Is your revenue cycle ready for value-based care? 5 strategies to improve your organization's financial strength

While most stakeholders agree the shift toward value-based care is imminent, the current political environment and uncertainty surrounding healthcare reform have caused many healthcare organizations to slow or stall their efforts to prepare for risk-based medicine.

A Deloitte survey found more than 80 percent of physicians still received some compensation under fee-for-service models or salary arrangements as of 2016. In comparison, physician participation in value-based payment models only increased 5 percent in 2016 from the year prior.

This news comes as no surprise to most healthcare executives. Nineteen hospital and health system leaders reported similar trends within their own organizations during an executive roundtable discussion at the Becker's Hospital Review 6th Annual CEO + CFO Roundtable in Chicago on November 14, 2017. Most leaders said their organizations still operate on a fee-for-service basis and have no plans to change this model in the next year.

Healthcare finance leaders are still taking a proactive approach to value-based care, despite this slowdown. Strengthening financial practices, especially revenue cycle responsiveness and adaptability, emerged as predominant themes during the discussion. Leaders shared current and future plans to improve financial strength, such as investing in revenue cycle management solutions to ensure their organizations can quickly and efficiently respond to and pivot amid unpredictable value-based environments.

Here are five strategies leaders identified during the discussion to strengthen their organization's financial operations to better position them for value-based care.

1. Centralize billing systems. The CFO of a 12-hospital system in the Midwest, which was built through a series of acquisitions, highlighted the challenges of managing hospitals with separate billing systems. For years, the health system allowed acquired hospitals to operate locally, resulting in nine different billing offices across the system. Billers worked on a payer basis at each location, creating an unnecessarily complicated and inefficient system, according to the CFO. "We consolidated our billing into one location to prepare for a large focus on payers," he said.

Uniting disparate hospital billing systems into one is just the first step, according to a GE Healthcare revenue cycle business leader at the roundtable. Combining hospital and ambulatory billing services can further streamline an organization's revenue cycle and help them lay a stronger foundation to be more financially nimble as their markets and payer-mix evolve. Moreover, a single billing and revenue cycle management solution also helps organizations manage larger billing volumes on a more timely basis, which will be more important than ever under value-based care.

2. Foster strong payer relationships. Effective payer collaboration is invaluable for healthcare organizations looking to improve their financial strength. "It's really critical to collaborate with payers to create a payment environment in which we can make the changes," said the CEO of a 739-bed academic medical center in the Northeast.

By developing more efficient financial and care delivery processes now, healthcare providers can poise themselves as ideal partners for payers to link up with when value-based payments finally gain prevalence in their market. Specifically, enterprise revenue cycle management solutions can increase organizations' agility and adaptability to changing payer mix and levels of risk, helping CFOs and back-office billers better manage multiple payers and multiple contracts featuring differing requirements, according to the GE Healthcare revenue cycle business leader.

3. Understand how you're paid and how you collect. Another health system leader discussed the importance of understanding budgeting requirements for value-based care initiatives. "Every functional area is touched when moving to value-based care, so hospitals must budget differently for these alternative payment contracts," said the senior vice president of mergers, acquisitions and partnership development at a 22-hospital nonprofit health system in the Midwest.

Hospitals should dedicate time to understand how they're being paid and determine the most effective collection methods, which can be very different than fee-for-service transactions, according to the senior vice president. Denied claims in particular threaten a hospital's bottom line, so having automated processes and technology to effectively manage and submit clean claims the first time is crucial. Hospitals with a firm grasp on billing and claims processes under fee-for-service care can give themselves a significant financial cushion as they begin to navigate value-based or risk-based contracts.

4. Create a single, integrated budget. A 739-bed academic medical center in the Northeast underwent significant financial restructuring to be better prepared for risk-based contracts under value-based care, according to the organization's CEO. The health system created a single budget to integrate the academic medical center with the other acute care hospitals in the system. The health system also restructured the employee compensation system to better support the organization's value-based goals and created an organization to manage third-party health plans, which account for about $2.1 billion in Medicaid, Medicare and commercial contracts, according to the CEO.

5. Use technology to streamline the process. Many leaders said their hospitals or health systems are turning to technology to ease the transition toward value-based payments. "We're really focused on creating an IT system that can support all of our initiatives," said the CEO of a small general medicine and surgical hospital in the Midwest.

Adopting a best-of-breed revenue cycle management solution can help healthcare organizations increase revenue capture and drive out cost to smooth the future transition from volume to value. As healthcare organizations enter more value-based contracts, they must be ready to meet any and all requirements for reimbursement, which will differ by payer. Hospitals and health systems can use a revenue cycle management solution to gain the level of flexibility and preparedness needed to manage a diverse pool of payer needs and ultimately maximize revenues.

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