Solving the RCM equation: What questions to ask in the discovery process

amick medassetts
Amy Amick, President, Revenue Cycle Management, MedAssets

Hospital executives today are more overwhelmed than ever before by the technology purchasing decisions they must make. As the healthcare landscape continues to evolve, leaders need to be sure that each dollar is spent wisely and that the products and services purchased will contribute to improved quality and efficiency and that their selections today will continue to serve them well with the industry changes at hand. With so many factors to consider in the decision-making process, it’s easy to get lost in the details and forget the big picture. What are the questions that a hospital or health system should think about before they select a new revenue cycle management (RCM) system? These are the top issues worth discussing:

How can a hospital or health system ensure it stays economically viable in the current market?

For the past 10 years, the industry has given disproportionate focus to electronic health records (EHRs), and the conversations have grown increasingly clinical since 2011 when Meaningful Use was put in motion to improve quality, safety, efficiency and reduce health disparities. The MU program has reimagined the structure of reimbursement payments, ultimately driving financial incentives for specific clinical activities.

As most healthcare providers have stabilized their MU programs, there is a shifting focus. Reimbursement rates continue to decline and margin pressures increase. Leaders are now more vested in how to maximize the revenue curve and to reduce the cost curve. In other words, hospital execs are wondering, how do we keep the lights on? Industry-wide, an overwhelming pressure to improve financial viability exists, with the margins in this business being so small and they are steadily decreasing. As reported by Modern Healthcare in 2014, hospital profit margins have continued to shrink despite economic recovery in recent years.

While historically hospitals have often addressed driving improvement within the revenue cycle one step at a time (e.g. point-solution focused), the conversation has now elevated to needing a holistic program that creates systemic change by focusing on addressing root cause within downstream revenue cycle challenges.

How should hospitals manage the elevated role of the consumer in patient access?

In the past five years alone, dollars owed through patient deductibles have risen 47 percent. Understandably, patient obligation has become a key consideration for hospitals as consumers gain more access to and visibility on what they will be expected to pay out of pocket. With the role of the consumer increasing and individuals taking a more active role in choosing their care, providers need to refocus their efforts on selling their brand and value to the consumer. Patient experience and price sensitivity also become more relevant in a person’s decision-making process for where to receive care. Patients also now have a greater access to data regarding the quality of care that they are going to receive. So how can providers prepare for this shift?

One effective technique is to establish a defensible, and transparent pricing strategy.

Take time to establish an appropriate pricing strategy. Key steps to do so include:

  • Link your item master to your chargemaster to get a complete picture of your pricing strategy in action;
  • Analyze your acquisition costs against target markups and actual charges;
  • Use your chargemaster reports to compare specific items in various departments and drive consistency; and
  • Minimize bill surprises by investing in technology that can provide accurate bill estimation upfront.
  • Stay competitive in your market by comparing your pricing data to that of your peers.

How do we move from fee-for-service to fee-for-value?

Many know that healthcare costs are out of control, but few truly acknowledge the impending economic crisis in this country. As those in the industry recognize, the current rate at which costs are increasing in healthcare is not sustainable The overall healthcare complex is an enormous part of our nation’s economy and represents approximately 18 percent of gross domestic product (GDP), and 4 percent of global GDP. In fact, studies indicate that in the next 15 years healthcare will reach 30 percent of GDP. The industry is clearly pushing radical shifts in reimbursement models for patient care as a means help curb the rise in healthcare spend under the auspice of reimbursing based upon what is formulaically determined as appropriate and reasonable to spend.

For this reason, hospitals have changed the conversation in value-based payment from “if I switch” to “when I switch, how will I ensure it’s successful?” The Department of Health and Human Services is projecting that, by 2016, 85 percent of Medicare’s fee-for-service payments to hospitals, physicians and other providers will be tied to quality and value rather than volume. This is a prime example of market pressures pushing providers to consider how to ready themselves to move towards value-based models. Yet so many providers are not clear on how to chart the best path moving forward.

So how can providers prepare? Be informed, so you can choose (or at least influence) the right model for your organization. Many types of value-based reimbursement models exist in the market today. Providers need to be proactive and evaluate the components of each model as it relates to their specific market conditions and performance capabilities. Analytics, which provide essential insights, are critical as organizations begin to transition and thrive under new payment models. Health systems must have the ability to tie patient quality outcomes to the financials. Dynamic access to clinical, cost, operational and revenue cycle data – actionable data that is – can enable leaders and front-line associates to make quick, yet informed decisions that connect the dots between price, process, patient outcomes and payment for sustained margin improvement. Finally, assess your risk. Providers need to identify where the highest cost services exist – in the pre, acute or post-acute setting – and determine what level of control over care may be necessary in each setting.

How do we implement a new patient accounting system (PAS) successfully?

The average life of a patient accounting system is approximately 10 years.  And with change to this technology so infrequently, replacement of a system can feel insurmountable at first, and require substantive effort to plan, execute and ensure an effective transition. 

Even with a successful patient account system transition, it is extremely common to have material business interruption during a period of stabilization post go-live of a new system, most notably seen in a delay to cash flow, and all too often, some amount of ‘lost,’ and never reclaimed. For example, it is not uncommon for a health system to simply lose revenue post-transition to a new patient accounting system. For this reason, it is critical to approach your implementation with a clear, well-thought-out strategy. According to a recent survey by Black Book, 86 percent of Chief Financial Officers report their organization must leverage next generation financial system technologies, including software and outsourced services, to keep solvent.

For instance, if your staff does not have the bandwidth to accommodate additional hours spent on the project or to support the learning curve that is inevitable with a change of this magnitude, consultants or staff augmentation options may be needed for a smooth transition. But it’s not always just about the implementation. It’s long been accepted that the best revenue cycle performers use “high-impact” workflow technologies that integrate with the hospital’s enterprise platform, i.e., its patient accounting system. Such surround technologies include (but are not limited to) patient and payor verification, contract management and denial management. In other words, the patient accounting systems alone are insufficient in fully maximizing the health system’s revenue cycle.

When you consider financial returns and efficiency benefits together – not as two separate benefits – does the combination of your PAS and the overlaying technology come out as a winning choice?

What’s the best option for RCM: People or technology?

It is not a ‘one or the other’ answer. Providers must meaningfully consider people, process and technology, and do so in tandem. Making a decision regarding people, process or technology without consideration to all three elements creates a high opportunity for failure. The revenue cycle is complex, and a clear eye to the ‘root cause’ of challenges that your institution may face is paramount. Focusing on root cause and then considering the role of people, process and technology as levers to help drive the needed change or improvement is key. Your answer may just be people. Or process. Or technology. But, a decision made in absence of thinking comprehensively across these three facets has a high likelihood of not being the complete or optimum choice.


chargemaster, MedAssets, PAS, patient accounting system, patient experience


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