RCM a critical component of accountability models
By Seema Mathur and Kim Lorusso, February 2012
Revenue cycle management holds the key to successful financial contracting in the world of accountability reform.
"Profitability" is a dirty word in healthcare, but let’s face it – financial success enables healthcare providers to invest profits to provide better quality of care and support accountable models now and in the future. Revenue cycle is a critical component of accountability models and should not be an afterthought after selecting a clinical system. Now is the time to ensure you have the proper infrastructure in place to support accountability models that will require new reimbursement capabilities that incorporate different approaches to risk, such as episodic bundling.
Much has been written about accountable care, but it can be hard to keep up with all the change that healthcare reform is bringing to both the clinical and financial sides of healthcare. It is clear that many provider organizations are planning, prioritizing and juggling multiple IT projects, including 5010, ICD-10 and meaningful-use compliance. With meaningful use and shared savings, the focus of most provider organizations has been on clinical systems, often overlooking the importance and impact that revenue cycle has on healthcare reform challenges and needs.
As the healthcare industry considers the complexities of proposed payment models for accountable care organizations (ACOs), episode-based payments are emerging as a promising model for incentive alignment. What many provider organizations will realize as they dive deeper into the complex reimbursement strategies necessitated by ACOs is that revenue cycle demands will increase while fee-for-service revenues decrease. Organizations not ready to manage complex new payment models, such as episodic bundling and capitation, will likely see their revenue begin to shrink while they consider which processes and systems need to change for success.
If you are a healthcare finance professional, make sure you are working with your clinical teams on the importance of revenue cycle systems that can support complex reimbursement.
According to a report from the Center for American Progress, “At the heart of health reform is the fundamental challenge to simultaneously improve the quality of our healthcare and lower its costs. And at the heart of meeting that challenge is changing the way we use and pay for care.” Much has been said about quality of care when discussing healthcare reform or accountable care, but very little emphasis has been placed on the importance of reimbursement and the revenue cycle. But what if you didn’t have to cut costs to keep up quality? What if you were able to focus on investing them in the assets and resources you need to improve your patients’ care while also supporting your bottom line?
So that we are all on the same page, let’s define bundling and episodic bundling. Navigant Consulting provides comprehensive definitions for both:
“Bundling is the process of grouping services for payment purposes – either for a particular person over a predefined period of time or for a particular clinical diagnosis or procedure. Instead of providers receiving payment for each individual service performed, they receive one payment amount for a group of services related to either a particular person or a particular diagnosis or procedure.
“Under episodic bundling, a provider or group of providers receives a single payment per person and health event (e.g., hip fracture or knee replacement), with payment adjusted for the severity of the presenting patient’s condition. Episodic bundling may include a wide range of providers and services – for example, hospitals, physicians, physical therapists and long-term care facilities – it typically focuses on hospital and physician care along with some ancillary services.”
There are organizations out there that are eager to take on risk, but they are finding that the administrative and revenue cycle processes necessary for success differ from their historical fee-for-service arrangements. Is it that their current systems and processes don’t have the technical capabilities to execute these payments? In some cases, the answer may be yes, but there are systems out there that do support these capabilities. The key here is deciding how you plan to use episodic bundling and making sure you have the right process, people and systems in place to execute effectively. Here are a few crucial steps we recommend provider organizations take in order to ensure success when exploring bundled and episodic payments:
• Make sure you are considering the billing process. What are the penalties if you double-dip? What processes and systems can you put in place to identify charges included in the bundle? Can this process be automated?
• How will you distribute the payments? What systems can you put in place to help pay (bonus structures, withholds, capitation) with the accountability theme? If you are paying your providers fee for service, how can you incent them to control cost and quality?
• Will your episodes be confined to your door or extend beyond them? This becomes especially important in an accountability model. The questions about incenting providers become more interesting if the providers you are incenting are outside your organization.
• What level of flexibility should you adopt to help keep the doors open to new, different and financially beneficial payment contracts and models? Will your revenue cycle system support the models?
• How will you use the bundles to understand variation in care across your patient population? What data will you use to understand variation, and what systems will aggregate both codified clinical data and the cost of the aggregate charges? Revenue cycle would be a good place to start.
• Look for best practices and understand where there is under- and over-utilization. We can’t look at the gate-keeper models of capitation – since the incentive is on quality and efficiency, under-utilization will add to cost in the long run.
As providers consider these important issues, flexible and robust revenue cycle technology will become a requirement for successful healthcare organizations that want to provide quality care, stay profitable and stay in business.
No one knows what the future holds, but we believe that, over the next five years, revenue cycle and episodic payments will rule the accountable care headlines. We are seeing a trend of an increasing number of healthcare executives who plan to become part of an accountable care organization. Given this, the need for strong revenue cycle management and management of episodic bundling are critical, including:
• Having reimbursement directly linked to outcomes;
• Self-managing utilization in response to outcomes-based reimbursement;
• Referral and appointment management, patient experience;
• Distribution of shared savings;
• Understanding which charges are reimbursed individually or part of a bundle;
• Becoming proactive in scheduling patients for services and alerting medical staff if appointments are missed; and
• Strong analytics.
We have the utmost respect for healthcare financial executives out there – they are playing a game of hot potato with various compliance initiatives while trying to stay profitable and provide the best care possible. We would love to hear from other provider organizations. Is your organization considering becoming an accountable care organization? Are you executing episodic payments today? How is your organization handling episodic and bundled payments? If you aren’t handling these payments today, what plans, if any, do you have for the future?
Seema Mathur (Twitter: @aylafur) is a product manager for GE Healthcare, and Kim Lorusso (Twitter: @kimlorusso) is a product marketing manager for GE Healthcare. For more on GE Healthcare, click here.