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Developing a Robust RCM Strategy in an Evolving Payment Landscape

September 28, 2017
by Heather Landi
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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?”

Sandy Wolfskill

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.”

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