Revenue cycle poised for big rethinking

'Once the bubble begins to burst on clinicals, something's gonna have to give on revenue cycle'

About this time last year, HIMSS Analytics Executive Vice President John Hoyt declared in these pages that there's "a new future for revenue cycle."

There is. But not just yet. Since 2013, there's been "no change" – at least not anything appreciable – in the U.S. revenue cycle management market, says Hoyt. Still, the fact remains that "the average system out there is quite old – nine years."

[See also: RCM market expected to grow by leaps]

That said, shifting imperatives for healthcare finance mean big changes are necessarily in the offing. It may just take a few years for other priorities to get squared away.

"The market is focused, of course, on clinicals," says Hoyt. 

But sooner or later meaningful use will be old news, and then it's time to look to the future of accountable and value-based care. Simply put, most RCM systems aren't well-poised for a future where healthcare is rewarded for quality not for volume. 

[See also: Revenue cycle ripe for radical change]

"Once the bubble begins to burst on clinicals, something's gonna have to give on revenue cycle," he says.

At the very least, most of those systems are getting pretty long in the tooth, and the trend toward hospital consolidation means more and more of them will soon be getting yanked.

"Another statistic for year end is that the number of hospitals per integrated delivery system took a big jump last year from 6.4 to 7.1, which tells us that the acquisition spree has not slowed down," says Hoyt. "Consolidating systems, frankly, is probably driving some things that are changing in the market now. We saw last year a little uptick. It's replacements, due to mergers and acquisitions."

Still, for the most part, the market is relatively stable. But that could – should, must – change in the next handful of years, some observers say.

In 2013, Piper Jaffray analyst Sean Wieland offered his take to Healthcare IT News. "If any other industry had a revenue cycle like that, we'd all be living like the Amish," he said. 

"Healthcare is the only industry that has a revenue cycle with a designated subsector of companies that manage it," said Wieland, and "it costs 20 to 30 cents on the dollar to cross a trade" – compare that to Wall Street, which does the same for less than one cent.

There's an "enormous opportunity" to take costs out of the process "by actually fixing the revenue cycle," he said. "And by fixing I don't mean by incremental process improvements. I mean blowing it up."

Hoyt, too, thinks there are big changes afoot in the approach to revenue cycle – fundamental rethinkings of how it's done. "We've got these nice little seven-hospital systems," he posits. "But the real savings is (potentially) these 20, 30, 50, 200 hospital systems with one business office."

Banks do it all the time, after all, he says. "Go to North Dakota and look at how much processing is done there for credit cards. You've got to centralize this business back office stuff and rip out costs. We know 23 percent of our cost is administrative. If you can automate that and consolidate it into one function, yes, there's savings to be had."

 

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