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. In a Special Report published in Healthcare Informatics’ September/October issue, healthcare finance thought leaders shared their perspectives on the rapidly changing landscape around revenue cycle management and the importance of developing a robust RCM strategy.
For that Special Report, Associate Editor Heather Landi interviewed Brian Sanderson, managing principal of the Chicago-based Crowe Horwath LLP healthcare services group. Prior to joining Crowe, Sanderson was a partner at Ernst & Young LLP for seven years and a senior manager at Arthur Andersen LLP for six years. He was also a manager for Northwestern Memorial Hospital (Chicago) and Hinsdale Hospital (Hinsdale, Ill.).
In that interview, Sanderson shared his perspectives on the challenges facing healthcare finance leaders and strategies to help CFOs most effectively address those challenges. He also touches on the importance of optimizing technology to improve RCM, how automation is coming into play, and the role of the CIO in all of this. Below are excerpts from that interview.
What are the most significant challenges healthcare provider organizations are facing right now with regard to revenue cycle management?
The first is that there are a number of “revenue at-risk” reimbursement models being put into place, whether it be bundling, whether it be pay-for-performance or certain types 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. Second, the margins are getting very, very thin with respect to hospital operations. 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 and they are asking you to do more with less, there’s a bit of a disconnect there. It’s hard for RCM organizations to staff down and still retain performance.
The third thing is there’s a division here between centralization and de-centralization that each organization must understand. The far end of centralization is outsourcing it to an R1, to a Conifer Health Solutions, to an Optum; that is unique centralization of the revenue cycle function and then you ship it out to somebody to handle it. The other side of that is decentralization, where, within health systems or within physician practices, a lot of the core revenue cycle practices happen at the site, whether it be registration or collections. You, as an organization, need to figure out what works best for you to get the best performance at the lowest cost. There is no secret sauce there.
With the advancement of developments surrounding MACRA and potential cuts to Medicare and Medicaid, how is this affecting the current moment in healthcare revenue cycle management?
There is an enormous amount of uncertainty right now, but 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 is 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? So, there’s all that uncertainty and 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.
What should CFOs and revenue cycle management leaders be focused on right now?
It depends on what kind of system they are. If you are a huge national system, then you’re going to make different decisions than if you are a small regional system, and you’re going to make different decisions if you have a physician enterprise. And, that is a big challenge for a lot of health systems; they struggle enough to handle their revenue cycle management, never mind the doctor’s stuff and the implications of physician compensation tied to collections.
I have three pieces of advice: 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. 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.
Second, you need to decide how centralized you 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, such as patient access, reports to the chief operating officer. Whatever it is you decide is best for your organization, then stick with it and create accountability. I think the direction that we’re going, particularly for health systems of some size, is that 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.
Third, you really need to get 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. They don’t interoperate. My advice is, if you’re Epic, go all Epic; if you’re Meditech, go all Meditech. 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. 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.
Are you seeing more organizations leveraging IT to optimize revenue cycle management?
What we’re seeing as an industry is the integration of more technology, period—clinically, operationally, strategically, financially. If you look back at any industry that has consolidated in some regard, there is always the integration of technology to improve efficiency; automation is the next phase. But technology is getting better, so organizations are able to use tools to ensure patient registration accuracy, to collect on accounts, to score patients’ propensity to pay, there are a lot of tools out there. The issue is that a lot is them are disparate; you’ve got 42 different bolt-on tools and you are trying to get them to work together to improve performance. There are folks that do that and do it well. There are a lot of folks that struggle to optimize the use of their tools. Just because you buy it doesn’t mean you get the most value out of it.
What is the role of the hospital or health system CIO in all of this?
We spend most of our time with the CFO, so the biggest disconnect that we see in the marketplace is the disconnect between finance and the revenue cycle. Revenue cycle is doing these things, and finance either isn’t seeing it hit their financial statements or there may be something a revenue cycle leader does that negatively affects finance, so those two disciplines need to work more closely together. We call it bridging the gap between finance and revenue cycle. Secondly, our read to the CIO and CFO, the disconnect that we see most frequently is technology support, and not necessarily the utilities or the capital purchases, those tend to have a rigorous process for selection that I would think that the CIO and CFO would be together on. However, there is a disconnect around the technology support that is updating the utilities, getting ad hoc and meaningful reporting as changes occur in the payer setting. You need to have somebody that can go in and recalibrate their system. That’s where the biggest disconnect is. We think there need to be dedicated technology resources, and that could be a dotted line up to the CIO, but it needs to be a direct line up to the CFO.
Do you have any additional thoughts?
A couple of things: first, regardless of where the current political climate takes reimbursement, there is going to be more revenue at a risk. There’s going to be accountable care organizations, there’s going to be population health, there’s going to be contracts that have quality imbedded, so it’s going to get more complicated for organizations to understand what it is they should be collecting. Second, we see, on the short-term horizon, 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.