The healthcare revenue cycle is just beginning to feel the effects of consumerism as employers focus on containing healthcare costs. The typical hospital's cost structure increases 4 to 6 percent each year, while reimbursement increases by only 2 percent.¹  This means that today’s growing financial pressures on healthcare organizations will continue to increase as consumers bear an increased financial responsibility for their healthcare costs. Revenue cycle solutions that extend the capabilities of a hospital’s information systems are the key to improving access management, responding to healthcare consumerism, accelerating cash collection and improving payer performance.²

Revenue cycle management (RCM) involves a series of steps that looks at potential problems and opportunities for enhancing revenue for a hospital. Steps typically include:

1. Front end processes
2. Charge description through coding
3. Billing and follow-up of denials and bad debt
4. Receipt of payer remittance

Furthermore, the transformation of a hospital's revenue-cycle management practices involves four critical considerations: implementing integrated processes and systems, investing in emerging technologies, developing symbiotic relationships with payers, and executing innovative organizational models. 

According to HFMA, hospital financial executives have seen the statistics: About 13 percent of lost revenue can be blamed on underpayments, billing errors, denials, and self-pay debt. Rework accounts for up to 80 percent of billing office time. Viewed optimistically, these numbers suggest the revenue cycle is rife with opportunities to improve cash flow and reduce costs. Hospitals that have succeeded in attacking revenue cycle inefficiencies tell of cash influxes of seven figures or more. But such achievements do not come easily. Significant improvements require significant investments—in training, IT, restructuring, and staff time. But where to start? What changes need to be made first—or will provide the best ROI? Hospitals can learn a lot from seeing what other hospitals are doing. But the best answer often lies in a hospital’s own metrics. Like any major redesign initiative, revenue cycle improvement efforts should be based on sound quality management: Look to your data to pinpoint what needs fixing. Then, measure again to see if the fix worked.³

Questions to Consider:

1. What is the size of the overall RCM market? 
2. What is its anticipated size 3-5 years from now?
3. What types of services are being offered?  (e.g. purchasing of debt, admin-only, other)
4. Are there other perceived benefits to selling receivables besides cash flow (e.g. ease of administration, etc.)
5. How many vendors are currently providing these services?
6. Who are the major players?
7. Are they profitable?  Do we have any financials for them?
8. Are there any current or anticipated regulatory changes that might affect this type of business in the future?
9. Do these services have greater penetration in certain states?  Urban vs. rural areas?  Regions?
10. What impact has the use of RCM vendors had on providers?
11. What impact has RCM had on personal health debt?

² http://www.mckesson.com/en_us/McKesson.com/For%2BHealthcare%2BProviders/Hospitals/Revenue%2BCycle%2BManagement/Revenue%2BCycle%2BManagement.html

³ http://www.hfma.org/NR/rdonlyres/2932D0E2-ACBE-49F8-BE0C-E3CC4BA8E7C8/0/HFMA_RT_Siemens.pdf

Improving Access Management
The use of financial clearance solutions in your healthcare revenue cycle enables you to determine not only insurance eligibility but also the ability and willingness to pay healthcare costs. Including medical necessity checking during registration, scheduling and ordering can help reduce Medicare denials and increase reimbursement by providing medically necessary services or by issuing an ABN for non-covered services. By facilitating improved workflow processes and eliminating the “paper chase,” McKesson's solutions enable physician and hospital staff to accurately authorize services, determine, validate coverage for payment, assess payment risk and schedule resources prior to the patient’s arrival.

Responding to Healthcare Consumerism
Consumer self-service is becoming a standard part of day-to-day life. Access to a healthcare kiosk and portal will become an expectation in your patient community. Allowing consumers to research healthcare costs, schedule appointments, receive online statements and make electronic payments are just a few of options available from McKesson to help you respond to consumer demands. 

Accelerating Cash Collection
After services are delivered McKesson’s healthcare revenue cycle solutions maximize revenue capture and streamline the billing and collection process with electronic claim processing, direct entry of Medicare claims, automatic secondary billing, remittance posting, document image retrieval, contract and denial management, and financial analysis.

Benchmarks that flag the need for improved revenue-cycle management include¹:

• Outstanding revenues that exceed the industry average of 50 days;
• More than 15 percent of receivables exceeding 90 days:
• High management turnover in revenue-related areas;
• Evidence of cash-flow problems; and
• A declining net-to-gross ratio.

Opportunities for improved revenue-cycle management can be found in five key areas: denial management, the Follow-up process, patient payments, third-party payment compliance, and vendor contracts.

Denial management. Virtually all claim denials are the result of circumstances that are either administrative (e.g., the claimant failed to follow procedures, provide required information, or verify insurance eligibility) or clinical (e.g., medical necessity or relevance to coverage was not demonstrated or proven).

The follow-up process. Hospitals need to follow up on unpaid claims. Hospitals should have viable, practical business rules and objectives in place for ensuring/expediting payment turnaround.

Patient payments. Hospitals can optimize revenues by implementing a defined process for collecting payments from patients, either at the point of service or after insurance is paid (copayment and/or deductible).

Third-party payment compliance. When dealing with payers, hospitals are at a disadvantage because no industry standard exists for payment compliance, and the complexity of payer contracts makes understanding and complying with them difficult.

Vendor contracts. As hospitals are increasingly retaining third-party service providers to handle some revenue-cycle functions (e.g., small-dollar follow-up, patient-balance follow-up, and bad-debt collections), ongoing, broad-based evaluation of contract terms and vendor performance is essential to ensure optimal execution. Coordinating request-for-proposal processes can ensure optimum pricing and service levels.

¹ http://findarticles.com/p/articles/mi_m3257/is_3_57/ai_98953931

• Realignment in risk of collections
• The better able a provider is managing their revenue cycle the more money they will have for charity care and for making sure patients are covered.
• Revenue cycle improvements decrease the risk in collections