Revenue Cycle Management Trends and Innovation

In this Whitepaper we identify current state of revenue cycle management (RCM) in Healthcare and prognosticate key trends and innovation scope. We believe, these trends are position focal points for Healthcare organizations to alleviate RCM revenue leakages. We first provide a short preview of the current state of US Healthcare and the impact of Covid-19. We then present the RCM landscape, observed trends, and innovation directions.

Broad overview of US Healthcare: The US Healthcare landscape comprising of the system, marketplace, payers and providers, and consumers continues to evolve. The passage of the ACA ushered the development and application of new value-based models moving from a fee-from-service to patient outcomes, care quality, risk-based reimbursement, and medical cost sharing. It also accelerated multi-party data exchanges and data transparency. Post the ACA, the Healthcare sector’s movement has generally been in the following areas: (i) moving from size and scale to scope- competition is based on intelligence and execution than scale; (ii) Growth of the ACA leading to expansion in care coverage and technology frameworks; (iii) payor/provider integration and move towards value-based models; (iv) nascent virtual care, telehealth, and retail health. Then came Covid.

Covid-19 impact: Covid-19 has impacted US Healthcare in significantly deleterious ways. It has undermined health insurance coverage for millions of Americans who are without work, crippled many physician and hospitals with deep financial losses due to sudden massive decrease in demand more so in financially unattractive markets and poor and rural communities, impacted health adversely for minorities, and in general, created a crisis in public health. It has been reported [1], that in 2020, 47 hospitals closed or filed for bankruptcy due to a combination of poor reimbursements, inefficient revenue collection, dwindling patient volumes, cancelled elective procedures, higher expenses tied to the pandemic, and other factors. The outcome of the pandemic’s “great resignation” on Healthcare workforce has been a drastic shortage of workers in all functions. Many Healthcare organizations are offering significant sign-on bonuses and benefits, not offered previously, to attract and retain staff.

Covid has upended all conventions of how work is done and services offered. Virtual health is almost mainstream now and cutting-edge technology is now available and is continuously evolving to offer efficiencies at scale and better patient care [2]. Post Covid-19, Healthcare organizations will continue to face growing challenges system-wide, including revenue management. RCM is an area ripe for innovation being a significant source of revenue leaks. We next consider the current state of RCM practices in the US leading to pointing the innovation space.

What is RCM: RCM is a combination of processes, policies, and systems centered around medical billing. This includes: (i) the front-end environment where payments are accepted, pre-authorizations confirmed, and cost estimates provided; (ii) the middle-end where claims are submitted for health insurance companies and payments received; and (iii) the back-end where reporting, claims reviews, and payment follow-ups are conducted by both payors and providers, often leading to fraud and abuse investigations, recoveries, and penalties [3].

This is a seemingly simple process yet very convoluted due to medical coding requirements, under/over coding, inefficient contract management, incorrect charge capture, clinical documentation, claims validation, and minimum necessary documentation among others. Singularly or in combination these lead to claim denials, underpayments, and revenue leakage.

It is reported that Healthcare organizations lose between 1%-3% of their annual revenue from RCM leakage [4]. This implies that at 1% a $1B Healthcare organization could potentially lose $10M per year. On the average, claims denials are at 5-10% with the industry total yearly challenged claim estimated between $11B-$54B [5], and insurers routinely underpay between an average of 7%-11%. This leads to an average 3% revenue loss. Since these are average values, the poor performers leak significantly larger percentage of their revenues. Regarding hospital bankruptcies noted earlier, RCM leakage is a significant contributor to this problem.

Healthcare organizations are acutely aware of this problem. According to a recent survey, 96% of providers believe their billing practices and systems are inefficient, and 59% are focused on improvements. That leaves 41% doing nothing.

The RCM function presently is a blend of outsourcing and in-house management. There are over 200 RCM vendors in the US, many with off-shore captive bulk processing facilities. This is mostly commodity-focused contracting, supporting limited RCM functions, such as, denial follow-up, reconciliation, payment entry, collections. It is also limited in technology innovations as those are mostly driven by the client, if at all. With the onset of Covid-19 and shrinkage of the labor pool, RCM outsourcing has likely increased and will continue to do so in 2022 and beyond [6].

RCM innovation focus: RCM innovation and outsourcing as a strategic partnership has the potential to invert the financial leakage. This partnership can be based on co-ideation, co-creation, and co-execution holistically across the RCM function with the outsourcing entity being a strategic partner. We now examine the three RCM areas where innovation can be applied and the technology and tools to do so.

The front-end: Patient expectation and experience can be enhanced here by providing a seamless experience in non-clinical activities. These are patient scheduling, registration, automated reminders, eligibility verification, referrals and prior authorizations, cost estimates, and co-pay acceptances. Virtual health apps are widely available and healthcare organizations continue to invest internally, they are often not integrated with the middle and back-end of the RCM functions and systems. A strategic outsourcing partner offering a virtual app or integration capabilities is a compelling choice.

The middle-end: This is the most complicated and high-risk, high-reward innovation area in RCM. This is where clinical, procedural, and financial data (and information) merge. Some critical clinical and procedural elements are: accurate medical and procedural coding, accurate clinical documentation, clinical validation review, medical necessity determination, and validation of pre-authorizations. As an example, during pre-authorization certifications, many clinical EMR notes are unable to match clinical notes text to data field entries leading to errors and delays in a payor utilization management certification. A clinical note of a patient’s age does not square with the EMR DOB entry. When this hits the claim system, and if the patient has already been treated, the claim is denied. AI-based solutions can be of immense help in various middle-end functions to detect bad claims, eliminate under/over coding, accurate charge capture, understanding payor fee schedules, and check documentation related fall-outs, with opportunities for using machine learning and natural language processing, advanced analytics and robotic process automation. Another integration area is payor contract management. Constantly changing payor rules have to be integrated with claims and billing. An outsourcer offering these capabilities should always be a preferred partner.

The back-end: Advanced analytics can be very influential in identifying revenue leakage trends and root-cause analysis, while also aiding claims management, reducing denials, and improving collections. For example, typical RCM metrics such as, days in A/R, DSO, denial rate, adjusted collection rate, and others as appropriate, can be pin-pointed for defect points and fixed. When combined with the front and middle-end innovations, a beneficial 360-degree process feedback loop can also be realized.

While innovation is fundamental to any business, it is also costly and in today’s uncertain healthcare and business environment, hard to budget. It is also difficult to find the right expertise and professionals to work regularly with RCM staff who are function focused. This in itself requires innovative thinking for change and resource management.

Call to Action: In summary, the confluence of the pandemic, continuing healthcare financial jeopardies, staffing shortages, and patient experience expectations, mandate re-inventing the RCM environment. It behooves healthcare organizations to re-examine their current RCM approaches and move from the traditional in-house and outsourcing combination to an innovation led approach where the outsourced partner brings in the technology-driven innovation with a seat at the table. The front-end, middle-end, and back-end capabilities discussed above should provide enough RCM leverage to invert the revenue leakage and enable business growth. It is incumbent upon leadership to laser-focus on their current RCM state, determine gaps, and drive a holistic call to action.

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