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Growing Number of Hospitals Plan to Adopt or Improve Revenue Cycle Management System While Others Risk Value-Based Reimbursement without a Plan

Christopher Fisher, maxRTE Business Development Director


Recent numbers from Black Book provide mixed news about revenue cycle management. While the percentage of hospitals without a plan to optimize or replace an outmoded revenue cycle management system dropped from 35 percent in 2012 to 26 percent in 2018, a significant number of hospitals are planning either to risk entering value-based reimbursement without a revenue cycle management “net” or to seek consulting services.

Keep reading for an overview of the findings and an explanation of why revenue cycle management is particularly important today.

Why Revenue Cycle Management Matters

Few industries face the complexity healthcare does when it comes to revenue. Every step of the process – from patient registration to coding for services provided to billing and finally payment collections – is subject to intricate government regulations and insurance procedures. That’s why revenue cycle management (RCM) has become a specialized and critical component of the healthcare industry.

For a small healthcare provider, staying on top of things like insurance coverage, medical billing, and patient payments is a burden. There is a lot that can go wrong that can impede timely payments – like improper coding and lack of up-to-date knowledge about insurance company procedures for filing an insurance claim. That’s why it has become increasingly common to outsource some of these administrative aspects of medical services to healthcare revenue cycle management companies.

Larger healthcare organizations have more capacity to handle both administrative and clinical functions in-house. Still, the growing complexity of healthcare systems means they face continuing pressure to improve systems and efficiency, whether that means adopting new software systems, outsourcing components of RCM, or both. Proper revenue cycle management can make a huge difference to the bottom line for any healthcare organization.

Good News about Revenue Cycle Management: Hospitals Are Improving

According to the latest Black Book survey, revenue cycle management (RCM) is improving. Answers from 4,640 individuals at 522 hospitals and healthcare organizations about their use of technology services and solutions revealed that about 400 hospitals implemented a viable, effective revenue cycle management optimization or replacement plan between 2012 and 2018. That’s a significant portion of the total.

Other Healthcare Providers Still Struggle

On the other end of the spectrum, one-quarter of U.S. hospitals did not have an effective healthcare RCM solution in place in the 2018 survey. Further, about 82 percent of the healthcare facilities in this group expected to make value-based reimbursement decisions in 2019 and beyond without the use of advanced RCM software or an outsourced partner, the survey showed.

Why Healthcare Revenue Cycle Management Is Especially Important Now

Recent years have seen the rise of value-based reimbursement as an alternative payment model (APM) to a traditional fee-for-service system. There are various forms this effort takes, but all of them share the goal of helping to control costs and better align the interests of patients and providers by connecting payments to the quality and not just the quantity of care provided.

According to data from the Health Care Payment Learning and Action Network (LAN)—a public-private partnership launched in March 2015 to drive adoption and alignment of APMs – in 2020 almost 60% of health care payments had some link to quality and value, though only 40.9% of payment had the robust connection the organization is hoping to see.

These results indicate that health care payments are on their way to meeting LAN’s goal to link at least 50% of total U.S. health care payments to APMs in order to lower healthcare costs for private and public payers and improve care quality.

But what does value-based reimbursement mean for hospitals and other healthcare organizations? In a word, RISK.

That’s because many APM models include payments from health insurance companies based upon average costs for treatment for a particular condition. When health systems manage to treat a patient more efficiently, they can increase their profits on patient service revenue. On the other hand, when the costs of care exceed what is typical, the healthcare provider bears those extra expenses.

This new model means fresh revenue cycle management challenges. To effectively address the clinical and financial risks, hospitals will need powerful analytics that combine clinical and outcomes healthcare data residing in clinical systems with financial data to accurately measure quality improvements based on outcomes results.

An effective revenue cycle management process can help hospitals make the transition to value-based reimbursement. Without a viable, effective revenue cycle management solution, hospitals could lose revenue during their transition to this risk-laden form of reimbursement.

According to 95 percent of large hospital finance executives polled by the survey, it makes sense for revenue cycle management transformations to be implemented sooner rather than later. They believe neglecting transformation projects will catch up with hospitals quickly, negatively impacting their transition to value-based reimbursement transition and revenue.

Short-term vs. long-term solutions

While 85 percent of the Black Book survey respondents said they would partner with a healthcare revenue cycle management consultant or advisory company, hospitals will need to partner with a third-party vendor to implement an optimized RCM solution for the long-term.

The problem is that comprehensive platform solutions that cover all aspects of patient management, claims processing, and the patient payment process or even customized point solutions for a particular function like processing a patient’s insurance information require large budgets and are complex to implement.

In contrast, bolt-on solutions that automate specific components of the healthcare revenue cycle and complement their legacy financial and clinical systems are relatively affordable and simple. 

Bolt-on solution preferred by majority of hospitals

Bolt-on solutions are currently the more popular option, as about 45 percent of large and community hospitals in the survey were planning to use multiple bolt-on solutions for revenue cycle management in 2019.

Few hospitals expected to use a core legacy vendor for a software solution. Only 23 percent of small hospital staff, 15 percent of community hospital staff, and 17 percent of large hospital staff said a core solution would be their organization’s 2019 revenue cycle management strategy.

One of the key reasons hospitals are investing in more bolt-on solutions versus core software is because of staffing concerns. Healthcare organizations said they face challenges both in finding staff with sufficient expertise and in having the capacity to devote the time resources needed for implementing new revenue cycle management solutions or improving legacy software. 

Bottom-line conclusion: RCM system imperative

The climate of increasing adoption of some form of value-based payments along with inflationary pressures mean healthcare revenue cycle management is perhaps more strategically important than ever.

Healthcare providers seem to be aware of this fact, which is why 95% of providers plan to make new investments in software in 2023 (according to research from Bain & Company). The main type of software identified as a priority: revenue cycle management.

Black Book closes their report with a warning. “If hospitals are to maximize revenue and reduce claims take-backs, it is imperative that those still behind the curve find a way to dedicate appropriate resources toward implementing an effective RCM system.”


maxRTE has been helping healthcare providers shorten the revenue cycle for more than 20 years. With maxRTE, just one click validates plan-specific benefit data such as patient coverage effective dates, co-pays and deductible information. We help you navigate the increasingly-complex world of insurance eligibility verification and discovery with confidence. Visit maxrte.com for your free web demo.