be working within an environment that is integrated, not only from a technical perspective, but also from a business perspective and a workflow perspective; all stakeholders really now need to come to the table and they all need to be working toward that same, new goal,” Akimchuk says. “Traditionally, the role of the CIO may have been more to drive the technology element, but what’s happening now is clinical and finance are actually at that table, helping to define what’s needed and the three are working together in order to get the technology to produce the overall results that you need, oftentimes having to think outside of the box even as to how the technology may have been originally intended.”
And this collaboration requires a different approach for most organizations, he notes. “Traditionally within RCM, the revenue cycle side has stayed to its side of the line and clinical stays to its side of the line, but as we move more into value-based care models, it really requires both [departments] to work together to accomplish success and to drive to a singular goal as opposed to separate goals,” he says
Many leading healthcare organizations already are moving forward on this strategic approach as they move more deeply into value-based care. Brian Unell, vice president, revenue cycle at Piedmont Healthcare, a seven-hospital health system based in Atlanta, Georgia, says he is seeing increased collaboration across the Piedmont health system. “There is a lot more interaction between different parts of the health system that used to work in silos and are now working more collaboratively together. For example, programs that used to be solely focused on clinical documentation improvement that might have been led out of the finance area are now closely tied to our quality area and care management.”
Capretto notes that this collaborative approach is key to the effective leveraging of robust data and analytics to track performance in value-based care payment models. “The analytics will tell the story; what the quality measures that we really need to move the needle on for financial impact are, whether that’s making sure we’re taking advantage of incentives in our contracting models, or just making sure that our baseline performance is comparable to what we were receiving in a fee-for-service model. It really punctuates the need for the CFO and CIO to act together,” she says.
As healthcare moves to an environment where organizations are managing some level of risk, financial management technology will need to adjust as well, and there is the potential for newer technologies like artificial intelligence (AI) and machine learning, particularly for predicting denials and patient billing.
“AI is absolutely where we need to go, and we have begun to break ground in terms of better understanding of what it really means,” Akimchuk says. “The use of AI in RCM processes is a natural progression—understanding how you can automate and systemically drive action based on rules and responses coming back from the payers is absolutely the next step that we need to begin to look at to eliminate the implication of human error and to be able to truly control our overall costs.”
Capretto adds, “What is most exciting about AI is how it will change how people work with technology. I relate it to texting versus a conversation. I don’t think AI is going to solve all the issues, but I think AI will simplify some of the complexities that exist in our healthcare reimbursement structure today. AI can help manage some of the change, and it can identify things that are occurring throughout the process incorrectly and help drive some improvements.”
The pre-authorization process is an area that is ripe for the capabilities of AI technology, she notes. “It’s so time consuming for people to determine if a pre-authorization is necessary, and that would be an area where automation would significantly empower the RCM because the skillset for those folks who work in that area can be leveraged in so many other ways.”
However, industry leaders note that most organizations are early on in the journey of using AI and machine learning on the financial side of the business. “RCM leaders are very cautious, and some might say skeptics, and until [the technology is] fully matured, a lot of organizations are not willing to take the risk,” Capretto says. “I think the key to effective AI implementations is going to be an organization that is willing to partner with a AI firm to help build it together and do it small and then market it and package it. I don’t think, given the complexity, it can be done any other way.”