Hospitals and large practice groups have embraced the management consultant’s mantra of “focus on your core competencies.” As a result, we’ve seen a massive shift of the billing function to outsourced services firms known as revenue cycle management (RCM) companies.
RCMs have a laser-like focus on billing, collecting and reconciling payments for insurance payments, but have not really had to deal with patient payments because of historically small volumes. Because of the rise in high-deductible health plans, hospitals and their providers are going to be responsible for collecting as much as 30 percent of their revenue from their patients.
A patient receives a bill and, more often than not, is confused by the charges. Their first step is to call the number on the bill. In this case, while they think they are calling the hospital, they are actually reaching the RCM company that is handling the hospital’s billing (as well as that of 50 or so other institutions).
The patient wants to better understand why they owe something to the provider, or even better, make a payment on this bill on any outstanding balances. The individual who fields the call must now log on to that specific hospital’s billing system, which could be one developed by any of a half dozen or so software companies, including Epic, Cerner, Allscripts, Meditech or McKesson. And, depending on the hospital, they might also need to log into any number of bank systems as well, multiplying the number of permutations and processes to collect and reconcile a patient payment.
The CEO of an RCM company needs personnel who are well-versed on every vendor's software applications, banking systems and the nuances of each. If the RCM staff is not capable, the time spent with the patient who called makes the slender margins on which the CEO manages the company even slimmer. And that doesn’t even factor in staff turnover and the cost impact of training necessary to become adept at all those user interfaces.
This is further complicated by the fact that most of the interfaces found on these hospital information systems (HIS) are not known for being user friendly, which further increases training and costs. There should be a single, astoundingly intuitive interface that could handle the billing process from any of the major HIS quickly and easily; even the ones with unique or customized features. This centralized capability can be integrated with all those systems quickly and easily.
Let’s go a bit further with this train of thought. Along with a uniform interface, the RCMs would also process hospital bills electronically, the way most American healthcare consumers prefer to get such statements. This also benefits the hospital and RCM as electronic payments are typically remitted six times faster than those that are initiated by a paper bill. And back to the example, if the patient makes a partial payment, the outstanding balance can be billed periodically on a payment plan, ensuring that the total obligation is collected.
The value of incorporating electronic billing into an RCM’s operation means more efficiency and better margins. Even if an RCM believes that it has squeezed every penny of waste out of its process, it can do better if it can work around the need to send paper bills.
The typical payment cycle with a paper statement is 120 days, based on research conducted by the Medical Group Management Association. For RCMs that have any sort of performance-based arrangement with the hospitals they serve, slow pay can be disastrous.
By contrast, studies suggest that 71 percent of patients who get electronic bills pay them immediately. An RCM can see payment after a claim has been adjudicated in less than 14 days, on average, using this method.
Let’s add to the appeal of this approach. When a payment is received, reconciliation is done automatically, reducing time to post to mere seconds and eliminating the errors that come with manual data entry.
This isn’t a pipe dream that could bring consequential benefits to an RCM’s back-office and frontline staff as well as the hospitals it serves, especially as it relates to patient engagement. It’s a productive, effective way to meet that daunting challenge and, in the process, satisfy healthcare consumers with bills they can understand and pay.
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