Accountable Care > How’s payment reform changing the traditional revenue cycle?

How’s payment reform changing the traditional revenue cycle?

Author | Date November 12, 2013

For the past few years, the revenue cycle has had to take back seat as healthcare organizations and providers turned their focus to meeting the demands of state and federal initiatives that rewarded them for investing in certain kinds of health information technology (IT), the most popular of these being the EHR Incentive Programs (i.e., meaningful use).

With limited resources and tight deadlines, many health systems, hospitals, and physician practices were forced to put off addressing the technology and services they use to manage their revenue cycle. This is likely the explanation behind expectations for significant growth in the market for revenue cycle management (RCM) solutions and services.

According to projections by Black Book Rankings, the current $2.4-billion RCM software and services industry will experience a double-digit growth by 2014 as a result of payment reforms, the transition from ICD-9 to ICD-10, participation in accountable, and many other changes to the reimbursement.

“Most hospital CFOs have no choice but to leverage next generation RCM solutions in order to keep their organizations solvent,” Doug Brown, Managing Partner at Black Book Rankings, explained. “The reimbursement challenges ahead to get paid may require several new RCM applications, and the frank reality is that a failing RCM could quickly close a marginally performing hospital for good.”

For healthcare CFOs, investments in managing the revenue cycle are most likely to take the form of replacement technologies for existing systems. Approximately 3,000 hospitals in the United States reported being behind on their schedule for replacing their core RCM solutions, a process many originally planned to begin by the third quarter of 2013.

The causes of these delays are manifold. On the one hand, having to meet the more immediate demands of meaningful use and ICD-10 are taking attention away from the revenue cycle. On the other hand, a sizeable number of CIOs and CFOs surveyed — 63 percent and 88 percent, respectively — revealed that differences among executive leadership are preventing them from moving with a plan to select and implement RCM technology.

Another area of disagreement in the C-suite is the matter of choosing either one or multiple vendors. While a significant majority of CFOs (88%) prefer a best-in-breed approach to RCM vendor selection, nearly as many CIOs (83%) are in favor of a “single-source enterprise strategy” to reduce the strain of managing multiple vendors.

That the market for RCM services is expected to swell then should come as no surprise. In an analysis of top RCM consultants, experts, and advisors, those CFOs and CIOs looking to replacing their current RCM systems recognized a need to bring in external resources to complete the task.

From the CIO perspective, 80 percent reported a lack of sufficient IT or in-house staff to complete the overhaul of their RCM infrastructure. Meanwhile, three-quarters of CFOs (76%) in self-described low-performing hospitals indicated they would turn to external resources for financial survival in 2014 as it pertains to RCM challenges.

“Next generation RCM will not be achieved via old school directives to cut staff, slash expenses, and pushing RCM work to the lowest cost outsourcer. The new era of how providers get paid is going to impact the entire organization and most hospitals aren’t remotely prepared for it,” added Brown.

The irony is that during a time of significant change to reimbursement and payment in healthcare health systems, hospitals, and physician practices find themselves with tools for managing the revenue cycle that were designed for a way of doing business that is being outmoded.

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