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Transforming revenue cycle managementPartnerships for an industry-leading revenue cycle
2 Health care RCM
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Traditional approaches to managing the revenue cycle will need to evolve to serve the needs of US health care providers as they adapt to changing economic conditions where the lines between financial and clinical goals are blurred. As reimbursements come under pressure and costs increase, health care providers face unprecedented pressure to maintain financial solvency, deliver more efficient care, implement regulatory mandates and reduce back-office expenses associated with receiving payments.
Even though provider organizations are spending millions to modernize their IT infrastructures and implement sophisticated electronic health record (EHR) systems, typical revenue cycle technology still consists of numerous stand-alone software applications and databases pieced together through a complex web of legacy and home-grown interfaces and manual processes. Initiatives to streamline and modernize process flows and data analytics capabilities are further complicated and limited because revenue cycle systems are historically distinct from clinical systems and lack standard data models for sharing health information between payers, providers and patients. Although providers spend approximately $6.7b a year on revenue cycle management (RCM) solutions,1 an estimated 15%-20% of nominal billing value of claims submitted,2 are typically denied, a vast majority of which are due to technical or authorization reasons that can be addressed through more integrated systems. At the same time, payer (both government and commercial) scrutiny on compliance and audit of charges continues to be high, requiring enhanced tracking and management capabilities in the RCM function.
Today, the shift to value-based reimbursement models is linking payments for medical care to clinical outcomes. While in 2014, 20% of CMS payments were linked to the value-based model, the agency projects 50% of its total payments of about $600b will be linked to this model by 2018.3 As payers shift reimbursement based on fee-for-service to pay-for-performance, health care providers will need to optimize their RCM operations by adding technological capabilities to collect data and drive analytics for better clinical outcomes.
Increasing patient responsibility of payments through either higher coinsurance or higher deductibles has resulted in greater consumer engagement in their health care, which in turn is driving greater levels of transparency and improvements in the health care experience as patients increasingly comparison shop for their health care services. Some of this has been driven by nearly 30 million incremental people getting access to insurance coverage through almost 100 private exchanges in the US. Additionally, the proportion of insured adults in high-deductible plans (>$1,000) has increased from less than 10% in 2003 to more than 25% in 2014.4 Consequently, the burden of uncompensated care to hospitals has doubled to nearly $50b in this period.5
While these changes will require tighter integration across clinical and revenue cycle processes, many providers are finding that efforts to deliver improvements through re-engineering of existing systems and processes are cost-prohibitive, time intensive or not meeting expectations. To that end, health care providers are seeking new strategies that will help them transform the revenue cycle and achieve enduring resiliency that will help weather ongoing changes to the industry.
In order to succeed, health care providers will need to leverage modern, more integrated technologies, establish new partnerships and develop innovative solutions. While providers will need to optimize their RCM technology and operating environment, the transition must go beyond to include advanced analytics, improved payer connectivity and an enhanced patient experience to achieve a truly transformational revenue cycle environment that can meet the opportunities and challenges described above.
Transforming revenue cycle management
1 Ovum health care technology spending, 2015.2 “Hospitals Denials Management … Insource, Outsource or Both?” Holly Pelaia, Human Arc, 2013.3 “Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value,” U.S. Department of Health and Human Services, January 26, 2015.4 Kaiser Family Foundation.5 American Hospital Association Financial Factsheets, 2015 update.
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In this document, we will examine the road map for transforming the revenue cycle of the future (Figure 1).
(Figure 1)
The need for transformation of the revenue cycle model
Optimize the technology environment and integrate EHR with RCM
Adopt advance analytical techniques
Enhance patient experience
Move to value-based care and reimbursement cuts
Continuously evolving regulation (e.g., ICD-10)
Standardization of care
Increased consumerism
Increased patient financial burden
Health care market forces
Key RCM Imperatives
Improve payer connectivity
Degree of transformation
Exte
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and
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4 Health care RCM4 Health care RCM
Elements of a transformative revenue cycleSuccessful health care organizations must focus on improving financial performance and enhancing the patient experience, while delivering efficiencies and reducing the overall cost of the revenue cycle. The four key elements of a successful transformation include (Figure 2):
I. Optimizing the RCM technology environment
II. Adopting advanced analytics techniques
III. Improving payer connectivity
IV. Enhancing the patient experience
Organizations that successfully transform along these four pillars will be well on their way toward achieving a leading RCM environment.
I. Optimizing the RCM technology environment
Optimizing the technology environment is an essential step in every RCM transformation. An integrated system not only requires connecting the EHR with the RCM system (i.e., connecting the clinical and the financial data), but also enhancing operational capabilities of the RCM and streamlining the clinical and financial systems for greater insights into treatments, costs and outcomes. Adding functionality, such as advanced computer-assisted coding (CAC) and rules-based workflow capabilities, increases efficiency and contributes to revenue improvements through exception-based processing.
II. Adopting advanced analytics techniques
Advance analytics are imperative, not only to conduct analysis on historical information to identify claims denials and revenue losses, but also to leverage the information for predictive intelligence.
