Radical changes in revenue management: the shift to end-to-end RCM has begun

Uncompensated care, payer denials, and underpayments are costing health systems billions of dollars in revenue leakage each year.

To address these revenue problems, many health systems have turned to bolt-on revenue cycle management (RCM) solutions — often from multiple vendors — to try to improve their revenue management. But these multiple add-on technologies often exacerbate a health system's financial challenges by contributing to recurring denials, underpayments and high vendor management costs.

In a July Becker's Hospital Review webinar sponsored by FinThrive, Jonathan Wiik, vice president of healthcare insights at FinThrive, discussed the current state of revenue management, shortfalls of traditional RCM approaches, emerging trends, end-to-end revenue management success stories and the future of the healthcare economy.

Four key takeaways were:

  1. Health systems face multiple revenue cycle management challenges. According to Mr. Wiik, the "big six" industry trends affecting RCM are:

    • Workforce. The Bureau of Labor Statistics reported more than two million job openings in healthcare. "Most hospitals are running at 75 to 85 percent capacity in staffing," he said.

    • Automation. Half of providers are expected to invest in AI by 2023, according to a Gartner report. Automation is designed to offset labor and workforce issues.

    • Profitability. The AHA noted that uncompensated care increased by $1.1 billion from $41.6M in 2019 to $42.7 billion in 2020. "Hospitals have also had five negative months of margin, according to Kaufman Hall's margin index this year," Mr. Wiik said.

    • Payer mix. "It's alarming that 52 percent of the payer mix on average nationally is going to be funded by government," he said. "Private insurance or employer-sponsored insurance is going to shrink from about 33 percent to 22 percent."

    • Health equity. The pandemic revealed disparities in health equity that must be addressed.  Leveraging third-party data sets for social determinants of health to identify socioeconomic insecurities are critical to ensure care and financial outcomes are achievable.

    • Frictionless. According to patientengagementhit.com, 93 percent of patients responding to a survey indicated that a poor billing experience would prevent them from returning to a provider.  An elegant, accurate, and integrated virtual intake management program, along with seamless and flexible payment options, are key elements of a frictionless patient experience.

  2. Current RCM efforts are expensive and redundant, and often fail to generate positive results. "Revenue streams are volatile, with escalating labor and supply costs," Mr. Wiik said. "RCM vendor performance has been difficult to measure, expensive to maintain and duplicative in its offerings. Hospitals are closely evaluating their vendors and are looking to consolidate or eliminate some partnerships.

    "I can tell you those vendors are not talking to one another," he continued. "That is left to the hospital, which lacks resources and expertise to manage a comprehensive data acquisition strategy. Those [health systems] that have more vendors have more claims denials."

  3. A revolutionary key performance indicator-based approach fuels holistic revenue improvement. "Rethinking revenue management involves a fundamental shift from the traditional cycle of inefficiencies in RCM," Mr. Wiik said. For example, health systems that use robotic process automation bots should be able to link that investment to saving the work of several people. "It needs to be measurable," he emphasized. "Let's work smarter, not harder, and automate wherever you can." Intelligent automation is part of the revenue management solution of the future.

    FinThrive research has found that almost two-thirds of healthcare finance leaders will invest in a single-vendor RCM platform within the next 12 to 24 months. The shift away from fragmented bolt-on solutions to end-to-end RCM platforms has begun.

  4. The patient is the new payer. Mr. Wiik concluded by addressing issues of transparency and consumerism. "As patients have more choices on where to go, they are going to go to places where the care is good and accessible, but is also somewhat affordable and easy to pay," he said. "They are going to want to shop healthcare like they shop any other good."

Health systems must rethink end-to-end revenue management strategies to consolidate vendors and focus on measurable improvements to compete in today's rapidly changing healthcare market.

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