Ongoing changes in both public and private payment are shifting the landscape around revenue cycle management these days, and U.S. physicians and hospitals are facing considerable impacts on their healthcare reimbursement. Healthcare finance thought leaders say, at the CFO level, healthcare organizations face increasingly thin operating margins, declining reimbursement rates and changing reimbursement models.
“It’s the struggle with how do I bend the cost curve to continue to be viable in this environment, where I am seeing payer mix shifts going from the commercial world over to the government world? And this is being influenced by the Baby Boomer generation coming off employer-based health plans and moving into the Medicare world, be it through traditional Medicare or Medicare Advantage,” says Sandy Wolfskill, director of healthcare finance policy at the Healthcare Financial Management Association (HFMA), a Chicago-based trade organization for healthcare finance professionals. “There’s also the impact of the changing reimbursement models whereas we’ve lived in a fee-for-service world, for a very long time, and so the emphasis was on volume. In the value-based world, we now are confronted with the issue of risk, and if we assume risk in our contracts with our payers, how do we control for that risk and how do we manage that risk?”
Brian Sanderson, managing principal of the Chicago-based Crowe Horwath LLP healthcare services group, agrees that the growth of “revenue at-risk” reimbursement models impacts healthcare organizations’ revenue cycle strategy. “Whether it be bundling, whether it be pay-for-performance or certain type of services that are tied to quality metrics, a higher percentage of third-party reimbursement is tied to these things, so it’s hard for revenue cycle management to understand exactly what they should be paid and then build processes around them to ensure that they get 100 percent of that payment,” he says.
And, he adds, “There’s a lot of cost pressure on revenue cycle organizations to ensure that their cost to collect is as lean as possible. Unfortunately, when the contracts are more complicated, they are asking you to do more with less, so there’s a bit of a disconnect there.”
As Healthcare Informatics’ Editor-in-Chief Mark Hagland noted in a July article about revenue cycle management, the advance of developments related to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) law, including the Merit-Based Incentive Payment System (MIPS) program and the potential for Medicare and Medicaid cuts to hospitals and physicians, particularly if the Affordable Care Act (ACA) is fully or partially repealed, all pose to significantly impact federal healthcare reimbursement. Meanwhile, Hagland noted, private health insurers are becoming far more demanding and rigorous in their claims management, with outright claims denials accelerating now.
In an interview with Hagland, James E. Green, a managing partner at The Advisory Board Company, the Washington, D.C.-based research and advisement organization, said physicians are beginning to realize that the business of healthcare is far more complex now than it was 20 years ago. “The procedures are more complex, the payment processes around office-based procedures are more difficult; and they’re doing more procedures outside of facilities than 20 years ago, when many of these doctors got into practice. And they’re realizing that if they’re not incredibly meticulous about their billing processes and revenue cycle around those procedures, they’re leaving tons of money on the table,” Green, who is the national partner in The Advisory Board’s Revenue Cycle Service Line, said.
James E. Green
“There is an enormous amount of uncertainty right now,” Sanderson says. “Most of the angst that we’re hearing is in the office of the CFO. There’s a lot of uncertainty relative to ‘What is my revenue actually going to be? What do I expect my revenue to be, what do I want it to be, what do I project it to be, and what do I manage it to be?’ Then it drops down into the various pieces that affect revenue and report to the CFO; one of those is managed care contracting, another one is reimbursement, and then also revenue management. There is a lot of pressure on the revenue cycle operators to make sure that they collect every last penny that they are due.”
Top Priorities for Revenue Cycle Performance
Drilling down further, revenue cycle leaders are now primarily concerned with revenue integrity and denials, Wolfskill says. “What we mean by revenue integrity is making sure that we have classified and are charging for services correctly, that the services we do provide are documented in the patient's electronic health record and that we have charged for them appropriately, that we have coded them correctly, and then that we have been paid correctly by the payer.”
Green noted in his interview with Hagland that claims denials are skyrocketing on the commercial insurance side. “We did a survey of our clients in which we looked at commercial write-offs for initial denials: 54 percent of denials were commercial in 2015, versus 58 percent in 2016. And that’s significant; four points is significant, when you think about it. This is the total percent of denials out of all denials. And we’re seeing initial denials ranging from 4.5 to 5.5 percent of net revenue on average. So, for a typical $800 million organization, that becomes a substantial amount of money that you’re writing off,” Green said.
“We’re seeing some organizations doing some very interesting things” to reduce denials, Wolfskill says, noting healthcare providers working with payers to streamline the process. And many healthcare providers are leveraging health IT tools to automate RCM processes, which helped to decrease denials and boost revenue.
Looking at the current moment in U.S. healthcare around revenue cycle management from the provider’s perspective, Brian Unell, vice president, revenue cycle at Piedmont Healthcare, a seven-hospital health system based in Atlanta, Georgia, says he is seeing the move toward higher-deductible health plans, a shift of more financial responsibility onto patients, as well as a move by managed care companies to limit diagnostic services in the hospital setting. “That is obviously an impact to reimbursement for hospitals. And, then there is a move, people use the term value-based care, to try to incorporate quality measurement into the reimbursement,” he says.
