The Smart Revenue Cycle: The Future Of Innovation

Revenue cycle management (RCM) is a rapidly changing, multi-billion dollar market with a complex set of challenges. Care delivery organizations are starting to realize that the way they’ve traditionally managed the revenue cycle will not work going forward. New and emerging dynamics are fundamentally altering how healthcare is delivered and paid for. To navigate these shifting undercurrents, organizations must appreciate the factors driving change and develop innovative strategies to create a new paradigm.

The Push to Evolve

There are several factors reshaping the marketplace. First is the rising complexity of RCM processes. Due to macro trends, such as expanding regulatory requirements, shrinking reimbursements, and provider consolidation, the revenue cycle is becoming increasingly complicated. It is harder to achieve consistency, accuracy, and comprehensiveness in claims submissions, payment processes, and receivables. These factors increase the chances of revenue leakage and contribute to sluggish financial growth.

Another stressor is the friction between payers and providers. The two sides are pursuing distinctive and sometimes conflicting objectives, and the technologies they use are different and often do not communicate well with one another. This leads to substantial process duplication, which results in significant administrative burden and waste.  

The biggest factor accelerating change in RCM is the shift in payment risk from payers to patients. The emergence and proliferation of high-deductible insurance plans are fueling this dynamic. According to TransUnion research, patient balance after insurance (PBAI) has grown by nearly 90% since 2012 and today, the average deductible has topped $2,000. Patient out-of-pocket costs represent more than 30% of total hospital revenue, demonstrating that the patient is becoming the largest payer. 

At the same time, research suggests that patients are frequently confused about their medical bills. Rapidly rising patient liability, paired with a lack of understanding of that liability’s implications, is leading to a material increase in uncompensated care. Compounding the issue is the practice of collecting directly from patients, which requires new provider competencies that are appreciably different than those needed before.

Opportunties To Rethink The Status Quo

Although organizations may acknowledge that “the way we’ve always done it” isn’t going to work, they can be unsure how to reimagine their RCM approach. Here are a few key strategies to consider.

• Streamline core traditional jobs

• Functions like scheduling, eligibility verification, claims management, and patient collections will always be critical to healthcare operations. However, to stay afloat amid tightening margins, providers must achieve a higher level of performance in these areas, and more efficiently, consistently, and accurately execute tasks.
  

  To perform these traditional jobs more effectively, organizations may want to review and optimize their current shoring strategies and reflect on which activities are better performed onshore, nearshore, and offshore. Automation is, of course, another tactic worth considering because, deployed to highly repeatable tasks, automation will boost efficiency and accuracy while decreasing cost-to-collect.

• Prioritize the patient

Since the patient is becoming the primary payer for many healthcare organizations, it is important to provide a financial experience that increases cost transparency and eases the payment process. Shifting emphasis so financial communications begin before the start of a patient encounter can help individuals better understand their responsibilities and commit to workable plans to meet them.

Similarly, adopting processes to activate new patients, who were recently referred to the organization, can ensure the entity reliably captures this novel revenue. This requires new competencies for front-office staff, including aptitude with marketing analytics and omni-channel communication.

As RCM evolves into a direct-to-consumer discipline, the ability to communicate with patients when they are making clinical and financial decisions becomes essential to capturing their interest and engaging them in care.

• Make better use of data analytics

The emerging consensus is that data analytics have the potential to save our healthcare industry tens of billions of dollars in administrative work. At the same time, it’s clear that providers have not yet taken advantage of the opportunities offered by data analytics. Around 40% of hospitals are struggling to establish and maintain an analytics team and infrastructure. Moreover, healthcare providers usually leverage only a fraction of the data to which they have access (around 10%).

There are many ways data analytics can provide value. Focused application of targeted analytics around denials and underpayments can unlock significant revenue in a few months. Leveraging data analytics to understand patient propensity to pay and payment patterns will help improve PBAI collection. Health systems typically collect only a small fraction of PBAI—usually less than 20%. By using technology to analyze patient behavior data, organizations can see who’s paying what, at what time, based on what interaction. Using a patient engagement platform, organizations can engage customers with the right channel, at the right time, to maximize collections.

Consistently identifying front-end coverage is another area where technology can make a difference. By applying analytics to pinpoint primary and secondary coverage sources, organizations can reduce patient liability. Using a coverage discovery tool that combines eligibility and enrollment services, an entity can gain valuable insights to lessen self-pay volume.

Regardless of the area of focus, organizations need the ability to access real-time data, which historically has been difficult to do. Although organizations can assess performance compared to year-over-year trends, they struggle to appreciate it vis-à-vis their competition in the marketplace, in real time.

By using a predictive RCM performance framework, technology can help organizations objectively review and compare operations. To be effective, such a tool must have a robust infrastructure created by skilled data scientists, as well as access to a large volume of clean data from which to generate rich insights.

Embracing Innovation

Organizations must keep an eye toward the future. RCM will continue to evolve, and the amount of disruption over the next decade is shaping up to be substantial. Two clear dynamics are emerging. The first relates to the growing applicability of intelligent technologies in the RCM space, including artificial intelligence (AI), robotic process automation (RPA), machine learning, and cognitive solutions.

These technologies allow organizations to remove some of the labor from RCM functions and collect more money, faster, and with better predictability at a fraction of the existing cost-to-collect. By leveraging these solutions, organizations can view RCM in a new, more strategic light, and use it as a competitive advantage in their markets. Looking to the future, intelligent solutions will play a more prominent role in executing RCM operations, and hospitals and health systems need to consider how to weave these technologies into strategic plans.

The second dynamic relates to the growing interest in easing payer-provider friction. Conversations about better alignment of payer-provider processes are developing and are covering topics like prior authorization and adjudication. There is energy and willingness to talk about new approaches for creating transparency in the pre-encounter financial reconciliation, including steps to provide clearer information in real-time, and more consistent approvals prior to the clinical encounter.

Over the next decade, it’s reasonable to believe that we’ll see an evolution of current payment models to better align payers and providers. That could represent significant disruption for RCM as payment will occur upfront rather than post-encounter.

The Role Of The RCM Vendor

The number of RCM technology and services vendors in the market is rising, and the complexity of the space is increasing. The total RCM spend in the U.S. today is somewhere between $70 to $75 billion dollars annually. While the market is growing at 2%, organizations are seeking help from external partners at a much faster rate, closer to 9%. Providers clearly need help to execute and operate their RCM framework. However, not all vendors are able to provide the range of services required to offer a consistent superior experience.

What healthcare organizations need is a partner that will join with them in navigating changes and overcoming challenges. The partner should have not only proven experience and scale, but also significant software capabilities including an expertise in intelligent technologies and analytics.

Also critical to the success of this partnership, is the commitment to adopting design thinking methodologies in the exercise of innovation to deliver true patient-centric solutions.

By working with such a partner, organizations can more easily and accurately assess their current performance against competitors, identify revenue leakage areas, and find opportunities for growth. This powerful combination can lead to stronger financial performance and a better patient experience that will carry the organization well into the future.

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By Thomas Laur, executive vice president of Change Healthcare and president of Technology Enabled Services