Key elements of advanced analytics include:
1. Tools to reduce bad debt write-offs and days receivables outstanding (DRO) — The ability to instantly adjudicate a claim and provide a bill to the patient at the point of service significantly reduces potential for bad debt. This feature also helps providers reduce DRO.
2. Proactive denials management — A shared IT platform used by payers and providers improves the accuracy and timely notification of denials, improving the providers’ ability to resubmit a claim correctly.
3. Predictive analytics and business intelligence — Robust data mining, predictive analytics and risk modeling revenue programs enable providers to enhance revenue, optimize payer contracts and improve patient treatment outcomes.
(Figure 2)
Elements of a transformative revenue cycle
I. Optimizing the RCM technology environment• Integrated EHR solution• Advanced computer-assisted coding (CAC) platform for
efficiency and reimbursement• Coding efficiency improvement/error reduction
II. Adopting advanced analytics techniques• Tools to reduce bad debt write-offs and DRO• Proactive denials management• Predictive analytics and business intelligence for
improving outcomes and financials
III. Improving payer connectivity• EHR/RCM platform optimized for value-based care• Single platform for claims management and adjudication• Real-time adjudication
IV. Enhancing the patient experience• Seamless patient access• Transparent pricing for single or combined services• Financial counseling for high-deductible plans• Patient financing program
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III. Improving payer connectivity
Enhancing communication between providers and payers may be the most critical aspect of a successful RCM transformation. Payer connectivity can improve communication in the scheduling and pre-registration, eligibility and pre-certification processes. This shortens the time required for patients to set up appointments and also results in more efficient claims processing and denials management. Today, some of these steps have been demonstrated or accomplished on a pilot scale and represent the long-term goals for any RCM system.
The following are functionality goals that have the potential to transform connectivity with payers:
1. EHR/RCM platform optimized for value-based care — Deploy flexible and upgradable systems that aggregate professional and facility billing across multiple providers or specialists and then divide reimbursement accordingly.
2. Single platform for claims management and adjudication — Implementing a single IT platform for both payers and providers significantly reduces the administrative burden for both stakeholders, increases claim accuracy and reduces provider underpayments and denials.
3. Real-time adjudication — Real-time claims adjudication through claims submission at the time of service enables providers to perform patient billing and collection at the point of service, reducing the risk of nonpayment. In addition, a detailed explanation of benefits that provides a single statement for all services rendered also enhances the patient experience.
Level of partnership transformation based on the degree of RCM transformation
4 Enhancing patient experience2 Adopting advanced analyticstechniques
3 Improving payer connectivity1 Optimizing the RCM technology
Key characteristics of an ideal future-state revenue cycle
Transform the business for future RCM
Optimize for shift to
value-based reimbursement
Level of partnership
transformation
Implement integrated EHR solution (e.g., Epic/Cerner)
EHR/RCM platform optimized forvalue-based care
Patient financing program (e.g., partner with financial institution)
Predictive analytics and business intelligence(e.g., partner with technology company)
Real-time adjudication(e.g. partner with Payer)
Single platform for claims management and adjudication(e.g., partner with payer and technology company)
Seamless patient access
Coding efficiency improvement/ error reduction
Tools to reduce bad debt write-offs and DRO
Proactive denials management
Advanced computer-assisted coding (CAC) Platform for efficiency and reimbursement
Financial counseling for high-deductible plans
Transparent pricing for single or combined services
1
2
2
2
3
3
4
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4
3
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Improve revenue cycle performance
Degree of transformation
Exte
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(Figure 3)
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Current ability of off-the-shelf EHR/RCM applications to address future market needs
IV. Enhancing the patient experience
As they implement targeted improvements in technology, analytics, and connectivity, providers also need to make improvements that enhance the overall patient experience, particularly in those areas most visible to patients. These include:
1. Seamless patient access — Providers that integrate scheduling and registration through a call center or patient portal will set up one seamless patient-friendly process.
2. Transparent pricing for single or combined services and patient estimates — Stronger connectivity with payers will establish more effective and transparent bill estimation capabilities. Combined or integrated estimates provided to
patients prior to care with inputs from both payer and provider increase transparency, improve estimate accuracy and reduce overall patient confusion.
3. Financial assistance and counsel — In many situations, providers need to provide financial counseling services to explain the increasingly complex nature of health care reimbursement, benefit plans and financial responsibility to patients.
4. Patient financing program — In addition, offering patient financing is a necessary payment option that will both make a patient’s burden more manageable and decrease bad debt for providers.
Achieving transformation through partnersAs health care providers embark on this transformation, they will soon arrive at a key decision: do they engage in this transformation through internally-developed solutions, contract with outsourced vendors or form innovative partnerships with key stakeholders (Figure 3). In order to deploy the necessary functionality, providers can consider sourcing bolt-on modules from current EHR vendors. While some vendors offer sophisticated and integrated solutions, few offer either complete or sophisticated offerings that cover all functionalities required for transformation (Figure 4).
