After EHRs, Providers Invest in Revenue Cycle Management for Success

Federal actuaries project national healthcare spending to account for over 19 percent of GDP by 2027. Despite the acceleration in domestic healthcare spending, the US is not experiencing better care quality or outcomes compared to similar countries.

Provider organizations are under intense pressure to reduce costs while improving health outcomes through a variety of healthcare reforms, including value-based reimbursement. In response to industry pressures, providers started with revamping their clinical systems, like EHRs, in hopes that optimizing care delivery would lead to lower downstream costs and achieve the goals of value-based reimbursement.

EHR systems played a significant role in redesigning and improving clinical processes. As reported by Definitive Healthcare, the leading provider of data, intelligence, and analytics on the healthcare provider market, EHR adoption rates went from around 73 percent in 2009 to 98 percent less than a decade later.

With the help of EHRs and other clinical support systems, industry experts are noticing an improvement in both care quality and total costs of care. One major payer recently reported that value-based reimbursement initiatives reduced costs by 15.6 percent while improving preventative care and decreasing emergency department visits and hospital admissions.

But even after the EHR bubble burst, more work still needs to be done, particularly on the financial side.

In light of financial challenges, hospitals and health systems are starting to prioritize revenue cycle management investments now that their organizations have implemented EHRs and clinical support systems. In fact, 68 percent of hospital executives in a recent Healthcare Financial Management Association (HFMA) survey said their organizations plan to increase revenue cycle IT budgets in 2019.

Substantial investments in EHR implementations have left many provider organizations without the capital or resources necessary to implement effective revenue system management processes. Currently, only 85 percent of US hospitals use revenue cycle management software, Definitive Healthcare data shows. Even fewer hospitals (21 percent) have a bad debt recovery process in place to recoup revenue owed to the organization, a 2018 survey found.

The lack of adequate revenue cycle management solutions is creating significant revenue capture and collection challenges as the shift to value-based reimbursement continues and payment structures become more complex. Hospital expenses are outpacing revenue growth, causing operating income to fall for nearly two-thirds of health systems.

What’s more, cash on hand growth has significantly slowed in the past five years, Definitive Healthcare reports. From 2007 to 2017, cash on hand increased by 23 percent. But in the most recent five years, it has only increased by one percent total, leaving hospitals with less capital to improve their clinical and financial processes.

And hospital leaders are putting their money where their mouths are. Data from Definitive Healthcare shows a considerable jump in revenue cycle management solution installations over the past few years.

Hospitals and health systems installed over 9,000 revenue cycle management solutions by April 2019, with 37 percent of those installations taking place between 2012 and 2017 and 10 percent occurring in the last 12 months.

Additionally, the data found that 91 percent of hospitals have at least one revenue cycle management module installed as of April 2019.

Efficient revenue cycle management solutions reduce hospital costs and ensure providers receive the correct reimbursement for their services, especially under more complex payment arrangements, such as bundled and capitated payments. The solutions gather data from disparate sources and give providers the information they need to identify, track, and improve financial health.

Revenue cycle management investments can also help hospitals effectively manage the financial portion of value-based reimbursement.

Only 13 percent of hospital CFOs said they are prepared for value-based reimbursement in a new survey from consulting firm Kaufman Hall. The rest of the hospital leaders cited a lack of financial planning tools as their most significant challenge with implementing value-based reimbursement models.

Hospitals and health systems have many more options for revenue cycle management solutions compared to the relatively small EHR market. While EHR heavy-hitters Epic Systems and Cerner carry revenue cycle management solutions, a large number of smaller vendors are also competing for market share and offering highly-rated solutions.

Vendors are competing in the large RCM market by offering comprehensive data analytics services, cloud-based services, clinical system integration, and more. And as hospitals and health systems realize the benefits of effective revenue cycle management solutions, the healthcare revenue cycle management market will continue to grow. One market report projects the space to be worth $43.3 billion by 2022.

With so many options and evolving financial capabilities, the revenue cycle management market is unlikely to burst like the EHR space in the near future.

Hospitals and health systems will not be left without revenue cycle management options in the near future. Revenue cycle management solutions are poised to help providers manage both the clinical and financial aspects of healthcare, resulting in value-based care alignment, reduced claim denials, and better revenue capture – all of which are capabilities that hospitals and health systems will need as the industry continues to curb spending.