Throughout this time, I have noticed one constant characteristic that drove a significant portion of revenue cycle performance (or lack thereof). What’s more, this characteristic is unnecessary and just plain untrue – that revenue cycle is a complex beast that is extremely difficult to tame. The reality is that the revenue cycle is, in fact, simple. However, that does not mean that revenue cycle is easy (because it’s not)…..and there’s a difference.
People believe revenue cycle is complex and difficult for several reasons. These include factors such as incessant governmental regulations, extensive and inconsistent third-party rules and requirements, the involvement of multiple siloed departments and fragmented ownership, ever-changing technology platforms and so on. In my opinion, organizations have used these factors as justification for creating over-complicated revenue cycle operations, and excuses for under-performance.
My theory is that many people who have been involved in revenue cycle management for years believe that it’s complex for one major reason: because the alternative is too painful to admit. In other words, if revenue cycle truly is simple, then too many revenue cycle professionals have been working too hard for way too long. But, we must get past that emotional factor in order to absorb and embrace this counter-intuitive perspective. So, with that in mind, let’s talk about how and why revenue cycle is concurrently “simple” but “not easy”.
First, the “Simple”: The simple part of revenue cycle has to do with the underlying foundation and principles that everything else is built upon. This is true of basically anything and everything in life; the foundation must be solid and strong enough to support the eventual structure that it is going to support. Here are the foundational elements that create the “simple” part of revenue cycle.
Recognize and honor the objective: There’s a saying that goes “revenue cycle means different things to different people”. Well, that’s a sure-fire formula for having everyone in the boat rowing in different directions. The one, singular objective of revenue cycle operations is this: “To turn healthcare services into cash flow in the fastest, most efficient, legal and ethical manner possible, period”. All decisions regarding organization, policies, processes, technology, etc. must be designed with this one goal in mind. Everything else is incidental. To quote Judge Reinhold’s character Brad Hamilton in Fast Times at Ridgemont High; “Learn it, know it, live it”.
Philosophical pillars of strength & conviction: While this may sound Zen-like, these tenets form the core of everything else about the revenue cycle that will eventually be built, implemented, and managed. These three guiding principles, if followed faithfully, will ensure cohesion between every element of the operation. These are:
• Simplicity: Targeting areas with the highest impact, and designing solutions based on the rule, not the exceptions.
• Focus: Always keeping the end-result objective front and center, concentrating on the task at hand, and eliminating the “noise” and non-value-added activities.
• Sustainability: Building an operational design whereby day-to-day performance and overall results can be maintained on a go-forward basis irrespective, and in spite of, inherent complexities and external forces.
The Pareto Principle applies: Actually, what we’re talking about here is the Pareto principle on steroids. Forget the 80/20 rule. You have to turn this into the 90/10, or even the 95/5 rule when designing every aspect of the revenue cycle. For any function, process, or activity the focus must be on the common denominator that occurs in, or impacts, the clear majority of the instances involved. The revenue cycle is an imperfect operation, so don’t try to build a perfect solution that covers every single possibility. It’s the 90%-95% of the daily, recurring activities that feed the bulldog known as “results”, so build everything to successfully address that. Then, and only then, develop protocols for addressing the remaining 5%-10% of the outlier occurrences. You’re never going to get 100% of the revenue cycle correct or completed. That’s why there are benchmarks for things like self pay bad debt and denial write-offs. Accept that and move on.
Less is better: OK, this is simply the “K.I.S.S.” mantra with a little polish on it. This is a natural by-product of the prior two elements. This “less is better” tenet applies to essentially everything involved in the structure of the revenue cycle. When designing work flows, processes, work queues, policies, even details like specific claim edits and denial categories for reporting, keeping the overall objective and the 95/5 principle in mind, you should end up with fewer elements and components to execute and manage. And they should be more than sufficient to get the job done. Every time you add or bifurcate something, you add a layer of complexity that, more often than not, isn’t necessary and adds no real value to the end product or goal.
Redundancy equals results: Once you’ve adopted and followed the previous three rules, you should end up with processes and work flows that are extremely redundant. Naturally, specific job functions will seem mundane to some staff, but this is what produces consistent and reliable results day-in and day-out. You should have, and want, job functions that are boiled down to their basic core elements, eliminating anything that does not serve the overall objective, so staff have a limited, well-defined and focused job responsibility that is predictable and manageable. Forget the argument that “it’s not fun for the staff”. You’re not in business to create “fun”, you’re in business to produce cash flow. The best performers, the ones who care about producing results, will embrace this approach and raise the performance bar every time.
Manage by measuring: Yes, this is the “That which gets measured gets managed” adage. Let’s face it, revenue cycle is to healthcare what baseball is to sports: both are easily boiled down to and understood via a handful of statistics, or in the business vernacular, Key Performance Indicators. There are a few critical factors governing the use of KPIs in revenue cycle management. First, remember that “less is better”, and that applies to KPIs. While every core function needs a set of KPI to guide and manage performance, each should be a relatively short list (around 5, give or take), and overall A-List revenue cycle KPI’s (i.e. an executive dashboard) should involve less than ten. Second, all KPIs for all functions need to be connected to and support the overall objective of generating cash flow. There needs to be a “cause and effect” of what’s being measured and how it impacts the objective. Otherwise they are a distraction and will create an inefficiency in the operation. Third, make sure that you share this information routinely with staff at all levels. Use KPIs as a way to “Keep People Informed”. I have found that staff respond in a very positive manner to having access to this information and getting feedback on performance, be it good or bad.
