Should struggling hospitals put off the RCM investment?

Some financially distressed hospitals need to invest in an updated revenue cycle management system to stay in business. But when a hospital is already struggling financially is investing in an upgraded system a smart move?

Without the ability to work with multi-provider bundles, shared savings or other complex payment models, hospitals with dated RCM systems are at a significant disadvantage.

Trying to use antiquated RCM systems to add the new data sources and analytics needed to validate inbound revenue is like "trying to deliver the functionality of a modern EHR using a typewriter," says Jay Sultan, principal strategy advisor at Edifecs, a health IT company.

"Payment reform is driving CMS, Medicaid and commercial payers to alter the revenue cycle, with a larger portion of provider revenue driven by performance elements outside of a traditional RCM system's capability," he says.

Although the need for updated RCM systems is clear, what options are available for struggling hospitals?

Hospitals should prioritize technology investments based on bottom line impact. In some hospitals, "current RCM technology and the processes that it drives are so antiquated that maintaining the system costs more than the revenue assurance/enhancement it delivers," says Mr. Sultan.

If a hospital's RCM system is so dated it is impairing bottom line performance, and the hospital doesn't have the capital necessary to update the system or outsource, there are few options available. Rather than allowing an RCM system to wreak havoc on a facility's finances, "They would be better off shutting it down, reallocating the employees, simply submitting their claims and trusting the payer," Mr. Sultan says.

The reasons hospitals lack the capital to invest in updated RCM systems vary. However, many times clinical technology investments are winning out over financial investments such as revenue cycle upgrades. In fact, CFOs surveyed by Black Book identified health IT as the primary reason for their RCM issues, with 40 percent of CFOs saying they were forced to postpone revenue cycle software transformation due to a misjudged EHR, health information and portal expenses.

More articles on healthcare finance:

California hospital to close after restructuring plan fails
South Dakota hospital to lose Medicare funding
Mayo operating income dips 36.9% as expenses rise

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