Physician Group Revenue Cycle

Revenue Cycle Risks and Rewards in the Era of Value-Based Care

July 10, 2017 5:40 pm

For years, the physician practice revenue cycle has exhibited a degree of financial predictability amid constant healthcare industry change. There have been significant challenges, of course, but in the big picture a practice’s financial marching orders have remained consistent: improve the amount and speed of collections while identifying and minimizing payer denials.

The advent of value-based care is transforming the foundations of the physician practice revenue cycle. The arrival of MACRA means that payment from value-based care contracts will contribute a much more significant portion of revenue for provider organizations. It will also create major new financial winners—and losers. Practices that outperform under new models will see payment increase by 19 percent or more, while those that fall behind could suffer up to a 9 percent drop. Meanwhile, practices that participate in alternative payment models (APMs) that include downside risk could be on the hook for reimbursing the Centers for Medicare & Medicaid Services (CMS) for payments that exceed a target price.

This revenue cycle uncertainty falls disproportionately on specialty practices, which are generally newer than primary care practices to the core mandate of value-based payment: assuming holistic accountability for patients throughout an episode of care and across all settings.

To capitalize on the upside presented by emerging payment models, while minimizing or avoiding risk, provider organizations must be ready to transform both clinical and financial processes across their practices. They must implement best practices and invest in the skill sets and tools that are needed to effectively analyze, predict, and collect on revenue.

Building on the Fee-For-Service RCM Infrastructure

Adapting to risk-based payment models represents a major change for providers, but the good news for many organizations is that existing fee-for-service (FFS) revenue cycle management (RCM) infrastructures and skills will remain a critical part of their financial foundation. However, RCM will have to emerge from the back office and take on a much more strategic role as it builds new capabilities and processes to support value-based care.

The traditional focus on submitting clean, accurate claims up front, then following through to ensure appropriate payment quickly, is no longer sufficient. In addition to accurately forecasting and optimizing FFS revenue streams, teams must now expand their revenue cycle purview to encompass and drive accurate revenue projection and risk management across value-based care activities. In this way, RCM becomes the first step, not the last, in maximizing financial performance.

As with FFS RCM, accurately determining how much revenue will result from value-based sources requires anticipating that some percentage of potential revenue will not come in because of either internal error or inaccurate payment. Because value-based contracts are relatively new, both providers and payers have a lot of details to work out around compliance, measurement, reporting, and payment expectations. These challenges are complicated by the fact that value-based payments are affected far more than are FFS payments by the subtle details of clinical encounters across multidisciplinary teams of providers in every possible care setting.

Consider the example of the Oncology Care Model (OCM), which has been designated as an advanced APM in MACRA. Oncology practices participating in this model assume accountability for entire episodes of cancer care. They drive sustained improvements in quality and cost, enabled by CMS payments of $160 per patient per month, and receive a share of any savings that are generated. Yet some practices are experiencing revenue shortfalls because they struggle to correctly identify all qualifying episodes.

Fixing this challenge is not about adjusting codes and completing fields to submit cleaner claims. Instead, answers lie in a complex variety of clinical, financial, demographic, and other factors that align with the OCM program guidelines. Optimal performance requires the ability to understand and manage risk across a population and tools to forecast potential clinical and financial outcomes.

Maximizing Revenue for Value-Based Care

As with forecasting, another aspect of traditional RCM that changes under value-based care models is denial management. In traditional FFS best practices, an organization tracks denials to root causes to determine whether the denial was legitimate, and if so what errors on the claim can be corrected, what processes should be tweaked, and which staff may need to be counseled. The goal is resubmission and approval.

Under value-based care, all of those steps remain in play, but the organization should also analyze the episode for issues such as deviations from care pathways or errors in outcomes documentation. Furthermore, under MACRA, Medicare FFS reimbursement is adjusted based on the Merit-based Incentive Payment System (MIPS) composite score, which is calculated from data in the practice’s electronic health record, among other sources. Gathering this data can be problematic for some practices with older legacy technology or no such technology. RCM is then required to close the loop with the practice’s clinical leadership to flag issues requiring immediate attention, such as gaps in care or in documentation. Indeed, the two parties must be in constant dialogue to optimize value-based care performance.

Providers may take comfort from the fact that under a bundled payment model such as the OCM, they can avoid the RCM challenges associated with tracking down denials and underpayments hidden in dozens of individual claims on a single episode of care. However, this consolidation also means that instead of being spread out across many small charges, the risk is associated with a single, more complex payment.

To receive payment under OCM, for example, the provider is responsible not just for prescribing the proper medication, dosage, and duration but also ensuring that with respect to oral oncolytics, patients fill the prescription as directed. This requires new processes for gathering RX data, enhancing patient engagement, and documentation.

Perhaps most critically, with OCM payment tied to defined performance periods, it is essential that revenue cycle leaders detect issues and intervene while cost and quality improvements are still possible—and that they do so on a consistent and ongoing basis. Waiting until the end of a period to analyze results can result in being dropped from the program if the practice has fallen short of cost-saving targets.

Other types of value-based models present revenue optimization challenges that are at least as complex. To successfully forecast revenue under shared-savings models, for example, provider organizations need real-time visibility into how they are performing against specific cost and quality measures and against their peers. Thus, new tools and techniques likewise are needed for this evolution of RCM.

Some revenue cycle leaders may look at the arrival of value-based care as another series of operational and process-related hills to climb. Indeed, new sets of competencies and tools will be required for success. But the value-based care transformation promises to be far more fundamental, not to mention far more beneficial clinically and financially for practices and patients alike. It compels RCM teams to step to the forefront of their practices as experts in predictive-risk assessment and ongoing care management who are uniquely positioned to safeguard the long-term financial health of the organizations they serve.

Charles Saunders, MD, is CEO, Integra Connect.


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