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Preparing the Healthcare Revenue Cycle for Value-Based Care

The transition from fee-for-service to value-based care reimbursement has serious implications for healthcare revenue cycle management.

Jacqueline LaPointe
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Published: 15 Jul 2016

Not only do value-based care models aim to make healthcare providers more accountable for the services they provide to patients, but they are also designed to shift financial accountability away from payers to healthcare organizations. However, many providers are left wondering how to align their healthcare revenue cycle management strategies with value-based reimbursement arrangements.

In a June 2016 survey conducted by Health Catalyst, less than one-quarter of hospitals reported that they are on track to achieve the goal set by the Department of Health and Human Services (HHS) to tie 50 percent of Medicare payments to a value-based payment model by 2018.

While value-based reimbursement adoption has defied expectations, most healthcare providers are committed to making alternative payment models work. About 23 percent of those surveyed expected to connect half of their payments to a value-based care model by 2019, a year later than the federal goal set by HHS.

To facilitate an effective transition away from fee-for-service reimbursement structures, providers may need to refocus their healthcare revenue cycle management strategies to include more data analytics tools, population health management, and better patient billing techniques.

Here’s a look at several healthcare revenue cycle management considerations for implementing value-based care payment models.

Investing in data analytics to maximize claims revenue, track outcomes

In simple terms, value-based care hinges on care quality improvement. Providers should invest in data analytics infrastructure or vendor-sponsored systems to help analyze quality metrics and monitor an organization’s progress with improvements.

Private and government payers are increasingly providing financial incentives on top of fee-for-service arrangements for providers that are able to improve care delivery and cut healthcare costs. But providers can also face financial penalties for not achieving quality and cost benchmarks.

Robust data analytics tools are key to maximizing claims revenue in a value-based world, especially since providers can monitor their performance in real-time and make improvements to claims management systems.

“What providers absolutely must have are really powerful analytics that are able to take clinical and outcomes data, a lot of which resides in clinical systems, and combine it with financial data to accurately measure where we improve quality based on outcomes results,” Deanna Kasim, Research Director of Payer Health IT at IDC Health Insights, told RevCycleIntelligence.com.

“There is an absolute need that if this is going to be successful in terms of changing reimbursements and care delivery models, payers need to get providers and the consumers to the table and there has to be the next generation of analytics applications to support these efforts.”

In addition to measuring and maintaining performance, healthcare analytics tools are beneficial for monitoring claims management systems.

A 2016 survey from HIMSS Analytics found that one-third of providers still use a manual process to manage claim denials — even though survey participants explained that automated claims management systems are able to better identify root causes of denials, suggest resolutions, and cause fewer write-offs.

With 96 percent of hospitals possessing certified EHR technology, according to HealthIT.gov, EHRs are a good starting point for revenue cycle analytics, especially since value-based care relies on clinical data to measure quality. Meanwhile, other providers are seeking revenue cycle management systems from clearinghouse vendors or revenue cycle-specific vendors, HIMSS Analytics reported.

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Using population health management to improve quality and cut costs

With an emphasis on patient outcomes under value-based reimbursement models, providers are searching for ways to improve population health management programs that target at-risk groups, such as baby boomers or chronically ill patients.

Providers can start by identifying the most expensive patient populations, which tend to have high hospital readmission rates and more emergency department visits. While these are high-cost events for providers, value-based care models may also further penalize providers for not preventing adverse healthcare events.

“The setting of target dates for the transition from pay-for-volume to pay-for-value means that provider organizations must ramp up their own preparations for adopting an approach that emphasizes population health management,” stated David Wennberg, MD, MPH, Northern New England Accountable Care Collaborative CEO, in a 2015 report from Health Technology Transformation.

Researchers advise healthcare organizations to acquire more primary care physicians to boost preventative and chronic care management, invest in patient-centered medical homes, focus on care management for high-risk patients, and use clinical registries to monitor patient health statuses.

“The setting of target dates for the transition from pay-for-volume to pay-for-value means that provider organizations must ramp up their own preparations for adopting an approach that emphasizes population health management."

“You need a methodology to identify high-risk patients and then a care management program to manage the care of those high-risk patients,” said Jonathan Niloff, MD, McKesson’s Chief Medical Officer. “It's a well-known phenomenon that a small proportion of patients always account for a disproportionate share of costs, so one can get a lot of return from focusing on those high-cost patients.”

While EHR systems are key to collecting population health data, providers could also benefit from additional patient risk stratification programs to identify high care utilizers and cost drivers.

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Improving front-end revenue cycle tasks to improve patient revenue

Improving front-end revenue cycle management techniques has been a major challenge for many healthcare providers, even before the onset of value-based care. However, as providers continue to implement alternative payment models, collecting patient data upfront and engaging patients with their healthcare decisions have become more important for boosting revenues.

“From a revenue cycle perspective, getting the most accurate information up front starts with patient scheduling and patient registration,” said Gary Marlow, Vice President of Finance at Beverly Hospital and Addison Gilbert Hospital.

“That provides the groundwork by which claims can be billed and collected in the most efficient and effective manner possible,” he added. “The last thing you want is getting a claim submission kicking back to them then having to work their way through the institution.”

A major front-end responsibility remains discussing a patient’s financial responsibility every time the individual seeks medial services. However, only half of providers repeatedly educate their patients about their financial responsibility and the organization’s payment policy, according to a Navicure survey in May.

“From a revenue cycle perspective, getting the most accurate information up front starts with patient scheduling and patient registration."

This error of omission has become especially problematic for many providers in the wake of healthcare consumers enrolling in more high-deductible insurance plans causing medical bills to exceed a patient's ability to pay. An Instamed report from June explained that 90 percent of the 12.7 million consumers in the 2016 open enrollment period chose a high-deductible plan, which has caused consumers to pay 225 percent more in out-of-pocket healthcare costs since 2006.

Providers are finding that high-deductible plans and a lack of financial communication have caused patient-generated revenue to drop. But, increasing healthcare transparency and patient engagement strategies could help providers collect payments and induce more patients to the practice.

“You can’t over-communicate enough," claimed Chad Sandedur, Director of Healthcare Analyst at AArete. "A lot of consumers are expecting that visibility. They are shopping around and managing their high-deductible plans and managing the cost of out-of-pocket services. It’s important at the point of scheduling and communication to leverage the internal staff and helps us focus on health accounts more likely to collect.”

Better front-end patient data collection can likewise help providers capture the necessary data and documentation needed for payment through alternative payment models.

Gathering patient information upfront can also help providers properly place individuals in value-based care models or predict which patients may be placed in a model. For example, some participants in accountable care organizations failed to generate shared savings because they did not attribute patients to the ACO properly.

"It’s important at the point of scheduling and communication to leverage the internal staff and helps us focus on health accounts more likely to collect."

If front-end tasks, such as registration and documentation, are not properly done when a patient first arrives, providers risk losing fee-for-service revenues from denied claims and value-based incentives for incomplete performance measure reporting.

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