Time to Retire the Shadetree Revenue Cycle Management Approach

Revenue Cycle Management

Up until the 1970s, “shadetree mechanics” were commonplace in America. Everyone knew at least one person who was good with automobiles and could fix just about anything despite having only basic tools and minimal (if any) formal training.

Then came all the anti-pollution equipment requirements, followed by computer control of just about every automobile component. Suddenly the amount of knowledge required and the cost of tools to work on modern vehicles became so excessive that all but a sturdy few do-it-yourselfers realized they would be better-served by taking their vehicles to an expert professional.

This is the same realization small and mid-size hospitals and health systems are coming to regarding their approach to revenue cycle management (RCM).

As regulations and requirements increase, and the pressure and urgency to optimize financial performance grows (especially in light of the revenue lost as a result of the COVID-19 pandemic), the C-suite is recognizing RCM can no longer succeed without focused strategic attention and intention. It requires a leader and a staff with revenue cycle as their only focus to help ensure the entity has the sustained financial strength needed as market and payor dynamics continue to rapidly evolve.

Provider organizations have two options. One is to build a staff exclusively focused on RCM. That means hiring people, training them, paying salary and benefits, finding space for them, giving them the proper equipment and technology, etc. at a time when many hospitals and health systems are already struggling to remain financially viable.  Since 2010, 120 rural hospitals have closed and 453 more are considered vulnerable to closing.

The second option is to acquire these capabilities by working with a managed services partner that already has proven expertise, processes, trained personnel, technology, and best practices, etc. in RCM. This is the approach 80% of U.S. hospitals said they were considering in 2018, leading to predictions that RCM managed services will become a $23 billion industry by 2023.

Making the decision to partner with a RCM service provider has its advantages and concerns. Among the pros are:

  • Enables the provider organization to focus on its primary purpose. Moving RCM to a managed services partner enables the organization – clinicians especially – to focus on patient care while experts in coding, billing, claims and collections can focus on these functions.
  • Ensures RCM remains current on regulatory compliance. The compliance landscape was already shifting rapidly and constantly prior to COVID-19. Now it is changing faster than ever, with some pandemic-related regulations and reporting implemented temporarily while others are poised to become permanent. If there is a conflict between keeping up with changes to reimbursement regulations and clinical knowledge, clinicians may very well prioritize the latter. A managed services RCM provider doesn’t face that conflict.
  • Maximizes reimbursement and cashflow. Each health plan has specific rules and documentation requirements for processing claims, denial management and reimbursement. An RCM managed services provider can help the organization ensure claims are submitted the way each payor wants them, within their rules, to prevent/reduce denials and improve cashflow. A good RCM partner will also have processes, procedures and mechanisms to maximize collection of the patient portions of claims, an increasingly large percentage of overall revenue. If necessary, the RCM managed services provider can help a healthcare organization set up payment plans for patients, answer billing questions and manage other tasks to relieve internal staff of those burdens.
  • Keeps your RCM operation up-to-date. A great RCM managed services provider will understand all the issues around collections, accounts receivable, denials, coding, clinical documentation improvement, and claims processing. It will work to improve efficiencies in these areas by hiring the right staff, training and educating them, and giving them the most current and appropriate technology. It will also work to update systems and procedures to improve and automate processes wherever possible, increasing efficiency and throughput while eliminating the avoidable errors inherent in manual data entry. It will also share downstream process improvement opportunities with the client to help overall operations and not just revenue cycle.
  • Improves the patient experience. Taking a holistic, professional approach to RCM through a managed services partner helps ensure the patient experience regarding their bill and payment is as positive as possible. The last part of a medical encounter – be it a hospital stay or an outpatient procedure – will be their bill. Errors and/or poor customer service will significantly impact patients’ overall impression of the healthcare organization and the rankings, ratings and social media posts that result from it.

One constraint in partnering for RCM managed services is that the organization gives up full control of the process. Ultimately, it’s about trust. It’s like leaving a child with a babysitter for the first time. The healthcare organization must feel confident that the RCM managed services partner will care for their revenue cycle as strongly as the organization does itself. For hospitals viewed as a major employer in the region, there are also valid concerns that working with a RCM partner might be viewed as taking jobs out of the community. This becomes less of a concern when RCM managers employed directly by the hospital become employees of the company that is asked to step in to manage the process.

Just like the shadetree mechanic repairing cars for family and friends, the days of handling RCM internally are largely fading. By partnering with a RCM managed services provider, healthcare organizations can maximize revenue and cashflow while operating more efficiently, delivering a better patient experience – and remaining laser-focused on their core mission.


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