The engine of the U.S. healthcare system is fueled by an abundance of private and public capital and is helmed by some of the most skilled and driven members of the American workforce.
Healthcare accounts for more than 17 percent of the nation's gross domestic product and employs more people than any other industry in the nation. Venture capital alone invested more than $23 billion in healthcare in 2018, and nearly 9,000 biotech firms are working on treatments for some of the most pernicious health conditions humans face. However, despite massive investment and the efforts of a talented workforce, many of the nation's hospitals and health systems operate on razor-thin operating margins and face the dual challenge of achieving fiscal sustainability while delivering high quality care to patients.
The rising cost of care is also putting considerable economic pressure on patients as out-of-pocket costs and premiums continue to rise. Several trends drive the financial hardships faced by healthcare providers and patients, one being the abundance of waste in the industry. According to a study published in JAMA in October, roughly 20 to 25 percent of U.S. healthcare spending is attributable to waste. The largest portion of annual waste identified in the study — $266 billion — can be attributed to administrative costs, which includes key components of revenue cycle management such as patient collections and interactions with payers.
By addressing waste in the revenue cycle, hospital leaders can both better position their organizations for long-term success and pass savings down to patients. This endeavor, however, comes with a host of challenges.
At Becker's Health IT + Revenue Cycle Conference in Chicago in fall 2019, more than 20 leaders from hospitals and health systems participated in a roundtable discussion on eliminating wasted from the revenue cycle and what it will take to bend the healthcare cost curve. Dave Haight, vice president of advisory services with the healthcare technology company athenahealth, led the discussion.
"I've been in healthcare for 30 years and it seems like we've been having the same discussion for a while now, and it's all about cost, cost, cost," Mr. Haight said, adding that within the revenue cycle specifically there are a number of inefficiencies that persist despite the availability of potential solutions. "We still print stuff," he said. "When you get a denial from a payer, you still have to send them a box of paper."
Mr. Haight asked roundtable participants to weigh in on challenges they've experienced while working to improve revenue cycle efficiency at their organizations and share best practices or learnings they've encountered. The discussion largely focused on two key aspects of revenue cycle management: payer interactions and patient collections. This article details challenges related to the two and offers insights into how healthcare leaders are addressing these challenges.
Payer interactions
Challenges
Discussion participants cited denials management as the most formidable challenge they experience with regards to payer interactions. Appealing claim denials can eat up a good deal of employee time and eat into a hospital's bottom line. Studies have put the average cost of reworking a denied claim at $25, according to an insight article from the Medical Group Management Association.
During the discussion, the CFO of a three-hospital system based in the Midwest said his organization has an upfront denial rate of 12 percent. "When it's all said and done, we get that down to less than 1 percent, but we spend hundreds of thousands of dollars just executing the manual processes necessary to rework claims," he said. Manual, paper-based processes are often relied upon by providers, or required by payers, to rework claims. When denial rates are high, rework costs associated with these manual tasks can amount to a considerable financial burden.
Solutions
If possible, providers should consider automated, paperless documentation technology to both help prevent denials on the front-end and streamline the claim denials rework process on the back-end. With the right revenue cycle management solution, providers can integrate both front- and back-end data to generate cohesive, standardized claims. Health IT vendors like athenahealth offer teams that take on tasks such as claims submission, claims tracking and integrating updates on payer rules into the documentation workflow.
Beyond integrating technology solutions, hospital and health system leaders looking to address what they believe to be unnecessarily cumbersome payer rules can turn to advocacy by appealing to their state hospital group. The vice president of revenue cycle at a six-hospital system in the Northeast said her organization had difficulty with burdensome payer denials and appealed to the state hospital group. The group got the payer to the negotiating table along with state regulators. The interaction proved beneficial to the health system.
"I'm not saying it's fixed everything, it hasn't," she said. "But to fix a lot of this stuff, you really need a hammer coming from above … this isn't something we can effect change on as individual organizations."
Patient collections
Challenges
As out-of-pocket spending for patients has increased, so too has the share of hospital revenue attributable to patient payments. Providers are looking for new ways to improve patient collections and meet patients' consumer expectations, which have been shaped by the convenience and transparency of online retail. However, price transparency in healthcare is significantly more difficult to achieve due to the complexity of clinical care and distinct market factors.
The vice president of revenue cycle at a teaching hospital in the South with more than 1,000 beds lamented price transparency regulatory requirements on the legislative docket in his state, which he believes will be burdensome for providers.
"Should patients know exactly what they're going to pay?" the vice president asked. "Yes. But not understanding what it's going to take for providers to get there is dangerous … we looked at what we would need to do to comply with the legislation and it would take literally hundreds of staff … you have to price all of your possible base practices, the anesthesia, the pathology and then calculate the patient's out-of-pocket responsibility."
Patients want and deserve a transparent financial experience, but even if a provider can provide reliable estimates and pricing upfront, the fact remains that many patients may have financial hardships. Additionally, the increase in high-deductible health plans represents a cultural shift for patients, who are not used to paying big bills to hospitals and health systems directly. Providers must also educate patients on their coverage and how the billing process works.
"Patients are not used to paying these bills," said the revenue cycle manager with a seven-hospital system in the Midwest. "They're used to getting a bill and waiting for the insurance to process it. We're not just talking about a provider cultural change here. Patients now have to start thinking differently too."
Solutions
The convenient experiences consumers have in industries outside of healthcare are facilitated by technology. The billing experience in healthcare has to become more tech friendly — patients should be able to find out how much they owe and pay these dues with the same ease they pay other bills online.
"Patients want to be able to get on the phone and see and pay their bill," said the medical coding auditor for a 950-bed academic medical center in the South. "The struggle for us is we don't have that technology just yet. We're just starting to work on it."
Several executives cited cost estimators as a particularly helpful tool. A cost estimator uses data on a patient's insurance coverage and scheduled care to produce the approximate sum that the patient will owe after the care episode.
"We've brought in new technology in the form of a cost estimator [and give] the patient the opportunity to pay in advance," said the president and COO of a hospital in the Midwest with nearly 400 beds. "If they pay right then, they get a discount … we've been pretty successful with that in terms of point-of-service collections and payments in advance."
While new technologies can help providers improve patient collections, developing these solutions internally can be a cumbersome endeavor — many hospitals lack the expertise and resources for IT development. Hospitals and health systems with limited resources for internal solution development can turn to outside technology partners to help facilitate more convenient patient payment collections. For example, solutions provided by athenahealth allow providers to continuously engage with patients throughout their financial journeys. During the discussion, several executives said their organizations' revenue cycle performance had benefitted from partnerships with technology companies. Some also evangelized the outsourcing of the revenue cycle entirely.
Make people the priority
While executives described outsourcing revenue cycle functions as a cost-effective solution to financial challenges, other leaders said their experience with outside partnerships weren't as fruitful. The biggest setback to outsourcing, from their perspective, is the difficult nature of aligning values between organizations — with the most prominent being a commitment to the patient experience. Hospitals need partners that can commit to improve collections and financial performance without sacrificing the patient experience.
According to Mr. Haight, bending the healthcare cost curve must be a people-focused endeavor. Providers and their technology partners must come together under aligned values to successfully navigate an increasingly difficult reimbursement environment and give patients the experience they deserve.
"When you look at bending the cost curve. It's really about people," he said. "Technology's the enabler. But, at the end of the day, it's really all about people."