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Revenue Cycle Management Changes on the Horizon

July 20, 2010
by John Degaspari
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Report Sees Rise in Claims Management and EDI Spending

With so much attention focused on meaningful use brought on by recent healthcare reform legislation, it's easy to overlook potentially significant developments in non-clinical arenas. A report released last month by Williston, Vt.-based CapSite Consulting, for example, suggests that changes are afoot in revenue cycle management. If correct, the $950 million U.S. hospital market for claims management and electronic data interchange will grow by another $150 million over the next 18 to 24 months. The report also provides insights on the prospects for direct submissions to payers, customer evaluations of vendor reporting solutions, and industry readiness for the new Health Insurance Portability and Accountability Act (HIPAA) format.

Overall, explains Gino G. Johnson, vice president and general manager of CapSite, the report, which is the first of its kind by the company, sets out to answer the question of how hospitals were progressing with their revenue cycle management solutions despite the many clinical priorities faced by the organizations. To get the answer, the group surveyed 400 hospitals about their revenue cycle and claims management practices. According to the study's authors, the respondents, which were mostly small- and mid-sized hospitals in terms of both bed size and monthly claims volume, reflected the broader segmentation of hospitals across the U.S.


One of the most surprising findings was that nearly a quarter (23 percent) of the respondents said their hospitals intended to eliminate their reliance on a clearinghouse, and go direct to payers within the next three years. While Johnson acknowledges the trend, he adds that some hospitals planning to do so may be underestimating the complexities of going direct. In addition, he says, both parties-the hospital and payer-need to be prepared to make that goal a reality. “Some of the largest payers may well be prepared to accept [payments], but smaller payers may not be. It takes two to tango,” he says.

In any case, he adds, such a transition will not happen overnight. Although the survey did not break out the hospitals with regard to their size, Johnson believes that while large institutions such as academic hospitals may be prepared to make the transition, many rural and community hospitals lack the IT sophistication to do so at this point.

In another arena, the survey revealed that hospitals are making progress toward electronic submissions as required under the new HIPAA 5010 format, although much more work remains to be done. Overall, hospitals expressed a lukewarm level of confidence in their ability to submit claims electronically under HIPAA 5010. The answers “represent an industry that is making progress towards it, but is not 100 percent confident at this time,” Johnson says. When asked to evaluate their solution vendors with regard to HIPAA readiness, most hospitals rated their vendors at roughly a 7 on a scale of 1 to 10.

Some of the largest payers may well be prepared to accept payments, but smaller payers may not be. It takes two to tango. -Gino G. Johnson

Generally speaking, there was not a lot of differentiation among vendors with regard to their ratings by their customers. What differences exist may be due to better communication by vendors in reassuring their customers that they will provide them with the necessary software to meet the HIPAA requirements, Johnson says.


Overall, hospital executives rated certain aspects of their current solutions high, but also pointed to areas in need of improvement. On the plus side, they were most satisfied with Medicare edits, HIS integration, and payer edit accuracy. And yet, as noted by CapSite Research Director Brendan FitzGerald, respondents singled out reporting capabilities as an area in need of improvement. “There is clearly a lot of pain and dissatisfaction with the reporting capabilities of these solutions,” he says. One of the key takeaways of the survey is that vendors that can develop a killer application around reporting stand to win big, he adds.

Costs and fees are another sensitive topic among hospitals. Respondents identified fees as the top reason that would cause them to switch vendors. In addition, FitzGerald notes, health information system (HIS) integration, one of the top-rated solution attributes, was also one of the top drivers that would cause vendor replacement. Vendors should take note, he says: “If you are not making your story very clear as to how well-integrated you are, then you are missing a very important criterion that providers are looking for,” he says.

While 41 percent have signed three-year contracts with their vendors, a nearly equal number (38 percent) re-evaluate their agreements every one or two years. “There is constant scrutiny in getting the best deal from these vendors, especially when you factor in the fees, which is a top priority in getting the most for their money,” Johnson observes.

Healthcare Informatics 2010 August;27(8):30-31

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