Centralize, decentralize and customize: Choosing the right RCM strategy to maximize value and success
Healthcare acquisitions continue to escalate, and just when everyone thought activity couldn't grow any greater, it has. Last year, disclosed value deals increased 92 percent and physician practice deals nearly doubled in the first quarter 1. This year will likely show similar growth, with physician practices experiencing a significant amount of the overall healthcare acquisition activity.
Particularly for health systems, physician practices are critical acquisition targets. As health systems acquire practices, leadership must alter their mindsets and strategies regarding revenue cycle management. Health systems can take one of a few approaches to optimize revenue cycle management (RCM), including centralizing, decentralizing or customizing. This framework can help you make informed and disciplined decisions regarding RCM technology and processes.
1. Centralize: Combine RCM processes across all hospitals and physician practices into a single revenue cycle with a central billing office
More than two-thirds of healthcare decision makers have named analytics as one of their top three priorities 2, and these same decision makers may opt for a centralized approach to help standardize processes and data collection. As each physician practice becomes part of a health system, a health system leader must review its methodology for collecting and monitoring data. Often, the centralized billing office (CBO) can fulfill this role.
In addition to analytics, you must evaluate other key areas of the revenue cycle such as RCM technology, billing processes and organizational willingness to adapt. While it may seem cost-effective to rely on the health system's existing hospital claims management tool, you must ensure the centralized technology can optimize RCM across all provider types with questions such as:
1) Can the health system's clearinghouse technology accommodate the many nuances of physician practice billing?
2) Can the clearinghouse vendor demonstrate successful key performance indicators (KPIs) for physician practice RCM, such as claims first-pass rate and charge lag?
3) What is the process for identifying and getting denied or rejected claims out the door, and how long does it take?
4) How much time and how many resources are spent on the back end handling rejections and denials?
With a centralized approach, you must ensure billing processes and technologies can accommodate physician practice billing codes and claims, such as adapting to specialty practice billing. If the existing CBO cannot easily accommodate the coding and other RCM needs of a system's acquired specialty practices, you may want to consider decentralization.
2. Decentralize: Implement similar technology across all locations but billing remains separate across entities
Health systems electing to decentralize RCM processes do so because it allows every provider—hospitals, surgery centers, various practice specialties—to retain their optimal billing workflows. Although billing remains separate across entities, it's beneficial to establish standardized, cohesive RCM technology and processes. For instance, a single source technology provider, specifically for practice management and RCM, would enable standardization of data collection and reporting. Often, a single clearinghouse can be implemented across all organizations to accommodate many different billing offices and workflows. When considering standardized technology solutions, health systems should ask key questions such as:
1) How can the clearinghouse contribute to the health system's value-based initiatives?
2) Do the clearinghouse vendor have other solutions that can further reduce costs or make a greater contribution to profitability?
3) Does the clearinghouse specialize in hospital claims management or practice claims management, and can it provide KPI reporting with different metrics for each?
Health systems that take a decentralized approach may also do so because keeping billing offices separate makes it easier to collect and process payments from patients. Historically, hospitals and physician practices have had very different patient payment processes, so it's important to have technology in place that can accommodate both.
3. Customize: Allow each entity to keep separate processes, technologies and best practices
The customize approach works best during the first nine to 18 months immediately following an acquisition. It's often a short-term strategy to help you gauge newly acquired practices' successes and determine the best long-term strategy. With customization, you must set clear expectations regarding how practices will be evaluated and for how long. Part of this decision will be based on how much time and data the health system needs to conclude what is or is not working within each practice.
Customization can benefit from a best-in-breed vendor partnership, which allows practices to maintain their own systems without having to conform to a billing office's mandate. It can yield several benefits, as it enables practices to maintain their successful clinical, administrative and RCM processes. In addition, customization allows health system leadership to monitor a practice's performance and determine if its IT systems are facilitating optimal results. If a practice is performing well in any area, you may want to implement those best practices at other organizations―whether that's with a single RCM technology, a CBO or a combination.
Whatever the decision, the health system will need to create a transition plan for integrating the best option across the organization. And, of course, if customization is working, you may elect to keep things as they are rather than centralizing or decentralizing.
A data-driven strategy for a constantly evolving landscape
As they grow, health systems can realize many RCM benefits such as contract negotiation power and better capital resource utilization. In the midst of this growth, however, health systems must have a strategy to guide acquisition processes and ensure physician practices are set for success. Part of this acquisition strategy includes having an RCM partner that can help in the quest for value. Another part is having a disciplined, metric-driven approach to determine the right processes and technology for every newly acquired organization.
About the Author
Jim Denny is co-founder and CEO of Navicure, a provider of cloud-based healthcare claims management and payment solutions.
1 Gamble, Molly and Sachs, Benjy, “60 Statistics and Thoughts on Healthcare, Hospital and Physician Practice M&A,” Becker’s Hospital Review, July 2015, http://www.beckershospitalreview.com/hospital-transactions-and-valuation/60-statistics-and-thoughts-on-healthcare-hospital-and-physician-practice-m-a.html
2 Walker, Tracey, “Analytics a Top Priority for Majority of Healthcare Companies in 2015,” Managed Healthcare Executive, February 2015 http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/analytics-top-priorty-majority-healthcare-companies-2015
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