(Figure 4)
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Improve revenue cycle performance
Enhance patient services and revenue cycle operations through Improved efficiency and cost reductions
Manage revenue cycle services for large health care provider
Benefit toprovider
Benefit topartner
The RCM vendor signed a 10-year agreement with the health system to provide end-to-end revenue cycle services including upgrading its RCM operations from front to back
Large, nonprofit
health system
Top 5 RCM vendor
Optimize for shift to value-based reimbursement
Improved end-to-end revenue management
Innovative software and workflows for current and future reimbursement models
Improve revenue cycle products
Develop replicable models forother providers
Benefit toprovider
Benefit topartner
Strategic alliance to create RCM best practices, develop enhanced products, drive population health management and upgrade for future payment models
Non-profit health system
Leading integrated EHR/RCM
vendor
Transform the business for future RCM
Greater patient engagement through better patient estimates
Streamlining processes including prior authorization, claims edition, billing activities
Develop new technology
Leverage success for partnerships/ outsourcing with other providers
Benefit toprovider
Benefit topartner
Partnership developed for better patient experience as well as timely and accurate payments for services
RCM solutions provider
Large academic
medical center
(Figure 5)
As a result, many providers will need to forge innovative partnerships to drive revenue cycle modernization. Partnering with key stakeholders — from technology companies to EHR/RCM vendors — will offer providers the best avenue for achieving a truly modernized and technology-enabled revenue cycle.
Providers will need to evaluate where the partnership will have the greatest impact on improving the revenue cycle. Here are a few points to be considered:
1. Technology company — Through partnership with technology companies, providers can establish an opportunity for sophisticated analytics platforms that improve operational efficiency, improve patient outcomes and enhance the patient experience.
2. Payer — Though traditionally payer-provider relationships have been somewhat adversarial, payers and providers both stand to gain from increased collaboration. Payers can benefit from access to clinical and administration data from providers, while the increased transparency of information and communication helps to streamline processes and reduce costs.
3. Financial institutions — Partnerships between financial institutions and providers set the stage for new and diversified revenue opportunities, including outsourcing fees, payment guarantee fees, and patient financing.
4. EHR/RCM vendor — In addition to greater installation networks, vendors serving the health care IT market benefit from co-development with customers to create solutions better tailored to health care needs and pain points.
Within recent years, providers have entered into a wide range of partnerships marked by different degrees of transformation across the revenue cycle (Figure 5). This transformation has often been contingent on the types of partners, their respective contributions and the ultimate strategic nature of the partnership. Providers have largely leveraged vendor relationships to improve ongoing revenue cycle performance. For example, provider organizations forming partnerships with revenue cycle outsourcing organizations to improve the RCM function in which both organizations benefit from the relationship. Other examples include strategic alliances or joint ventures with industry participants (e.g., payers) or nontraditional players (e.g., financial institutions) in order to ready the RCM operations for value-based reimbursement or transformation.
Examples of current transformative partnerships
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Forging a successful partnershipTo forge a successful partnership, providers need to engage in a thorough and honest dialogue and then follow through with a clear execution strategy. Health care providers need to identify their pain points, prioritize solutions and then find the right partners to address those gaps and then execute their strategy to transform RCM and deliver a better experience for patients (Figure 6).
Execution planning
Identify gaps and pain points in the revenue cycle
Prioritize solutions to fill gaps
Identify partnershipsfor solutions
Evaluate partners
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(Figure 6)
Approach to identify, evaluate and execute the right solutions and partners
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Conc
lusi
onHealth care providers will have no choice but to evaluate and optimize their revenue cycle management functions as they respond to rising consumerism, evolving legislation and other key market forces.
Achieving this future state requires them to integrate their clinical and financial platform with an end-to-end revenue cycle technology that leverages analytics and enhanced connectivity with payers. Few health care providers have the wherewithal to do this on their own, so they will need to seek out transformative partnerships to create next-generation RCM solutions, whether those partnerships are with payers, technology companies or financial Institutions.
Health care providers that successfully transform their RCM will be taking a major step toward improving the patient experience, minimizing confusion surrounding medical billing and keeping pace with advances in health care technology in the decades ahead.
EY can help
To learn more, contact:Dan ShoenholzManaging Director, ParthenonCo-Head, Healthcare Practice Ernst & Young LLP+1 212 773 [email protected]
Keyuri ShahVice President, Parthenon Ernst & Young LLP+1 212 773 0669 [email protected]
Andrew AdamsPrincipal, Advisory Ernst & Young LLP+1 212 773 [email protected]
In today’s dynamic health care environment, the rewards are many yet the risks are high. As you explore opportunities, our integrated team can support you – from strategy to execution.
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About EY’s Global Health SectorAcross the world, health care systems and entities are under unprecedented pressure. Spiraling costs, exacerbated by aging populations and emerging market growth, are bringing newfound focus on value and outcomes. Mobile health and data analytics promise to revamp care delivery but are also bringing in competitors from other sectors. For governments, payers and providers, these trends create a host of challenges: extracting insights from “big data,” partnering in new ways, boosting operating efficiencies and more.
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