Now, the “Not Easy”:
OK, it’s time to fess-up: Some parts of the revenue cycle actually are complex, with coding & reimbursement being prime examples. For the most part, these are technical details inside the overall machine, and they require specific skill sets to execute. However, they should not impact the design of processes and work flows, and they should not be allowed to interfere with the overall objective. The engine of a car has numerous components and small parts, but they do not change the overall design of the car with respect to reliable and safe functioning. You can’t afford to let these pockets of complexity interfere with the overall design and governing philosophy of your revenue cycle operations.
Cultural bias: Having a long history of doing something a certain way brings with it ingrained beliefs that there’s no other way to operate. Thus, you end up with a lot of “You can’t do it that way”; “That may work somewhere else but not here”; “It’s more difficult than that”; “But what about (insert any insignificant or rare occurrence here)?”. The natural result of this type of thinking is the development of a myriad of over-thought, inefficient and avoidable operational design flaws that all lead to one thing; unnecessary complexity. What I’ve found to be interesting about this dynamic is that, instead of using critical thinking to reverse engineer and eliminate some of this complexity, organizations tend to keep adding to the complexity with countless band-aid approaches and piecemeal initiatives.
Walls, walls, and more walls: I admittedly have spent my entire career in healthcare, so I am not acquainted with the operating models of other industries. That said, I have to believe that healthcare is one of the most compartmentalized industries in today’s business environment. There are more siloes in a healthcare system than there are in a farming conglomerate. For the revenue cycle, this results in a fragmented design with respect to ownership, accountability and individual agendas. All of this, in turn, results in a divergence of activities that are not in synch with the overall goal. This is not a case of everyone in the same boat rowing in different directions, it’s worse. This is like having several people in their own individual boats rowing towards different destinations.
The distraction of external forces: As we are all aware, there is a litany of external forces that continuously bombard our efforts to manage the revenue cycle. From the Federal and State governments, countless third-party payers, our major competitors, countless vendors and others, they all compete for our time, attention and money. Without a strong force field to protect us from this on-going attack, it is easy to let these external forces drive priorities and activities and, consequently, distract us from the 95/5 formula that produces results. While it is easy to say that you don’t have to react to every nuance that comes down the pike equally (actually, you can’t afford to), the ability to successfully consider, vet and address said forces is a difficult and never-ending challenge for revenue cycle leadership.
The “fear of commitment” syndrome: This one has me a bit stumped, kind of like “the chicken or the egg” thing. The one thing I’m sure of with this one is that organizations rarely commit to the level of time and effort truly necessary to redesign their revenue cycle operations in a way that delivers the desired results. What I’m not clear on is the actual genesis of this lack or fear of commitment. Is it: 1) a pure under-appreciation for the actual effort that is required; or 2) an understanding of the effort but an ingrained focus or pressure on shorter-term results; or 3) an understanding of the effort but a lack of the intestinal fortitude required to bring together all the key stakeholders and see it through to the end? Whichever it is, or a combination thereof, the common outcome of this is an attempt by organizations to deconstruct and re-engineer the revenue cycle in an unreasonable timeframe with efforts to “fix it” via several piecemeal projects and initiatives. In the end, neither deal with the underlying issues of the built-in complexities and operational inefficiencies that need to be addressed. The result being a patchwork quilt of various squares that may or may not fit together, versus a completed tapestry that is cohesive, seamless and reflects a singular image.
Last but certainly not least, there’s the human element: This one is certainly not unique to the healthcare industry. The bottom-line is that, no matter what industry, department or function you are in you just can’t eliminate the “people” part of the equation. What makes the human element so critical and difficult is the fact that it’s connected to every level within an organization. There’s the line staff who need the right skills and work ethic; the managers and supervisors who need the ability and fortitude to effectively manage and direct staff; and the executive leadership who need to set and support the organization’s overall culture and strategic objectives. All of these “people” layers need to be coordinated and on the same page to have a consistent philosophy, approach, and expectation for managing operations and producing results. It is definitely rare to have all the right people in all the right places at every level. In my experience, this is where the lion’s share of the responsibility for inefficient operations and poor outcomes resides. Even with everything else in place, a failure at any level of the “human element” can, and usually will, derail the operation and compromise results.
Conclusion: While the distinction between “simple” and “easy” may be subtle, it is an important one to understand and embrace when designing and managing a revenue cycle operation. We have all marveled at the ability of highly skilled professionals like physicians, athletes and musicians to do things with such ease and consistency that are, to us, extremely difficult. If asked, I’m confident that their reaction to our sense of awe would be something to the effect of “For me, what I do every day (i.e. neuro-surgery, NFL quarterback or concert pianist) is simple. However, the process of getting to the point where it’s second nature was the difficult part”. These people don’t change how they do things on a whim or disregard the fact that there is a tried-and-true method to hone their craft and accomplish their goal. Similarly, there is a tried-and-true blueprint for building and managing an effective and efficient revenue cycle operation. And while this blueprint tends to present itself as relatively “simple”, the process of successfully building and managing it isn’t “easy”.
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About the author: Kevin Sharlow is Managing Partner and co-founder of Avid Consulting Group, LLC located in Indianapolis, Indiana. Kevin’s career in the healthcare industry spans 30 years, with extensive experience in the areas of revenue cycle management, operational redesign, accounts receivable management, patient accounting system remediation and revenue cycle analytics. Prior to co-founding Avid, Kevin served in Director-level leadership roles in the Revenue Cycle Consulting Practices at several firms including Cipe Consulting Group (now part of Cumberland Consulting). McGladrey (Now RSM), Huron Consulting, PwC and Ernst & Young.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
