Revenue cycle headed for a ‘new world’
January 5, 2015 in Medical Technology
“Frankly, our revenue cycle tools are built for fee-for-service, and they’re probably not ready for the new world,” says John Hoyt, executive vice president of HIMSS Analytics.
[See also: Revenue cycle ripe for radical change]
Right now, we’re living in an era where most providers’ RCM technology is years out of date. As healthcare pushes toward pay-for-performance and bundled payments, many systems are still living in an era of simple claims processing.
The Centers for Medicare Medicaid Services is pushing the needle on payment reform, knowing, as we all do, that “they’ve got to take the inflation out of the annual healthcare costs,” says Hoyt, speaking to Healthcare IT News for the January installment of our “Benchmarks” column.
[See also: RCM trends reveal haves and have-nots]
Still, despite a slew of interesting and innovative value-based initiatives these past few years, CMS still hasn’t quite figured it all out, “so they’re going down several paths at once,” he says.
Whatever ends up happening with payment reform, providers know the era of getting reimbursed for volume is in its gloaming — and that the technologies they deploy to manage their revenue streams must evolve.
That will happen. Soonish. But with most providers having focused investments on clinical technology to capitalize on meaningful use these past few years, there hasn’t been much cash left over for investments in financial tools.
The next big purchasing wave will focus on updating those capabilities for the new era ahead, says Hoyt.
“Once the penalties start kicking in for clinicals, most people will have made their big investments,” he says. “I think the next big thing is mergers/acquisitions and payment reform, with revenue cycle to handle it.”
“The writing has been on the wall for a long time,” adds HIMSS Analytics Senior Director of Research Jennifer Horowitz. “Because we’ve had such an unnatural market with the clinical applications, and the amount of focus there, at some point (providers) are going to have to focus on the revenue side. They’re just not going to be able to accommodate what they need to do anymore.”
Mergers and acquisitions should play a big role in the change going forward, says Hoyt.
“Look at the banking industry: They did what exactly we’re doing: A big investment in IT, redesigning processes, in the way they deliver their services, and they had massive consolidation.”
That’s where we’re headed, he says. “I know healthcare is local, but that doesn’t mean billing is. There’s no reason you can’t go to your local hospital and have the bill generated from Minot, N.D., just like your Mastercard bill is.”
More and more big players are following that route, such as the giant Catholic Health Initiatives (86 hospitals in 17 states), which outsourced its entire revenue cycle operations in 2012.
“I think that’s clearly the way to go,” says Hoyt. “Frankly, one of the jobs of clinical systems is to produce billing codes, and then who cares where they go? Send them to some billing company! You don’t have to be sending bills out of St. Mary’s hospital. There’s no reason for that.”
Such large-scale billing consolidation, of course, means “there’s going to have be some standard around what we do,” says Hoyt. “Get the Cerners and the Epics and the Meditechs of the world to generate all the ICD and CPT codes you need, the HCPCS codes and all that. And then you can consolidate billing. You have one central billing office. Or you outsource it. I think those are the trends of the future.”
One of the first sites that successfully did that, a decade or so ago, was the University of Iowa, says Hoyt. “They got their act together, they sent out one bill, with doctors and hospitals on it.”
Providers aren’t the only ones facing big changes, however. Payers will have to make their own adjustments, he says.
“Of course the insurance industry is going to have to change a little bit too to accept that, but Medicare is leading that trumpet by forcing consolidated billing: I’m gonna give you one payment and then you go figure out how much goes to the anesthesiologist.”
Or here’s another interesting thought: Given the arduous time so many providers are having trying to meet Stage 2 meaningful use, what if some were to just opt to skip it, and instead plow money that would have been invested in attestation into rebooting their revenue cycle technologies – hopefully offsetting any Medicare penalties by improving their bottom line?
“The number of people who qualified for Stage 2 stunned everybody, including the government,” says Hoyt. “And the government is obviously embarrassed by it. If it’s not massively improved, I think you’re right: ‘I’m gonna take that money and invest it in revenue cycle as I continue to grow my IDN. Acquire hospitals, acquire physicians, acquire home care, nursing homes, and fix my whole revenue cycle. Or outsource it.”
That’s happening, according to a recent Black Book survey, which found that the market for end-to-end RCM outsourcing could reach $10 billion by 2016, as “overwhelmed hospital leaders have realized that RCM isn’t their organization’s core competency.”
Financial resources are scarce, of course, and properly allocating them is critical to having a robust suite of revenue cycle tools.
A recent report from Black Book showed some 40 percent of hospital CFOs surveyed said their had been so damaged by “misjudged EHR, HIE and patient portal expenses,” that they’re postponing acquisition of new revenue cycle software until at least 2016.
Still another the 41 percent of CFOs said their hospitals were in good shape and would be moving ahead with “next generation” revenue cycle management tools.
[See also: Providers embracing RCM outsourcing]