Most revenue cycle experts agree that, regardless of the current political climate or what happens with the ACA, that payment models that leverage risk will grow in number. As hospitals and physician practices prepare themselves to manage risk, they need to understand the impact to their revenue cycle. “A perfect example is population health, whereby a patient might be enrolled in a population health plan but it might look like, on the surface, a regular Blue Cross Blue Shield plan,” Wolfskill says. It’s important to correctly identify the patient and the insurance plan to ensure providers are reimbursed appropriately for the services they are providing. “We just have to get better and better at linking patients and their plans together appropriately,” she says.
As a result of these ongoing trends, Unell 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,” he says, adding, “The integration between different silos is something that is beneficial to the health system, but also to the patient. The use of more huddles around complex patients, the desire to have patients be kept abreast of their status while they are here, to create a targeted discharge date near the time of admission, to really set the expectations not just for the providers, but also for the patients and their families.”
Many revenue cycle experts contend that, in the current environment, effectively communicating a patient’s financial obligation should now be a top priority for hospitals and physician practices, and this has become an area of focus at Piedmont, Unell says. “We’re really focusing on our patient experience, specifically as it relates to the administrative side, both from an ease of scheduling perspective as well as the post-discharge for the billing and collections efforts. We’ve come up with a term here, we call it ‘patient financial care,’ and we’re trying to organize ourselves in a way to take care of the patient’s financial care,” he says, noting that this includes providing more information to patients about the potential out-of-pocket costs associated with the healthcare services they are receiving as well as different options to pay their bill.
While priorities will vary depending on whether an organization is a large national health system, a smaller regional system or a physician enterprise, Sanderson lays out several areas that healthcare leaders and executives should focus on to optimize revenue cycle performance.
“Number one, you need real-time transparent measures of revenue cycle performance that give you sufficient time to enact change precisely. What we’ve generally seen is month-end reports, or quarter-end reports, that the CFO doesn’t completely understand or doesn’t know what to do about it. You need real-time information to make real-time change. When UnitedHealthcare decides that they are going to start denying a particular type of orthopedic service, you don’t want to find out in six months, you want to find out right away,” Sanderson says.
“Next, healthcare organizations need to decide how centralized they want this to be. There are places where the back-end reports to finance, and the middle revenue cycle reports to the chief medical officer, and the front end, patient access, reports to the chief operating officer. Whatever it is you decide is best for your organization, stick with it and create accountability. I think that we’re going in the direction, particularly for health systems of some size, where there will be a chief revenue officer that will report to the CFO, and that chief revenue officer is responsible for all things revenue cycle and revenue related,” he says.
Third, healthcare organizations need to develop some commonality of technology. “For a health system now, they have four different bolt-on systems, at various sites, that are supposed to be feeding to one place, but they don’t. If you’re going to decide on a particular utility, it has to be able to scale with how you, as an organization, are scaling. If you take the concept of best-of-breed, if they are not interoperable with your revenue cycle, if they just produce different kinds of things that somebody on the back end needs to put together, then that doesn’t work,” Sanderson says.
Broadly, Unell contends that healthcare organizations need to view revenue cycle as a strategic, value-added function and a differentiator. “Organizations historically look at revenue cycle as a cost-focused, transactional operation,” he says. “We believe here, and we’ve invested in it in the past five years and it’s paid dividends as far as our employee engagement, our turnover rates as well as our financial outcomes, that if you invest in it and approach it as a strategic function and something that can add value, it will.”
Leveraging IT and the Role of the CIO
Healthcare organizations and payers are increasingly leveraging IT tools to make revenue cycle functions more efficient and to reduce cost. “On the short-term horizon, we see a drastic integration of automation, or what we call RPA, robotic process automation, that’s going to take a lot of the core tasks of account follow-up and related things, rote tasks, and those are going to be automated. And those are the things that we’re working on now, that we see the responsible parties for RCM most interested in, because that’s going to decrease costs,” Sanderson says.
Wolfskill agrees, adding, “Commercial payers want more automation. The biggest movement we’ve seen in the past 12 months is a willingness to move ahead with electronic processing for pre-authorization for service. More recently, we’re seeing a lot of movement on the payer side, as well as the hospital side, to move information back-and-forth electronically.”
At Piedmont, senior executive leaders are placing more value on integration rather than best-of-breed technology systems, Unell says. “Historically, we had best-of-breed technologies; we had over 75 systems with ICD-9 codes in them. When preparing for meaningful use and ICD-10, we made the decision to do a change out. We realized integration is more important and we’re trying to leverage Epic to help us cross those silos, have a single source of truth and leverage analytics out of the system,” he says.
And, in the midst of all this work, there is an opportunity for collaboration between the CFO and the CIO to better leverage IT to support revenue cycle performance, industry leaders say. Wolfskill notes, "CIOs need to be engaged with the CFOs and understand the automation and technical resources that are out there to eliminate manual work, within a number of areas of finance, but especially within revenue cycle management. Where can things be automated beyond where they are today?" Wolfskill asks. “If the technology is not available within the core processing system that the hospital or system is using, is there a bolt-on that will solve this issue and let me automate and be much more effective and efficient in how I process activities within the revenue cycle?”
Sanderson also contends that data science will transform the revenue cycle. Since many revenue cycle positions are transaction-oriented, and the data is present to make accurate artificial intelligence predictions, there is an opportunity to use machine learning to resolve revenue cycle issues.