Hospitals and health systems are exploring ways to transform revenue cycle processes to offset financial pressures. However, shifting to a new business model for revenue cycle management can be challenging.
The hospital revenue cycle has become increasingly complex in recent years for several reasons, including the shift away from fee-for-service medicine, the adoption of advanced payment models and the rise of self-pay accounts. At the same time, many provider organizations are facing margin compression and dwindling reimbursement.
To navigate these headwinds and maintain a stable financial position, many hospitals and health systems are seeking to update their revenue cycle models via outsourcing.
During an executive roundtable at the Becker's Hospital Review 10th Annual Meeting in Chicago, Gary Johnson, senior vice president of marketing at R1 RCM, asked healthcare executives how far along they were in the discussion about the need to seek out an alternative model for revenue cycle.
The vast majority of the more than three dozen executives said their organizations are actively evaluating new revenue cycle strategies and moving forward with those plans.
The executives agreed that revenue cycle models of the past aren't effective in today's healthcare environment. However, transforming the process is not for the faint of heart. During the roundtable discussion, hospital and health system executives said they've encountered the following three challenges in their revenue cycle transformation journey.
1. Resistance to change. To overcome margin compression and operational pressures, hospitals and other provider organizations need to eke out every dollar possible from their revenue streams. However, some hospitals miss out on reimbursement or leave dollars on the table because they fail to change the way they do business.
"Many people in leadership recognize that the current model is not sustainable, but struggle to get the rest of the organization, including key stakeholders, to buy into the need for that change," Mr. Johnson said.
To help drive change and persuade stakeholders to give up the status quo, some executives said their hospitals brought in outside consultants for support. For some organizations the first step is just accepting outsourcing as a smart option to evaluate versus seeing it as an admission of failure or last resort. Others said they are handling the issue internally.
The CEO of a hospital in Texas said updating job descriptions helped his organization embrace change.
"I put 'change management' in everybody's job description as part of their responsibilities. It gives them accountability to know we're going to change as time moves along," he said. "It wasn't accepted well initially, but over the last year and a half it's started to grab some traction."
2. Need for expertise or staff. Revenue cycle improvement requires a combination of technology, people and process refinement. Hospitals and health systems that lack the resources or staff to drive this change are partnering with companies, such as R1 RCM, to reduce claim denials, drive down cost to collect and get paid accurately and timely for services provided.
Some hospitals choose a model that enables them to manage certain revenue cycle functions in house and outsource others. During the roundtable, the vice president of operations at a Michigan hospital said outsourcing certain functions made sense for her organization because they lacked the operations to support the breadth of revenue cycle complexity.
However, full end-to-end outsourcing is on the rise. A Black Book survey revealed 80 percent of hospital leaders were vetting or considering outsourcing full revenue cycle management by 2019. The survey also highlighted the increasing demand for revenue cycle outsourcing — 18 percent of hospitals implemented a full RCM outsourcing project in 2018, compared to 11 percent three years prior.
The executives who participated in the roundtable discussion shared various reasons their organizations chose to outsource end-to-end revenue cycle management, including the trust and security that comes from a risk-sharing partner, and how it frees them up to focus on their mission of providing quality clinical care. The vice president of revenue cycle at a Georgia hospital said her hospital chose to outsource specifically due to labor constrictions and staff shortages.
"I don't have enough staff to collect on a $100 account," she said. "I'm not getting any more people."
3. Lack of alignment. Hospitals and health systems across the nation are scooping up physician practices as they seek to expand their scale and services. Alignment of hospital and physician IT, including an integrated RCM platform, is critical to the success of these deals. Success also depends on aligning around common goals.
"Physician practices may see revenue cycle as not aligned with them," said the CEO of a 120-bed hospital in Illinois. "As you begin to insert prior authorizations and all of these resources from a revenue cycle angle, they haven't really embraced that as a complement to achieving an objective."
She said the key to bridging that gap is opening lines of communication between physicians and hospital leaders and discussing how revenue cycle is an important part of the organization's main goals.
"We all want the same thing. We want the patient to receive great care and we want it to be paid for."
Hospital and health system leaders are exploring ways to improve revenue cycle performance to offset the financial and operational pressures their organizations are facing. It can be challenging to update revenue cycle processes, especially for provider organizations that lack the technology, resources or staff needed to navigate the complexities of today's billing and payment landscape. To overcome these challenges, many hospitals and other provider organizations are partnering with revenue cycle companies, like R1 RCM, to help drive revenue cycle improvement.