Executive Insight (Page 37) https://healthcare-executive-insight.advanceweb.com/ebook/magazine.aspx?EBK=XI030314
Editor’s note: This article is the first of a two-part series on the hospital
review cycle process. Part 1 focuses on the nature and extent of the
problems and opportunities. Part 2 will provide an understanding of
corrective actions for existing problems related to governance, management
The healthcare provider industry is in a historic period of
transition encompassing fee-for-service medicine to the
more patient-centric elements of the Affordable Care Act,
along with many other challenging factors. The transition to ICD10
represents a major change in the number and complexity of
medical record coding; the move to Electronic Medical Records is
also ushering in a new era of data gathering and mining. As well,
the ongoing shift from inpatient to ambulatory care to chronic and
complex care coordination presents many interesting challenges.
The impact of the aging of America and the financial constraints
posed is a key driver to many of the contemplated changes in the
way the provider industry operates. The need for federal and state
governments to slow the growth of healthcare spending is an
overwhelming driver of change.
The revenue cycle production line is an increasingly complex
and constantly changing operation to manage successfully. Many
organizations are facing historically high levels of bad debts and
charity care as well as decreasing revenue streams, and the ability
to document and understand their nature is a growing management
concern. Managing compliance with governmental enforcement
agencies and commercial insurance payors can be daunting,
particularly as the audit scrutiny of pre- and post-payments grows.
Many organizations needing to improve the way they manage
their revenue cycle operations have finally recognized the importance
of a dedicated revenue cycle leadership governing the entire
production line. Traditionally, CEOs, COOs, and CNOs have had
little or no involvement in the revenue cycle process. In fact, many
C-suite executives have viewed the revenue cycle as a “business
office” function. Until now.
Nature of Downside Risks
Numerous downside risks are associated with an under-managed
revenue cycle process. Beyond billing and collecting patient service
revenue from insurance payors per the payor agreement,
Supply chain and revenue cycle can catalyze the transformation
by committing to use foundational data that is modified to
include the incremental data required to permit the continuous
flow of the data throughout the discrete applications and systems
which require parts of the same data. Care and thought is
required to intelligently construct the system and data elements
to allow easy reconciliation of patient, procedure, cost, quality,
and outcome. This process necessitates considerations from
the payer and suppliers as well, but the integrated outcome is
required by all parties to effectively compete and survive in the
Affordable Care world.
There is a transformational mandate for revenue cycle and the
time for transformation is now.
The bad debts associated with the patient’s self-insured portion of
the bill represent a major risk for provider organizations. In addition,
compliance with laws and regulations bring on increased challenges
and third-party scrutiny in terms of audits and non-compliance.
Service breakdowns in the revenue cycle production line often result
in negative impacts to overall patient satisfaction and perceptions of
Clearly billing, collecting and documenting are essential elements
of this process. If staff and physicians are not adequately trained
along the production line, results can mean additional expenses
associated with re-billing, audits, medical denials, and insurance
follow-ups. Not many organizations comprehend the extra cost
incurred of not doing things properly the first time. If you don’t have
a clear leadership chain of command and alignment between clinical
and non-clinical resources, then your organizational silos are costing
you money that could more effectively be deployed with better
leadership and management alignment.
Nature of Upside Opportunities
Despite all the gloom and doom of the downside risks, there is
hope. With a clear leadership chain of command and management
alignment, many organizations have a tremendous opportunity to
improve the operating expense spend associated with the revenue
cycle process. The improvement of the operating expense spend
is often accompanied by increased collection levels of net patient
service revenues and reductions in bad debts. Another key opportunity
posed is improved compliance with government and insurance
payor agreements and reduced audit risk. Furthermore, many large
organizations are still struggling with medical denial management
and the ability to better identify and manage the root cause of
medical denials can represent a huge opportunity for improvement.
Coordinated revenue cycle process can also lead to increased patient
Who is Responsible for the Revenue Cycle?
Many healthcare organizations are hampered by the attitude that
the revenue cycle is primarily a finance function. Organizations with
this philosophy stand to leave many dollars on the table. The fact
is many individuals in the clinical and non-clinical disciplines share
organizational responsibility and are part of the team. Teams with a
unified leadership structure generally outperform those with specific
leaders responsible for varying elements of the production line.
Teams with too many leadership silos are not managing to the organization’s
benefit as much as they are their own self-interests, leaving
coordination to be fragmented, limited or non-existent. These results
can be detrimental to the organization.
Organizational alignment of its revenue cycle efforts is one of the
greatest challenges organizations face. Clearly there is no one-sizefits-all
approach for establishments of differing nature, size and complexity.
Larger and more complex organizations have an opportunity
to align their governance and operations. The ability to hardwire and
routinely measure metrics are critical to the long-term building and
success of a revenue cycle function.
A well-functioning revenue cycle production line may well be a core
competency and strategic asset requirement of survival for organizations
in our future brave new world. Building this strategic asset will
pay handsome dividends to those organizations choosing to invest
wisely. The current and future direction of the healthcare provider
market will make developing and maintaining this strategic asset a
necessity for future success. The first step, however, is that senior
management all must be on the same page and acknowledge the
growing complexity of the revenue cycle function and understand its
overall strategic importance to the organization.
Henry Kotula is a partner in Hardesty LLC’s National Healthcare
Practice, a national executive services and CFO firm. Edmund King is
the president of Peninsula Healthcare Management, which provides
turnaround, restructuring, and bankruptcy advisory consulting
services to healthcare providers and related organizations.