Accretive Health becomes R1 RCM: CEO Joe Flanagan on rebranding and the company's future
Accretive Health, a provider of revenue cycle management and physician advisory services to healthcare providers, is poised for substantial growth in 2017 after a name change and the launch of a new revenue cycle management offering.
This month, Accretive announced it had rebranded as R1 RCM and launched the R1 Performance Stack offering. The company said the R1 brand is designed "to reflect the company's approach to serve as the one revenue cycle management partner for healthcare providers regardless of their payment models, partner engagement structures or settings of care." The R1 Performance Stack offers seven components to RCM, including comprehensive gains, assured standardization and proprietary technologies, among others.
With the name change and launch of the RI Performance Stack, the company anticipates to double by the end of 2017 — 5,000 employees going up to 12,000 with its current contracts. R1 RCM projects $400 million to $425 million in revenue in 2017 compared to $205 million to $210 million in 2016. By 2020, R1 RCM expects that number to reach $700 million to $900 million.
"We feel really good about the growth, so as we make the turn from 2016 to 2017, we just really want to be more active externally talking about the company and how it is today," Joe Flanagan, president and CEO of R1 RCM, said.
Mr. Flanagan, who replaced former company CEO Emad Rizk, MD, last year, recently spoke to Becker's Hospital Review in detail about the company, its name change and its future.
Note: Interview has been lightly edited for length and clarity.
Question: What prompted the name change? Why R1 RCM?
Joe Flanagan: We wanted to make a change to better represent who we are today. We have a long history, and as we looked at our capabilities, our strategies, our core values, we felt it was important to communicate to the market what we knew as a company — that we've evolved to better meet customers' needs. The process took nine months and St. Louis-based Ascension, with whom we have a 10-year partnership, was a great partner in this rebranding journey. They understand us, given our long operating relationship, and they also understand our customer base. In addition to the rebranding of the company, we also launched a holistic new mission, vision and set of cultural values. I can't emphasize how important that is for me personally. The employees deserve a strong cultural identity.
Moving to the name itself, it was very important to convey what we do and our focus. If I break it down and you think about this "R1," the "R" has some connotations, first on our focus of managing revenue with our partners. The second thing is based on our experience — the only way to get the right patient outcomes and financial outcomes is to build strong relationships with the customers. And then the third thing is the confidence to commit to results. We've always been results-oriented. We've earned money when we drive value. If you look at the "1," it's really a signal of primacy obviously. We were formed in 2003. If you look at our closest competitors or peers, they formed after that. So that's a strength we want to play into. We think as we sit today, that we have leading performance. The final thing that encapsulates our brand is our ability to be the sole revenue cycle provider for our client.
Q: What does the R1 Performance Stack entail?
JF: The R1 Performance Stack is the culmination of all of our experience encapsulating that in an operating system to say, "For us to have the confidence to commit to results, or for us to have the confidence to talk at a level of detail that establishes credibility on how do we get performance, we have to have a point of view." And that's encapsulated in that performance stack. It starts from what's required from a human capital system then layers on top of that to say, "What methods do you bring to the table and how is that work done?" Then on top of that we operate and deploy the widest coverage of proprietary technology with our technology platforms. They encapsulate our methods. They're built by operators, for operators to drive results. Then on top of that you've got your analytics layer. Then finally we have a significant investment organizationally in monitoring all of our deployments against their adherence to the standard. So from our standpoint, to manage the revenue cycle end-to-end, you have to have all of those capabilities in place.
Q: What is the biggest challenge facing hospital and health system leaders today?
JF: One challenge facing the CFOs, if we talk about that as the primary customer within the healthcare system, is despite all the discussion of the revenue cycle, the market has not evolved to meet their needs. So, from our view, it's still a fragmented market — technology players, consulting companies, transactional service providers where the customer or the CFO's organization is still working to package all that together to get an outcome, which can be a huge demand on their time. Also, there are many changes going on in healthcare, and from our standpoint, the implications of those changes to the revenue cycle are: reimbursement is coming down, however you get there, and the transactional complexity in having to manage that reimbursement is going up. So, if there was nothing done on the current state of operations, you would have a situation where reimbursement, translated into revenue, is coming down for the health system, and there's upward pressure on their administrative cost because the transactional complexity is going up. When you have your fee-for-service, commercial government, then you have fee-for-value, and then you have the increase in payment residual, the transactions required to get the dollars of revenue back are just getting more complex. That squeezes their margins, so we think there's an increasing pressure on companies that have the capability to get the right revenue yield while bringing the cost to collect down, and that's an operational change.
Additionally, in that wave of provider consolidation, now there's pressure to deliver the synergies inside those business cases, which for the revenue cycle are really scale leverage. And the infrastructure to enable that scale leverage is not in place right now so you have to have physical infrastructure to allow centralization of work. You have to have technology infrastructure that can overlay all the host systems to facilitate the centralization of work. That's not in place inside those combined entities. So, there's a huge investment they have to make in a constrained capital environment, or there are partners that will facilitate them delivering those scaled benefits.
Q: What are your predictions for RCM in 2017?
JF: My sense is you will see the market that's serving the providers with RCM start to move toward this business model of technology-enabled services. And you'll see market participants come at it from different angles. Technology companies trying to make the shift to add services to their capability, and services companies trying to add technology.
Q: What trends are you seeing as far as merger and acquisition activity and consolidation in the RCM space?
JF: The physician RCM space continues to be pretty fragmented. One of the trends we think you'll see are companies that seek to optimize workflows and thus the capabilities between the acute care setting and the physician setting. It's a big market, it's growing in terms of the macro trends on healthcare. From our vantage point it's pretty fragmented still, and there's a lot of translation of capabilities when you look at it just through the lens of what has to be done in the acute care setting not shifting to the outpatient setting. So there could be some rationale for increased M&A activity. Then you'll continue to see activity where customers are looking for their long-term solution set. It's really critical that the end-to-end providers demonstrate compelling proof points on why that's a better path than internal operations.
More articles on healthcare finance:
S&P assigns 'AA' rating to Boston Children's Hospital's bonds
Moody's assigns 'Aa2' rating to Boston Children's Hospital's bonds
11 recent hospital outlook and credit rating actions
© Copyright ASC COMMUNICATIONS 2017. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.