Decades of healthcare financing evolution have created a complex and highly technical domain within every healthcare organization.
Since the inception of modern healthcare financing, finance departments have played a valuable role in ensuring that clinical enterprises receive funds for services provided. While a seemingly simple concept, decades of healthcare financing evolution have created an enormously complex and highly technical domain within every healthcare organization, where an army of administrative experts manages the interconnected processes of the modern revenue cycle. These teams have become accustomed to the constant state of flux as regulations change and new contract terms are created with the intention of more fairly paying providers.
The pure volume of change in the healthcare industry over the past several years has placed an unprecedented burden upon revenue cycle operations to adapt, absorb, and conform to new realities. These new realities are complicated not only by new increased regulatory forces, but rapid consolidation of health systems and physician groups, entirely new lines of business for which revenue cycle operations are now accountable, increased payer complexities (e.g., fee for service, incentive based payments, value-based payments), pricing algorithms, and increased patient financial responsibility.
For many organizations, the tidal wave of change in a relatively short period of time has made it even more challenging to manage—let alone adapt and improve—the most fundamental attributes and indicators that drive performance. Concurrently, investments to support revenue cycle transformation have been neglected in most organizations. As a result, the majority of revenue cycle departments are not well suited for today’s realities. Imagine for example, asking a manufacturing plant to operate in a service economy, utilizing a horse and buggy to provide intercontinental transportation, or asking an 8-track technology company to deliver music via Internet streaming services.
Given today’s challenges, hospital leaders must address the following critical imperatives.
Innovation. Health systems must embrace a necessary—and potentially disruptive—evolutional paradigm shift in conventional revenue cycle practices. Driving this shift, transformational, cultural, and environmental change must occur that is centered on entrepreneurialism and creativity. Examples of innovation include enhanced technology support, such as self-service capabilities (e.g., portals, kiosks, online scheduling), enhanced workflow and reporting, and propensity-to-pay prediction. Such innovation helps to avoid becoming obsolete and creates the ability to nimbly scale to known and unknown headwinds.
Investment. Strategic investment must be made in automation, technological advancements, and a robust recruitment and retention program for highly motivated, team-centric, and “Lean-savvy” talent. Examples of these investments are enhanced technology and resources that include appropriate staffing levels and skill mix, training, and staff development programs. Such investments run counter to short-sighted cost containment exercises by demonstrating ROI and recognizing more significant longer-term sustainable reduction in the cost to collect. This ultimately increases net patient services revenue and drives efficiencies. Health systems must move beyond their current view of revenue cycle as a cost center.
Integration. It is essential to create a holistic governance model that oversees the full integration of revenue cycle, clinical, and operational workflows that are truly aligned with patient-centric processes and go above and beyond expected standardization and centralization programs and efforts. This structure is necessary to avoid being “out-gamed,” outnumbered, and at the mercy of payers’ adjudication bureaucracies and denial algorithms. Successfully addressing these imperatives will demand a revenue cycle that is fundamentally different.
New Requirements for the Revenue Cycle Business Model
The key question for health system leaders is, “What can be done within the revenue cycle space to keep up with the current operational demands, while simultaneously positioning us ahead of future demands?” To maximize enterprise results, it is essential to establish an integrated view of the organization’s entire revenue ecosystem. There are four quadrants that make up the ecosystem: strategic drivers, payer contracting drivers, revenue cycle operations drivers, and clinical operations drivers.
Revenue Cycle Ecosystem
Leaders should ask questions as they assess the organization’s alignment across its strategy, payer contracting, clinical operations, and revenue cycle drivers. With a broader framing of the organization’s revenue ecosystem, it becomes clear that results achieved within the revenue cycle operations group are inherently constrained by their alignment and integration with other “upstream” drivers.
Other questions that should be top of mind for revenue cycle leaders are as follows.
As a healthcare leader, how are you trying to improve your strategic position? The growth of a health system’s ambulatory network is a common strategic imperative. However, given the new restrictions to hospital-based payment in the ambulatory setting, many providers notice significant cannibalization of their revenue streams as their ambulatory strategies successfully decant volume away from their main campuses. By strategically assessing the service delivery mix and payment, and carefully deploying services in light of the effects of cannibalization, revenue losses can be minimized and growth can readily offset site-of-care losses. Strategic initiatives should be continuously monitored, reviewed, and adjusted as system-wide impact is more clearly understood. This enables course correction to address possible negative outcomes in other areas or additional strategic opportunities.
What actions are being taken to align traditional fee-for-service commercial contracting models with new value-based payment models? The Centers for Medicare & Medicaid Services value-based purchasing initiatives have increased the focus of many providers on a subset of inpatient quality metrics, such as length-of-stay and readmissions. While it is difficult to argue against these types of improvements, they can have catastrophic effects on revenue if organizations have not aligned their commercial contracting models before initiating such changes. For example, healthcare organizations can experience substantially declining revenues if other measures are not taken to preserve volume and revenue in other areas, such as outpatient services.
As a healthcare leader, what are you doing to help align your clinical documentation improvement (CDI) program with today’s demands? While many organizations have instituted a CDI program, the recent ICD-10 implementation along with regularly scheduled changes/upgrades in the electronic health record may have caused disconnects, decreasing the case mix index. The challenges that prevent organizations from bringing their CDI programs up to speed with the demand and disruption or decline in payment are due to increasing shifts in the following areas.
- Complexity of payment models (e.g., value-based payment that requires more detailed coding and solid documentation)
Need for technology to implement and maintain ICD-10 coding and meet clinical documentation requirements
Need for technology/staff to keep up with regularly scheduled changes and upgrades necessary to maintain health record/documentation so organizations can receive the proper payment
In addition, new payment models put a premium on solid documentation and coding in the ambulatory care setting to ensure accurate adjustment risk factors are in place, placing further emphasis on the potential value of expanding the CDI program.
What have you done to develop a flexible revenue cycle model? Most health systems do not have a revenue cycle model that is sufficiently flexible primarily due to technology constraints, decentralized functions, non-standardized processes, and limited staff/personnel bandwidth. That said, it remains imperative that organizations evaluate their current state and strategically define the requirements for future state revenue cycle performance in their markets.
Historically, strategy, payer contracting, and clinical operations have taken priority over revenue cycle operations. However, revenue cycle factors must be considered and coordinated to ensure the capture and collection of the revenues to which providers are entitled.
Kevin Ormand is director and revenue cycle practice leader, The Chartis Group, and a member of HFMA’s South Texas Chapter.
Catharine Wilder is revenue cycle practice manager, The Chartis Group.