Leading hospital executives are assuring greater value by aligning revenue cycle management strategies with the Patient Protection and Affordable Care Act and preparing for the shift to a more mobile, consumer-centric healthcare environment.
The U.S. Supreme Court's decision on the PPACA has brought much-needed clarity but some new challenges to healthcare providers. Virtually every aspect of the law creates incentives to reduce costs and improve quality through sharing and analysis of patient data and leveraging information technologies, to create new clinical strategies and faster connectivity to payers. But there are challenges. This short white paper offers a few insights and actions for executives.
The challenges
Understanding the structural shifts to maximize shareholder value will involve realignment of revenue cycle management strategies and integrate new perspectives. The PPACA calls for dramatic 
reductions, including more than $700 billion in future Medicare spending. For nonprofit hospitals, Medicare reimbursements will be reduced over 10 years by more than $150 billion. In addition, hospitals will experience $14 billion in Medicaid reductions with a significant share of hospital payments to be cut, according to Moody's Investor Services. Most impacted will be local community and rural hospitals. Payers are also being forced to make cuts to meet medical loss ratios, also negatively impacting providers. With the cutbacks, the consumer is picking up greater financial burdens. Thus, leaders will use advanced targeting strategies to work with patients at financial risk, even earlier in the cycle and with consumer friendly strategies. However, a focus will also be on leveraging technology to offer whole new revenue streams, at lower risk and cost structures.
Value-based payment and readmission penalties. VBP or "pay for performance" models and readmission penalties, of some 3 percent, are driving many forward-thinking executives to rethink their processes, technology and strategies to lower cost and improve revenue prospects. While VBP is coming, there are incentives today for improvement in process and outcomes as well as payments for adoption of technology and reporting, that set the stage. Some incentive payments help hospitals who meet or exceed performance benchmarks set by CMS. Other programs include bundled payments and shared savings initiatives for coordination of care. These will continue to expand as well as some areas of shared risk and management of total costs of care. The PPACA requires new forms of comprehensive reporting, including the collection of significant data about clinical outcomes, detailed billing, reimbursement records and compliance information. Thus, maximizing value must balance compliance investments with longer term approaches to derive not only lower cost structures but additional and faster revenue.
Regulatory compliance. As noted above, much of the PPACA's changes involve compliance such as interoperability for meaningful use stage 2. Similar to the outcomes-based programs mentioned earlier, maximizing revenue will involve much tighter integration of systems, including the capacity to collect and integrate clinical data and provide patient record sharing in ways never done before. Along with new compliance standards, the PPACA also has an oversight and enforcement component. The recovery audit contractor program is designed to root out fraud, waste and abuse. Integrating documentation and billing practices, with advanced decision support tools, will not only support compliance but help identify recurring errors and further improve revenue recovery ratios.
Big data, interoperability and mobile healthcare. As coverage for the uninsured expands this year, providers will see an unprecedented increase in demand and the need for online data, impacting revenue. This data influx creates big strains on existing infrastructure. Institutions are investing now to overhaul and upgrade systems to improve interoperability for insurance eligibility and authorizations, Medicare, Medicaid and private insurance. All need coding integration (medical outcomes; compliance with clinical standards; payment and reimbursement requirements; doctor payments; and claims, billing, payment and collections data). The good news, improvements in interoperability will lead to better decision analytics and targeted revenue strategies.
We see hospitals needing still to focus on integration between EMR/EHR platforms and their legacy DB (Oracle, etc.) systems. Smaller and mid-sized providers are having difficulty to meet deadlines or achieve scale as they lack the mix of clinical, architectural and technology skills needed to integrate and build the custom applications for their specific requirements. It may be frustrating for hospitals that are ready for interoperability as some state HIEs don't yet have their infrastructure to enable data exchange. Once interoperability is achieved, where is the next real area of value creation? Mobile healthcare and decision analytics. It is estimated we will see a 68 percent increase in use of mobile patient data for online diagnostics and remote patient management, creating new cash flows, improving care and accelerating revenue cycles. The healthcare mobility device business is estimated to approach $36 billion in the decade. Leveraging mobility is an area sure to attract providers as they seek to increase revenue and value.
Opportunities
The PPACA has dramatically changed the operating environment for healthcare providers. While there are challenges, there are rich opportunities to align RCM with new technologies, leverage platform data, drive costs lower and increase revenue.
As suggested above, budget is not the biggest obstacle. Rather it is scaling and retaining the technical and specialized talent needed to architect and execute off the core EMR and EHR systems.
What strategies can be acted on today? First, forward thinking executives are looking to source talent beyond local boarders. Through specialized outsourcing and managed services relationships, they are establishing greater control and predictability to deliver their critical solutions. We see outsourcing as central, enabling providers to minimize upfront investments and increase agility and flexibility. A new breed of specialized firm, organized to lower platform costs and address the huge demand for customized decision support, mobility and application development, is becoming more available. These should be actively considered.
Secondly, we see a trend to greater use of advanced decision support tools that move beyond simple data visualization. Thus, leaders should be looking at best practices in the area of decision options and other analytic techniques. These have been proven across industries and the top business schools to support faster value-based decisions and may be central to new revenue and value strategies. Services will be cloud-based, lowering costs. Management teams will have greater agility, asking clinical and value/revenue-driven questions, such as: "What if we expand patient access, earlier engagement and mobile-remote diagnostics for our community cardiovascular population? Can we drive greater shareholder value, increase revenue and improve clinical outcomes?” These strategies can help those responsible for value creation and revenue cycle management best advance their organizations in the new mobile and consumer-centric healthcare world. Management can act now to be ahead of the curve.
David Dobkin, MBA, MSc, has over 20 years’ experience in healthcare, life sciences and performance consulting, including work as a principal with Ernst and Young and InterQual (McKesson). He currently serves as an account executive with 4thSource. He has worked with major healthcare providers and payers, in strategic sourcing, including the CEO's office of the Cook County Health and Hospitals System. His published areas of expertise include performance improvement, economic analysis, revenue enhancement and liability management. Mr. Dobkin holds an MBA in finance from the University of Chicago and a MSc in systems engineering from University of Illinois-Chicago. He can be reached at david.dobkin@4thsource.com.
Special thanks to Contributor Gill Epean. Mr. Epean, MBA, MSc, is CEO of Decision Options LLC.