Top trends in RCM drive hospital strategies

By Patty Enrado, Senior Editor, Special Projects

NEW YORK – Financial pressures from external sources are among the top trends in revenue cycle management (RCM), according to three industry experts. IT solutions and process strategies are both responses to pressures and top trends themselves.

Hospitals continue to experience pressure on their acute-care operating margins, said Joel Gardiner, principal, National Practice Leader, Revenue Cycle Management Services, Deloitte Consulting. Healthcare reform legislation targets approximately $110 billion in new cuts from reduced schedule increases in Medicare payments. "The cuts are front-loaded; they start immediately," he said. As a result, hospitals are looking to collect every penny that's due to them, he said.

Hospitals are also worried about financial statement reserves, said John Dugan, partner at PricewaterhouseCooper's Health Industries practice. They're determining whether they should have reserves established for the Medicare Recovery Audit Contracting (RAC) project. While larger systems may have the balance sheet to absorb the risks, smaller hospitals with thin margins will take a big hit, he said.

These pressures are driving system-wide operational efficiency initiatives, said Ken Saitow, Revenue Practice lead for Huron Consulting Group. Exercises include making staff more efficient and outsourcing areas of revenue cycle to entities that have deeper competencies to execute.

Technology is helping to drive efficiency and decrease cost, Saitow said. Patient liability estimators and IT systems that deliver actionable data, such as propensity to pay, enable hospitals to develop follow-up strategies, he said.

Hospitals are also relying on strategic pricing to fully maximize the cost shift to self-pay and sensitivity analysis to gain incremental revenue, said Dugan. In addition, they're focusing on core operations linked to charge capture and documentation.

Rising self-pay, combined with 10 million unemployed who are ineligible for public programs, has caused bad debt to skyrocket for many hospitals, said Gardiner. That trend has driven hospitals to address the front end of revenue cycle to mitigate and limit financial risk, Saitow said. Insurance verification, financial counseling and links to public programs and charity applications are just a few upfront processes, which drive point-of-service cash collection.

Dugan pointed out that the industry is also starting to see many hospitals invest in clinical documentation specialists and establish document improvement programs to help improve charge description and capture, which improves revenue cycle.