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.