Irv Lichtenwald

Hospitals without a Robust RCM are Losing a lot of Money

February 19, 2019

Healthcare Industry 6 Minute Read

A frequent knock on electronic health records (EHRs) has been that they’re just glorified billing systems that fail to provide enough clinical functionality to make a significant difference in quality of care.

So it’s somewhat incongruous that a recent Black Book report on revenue cycle management (RCM) system adoption would say that 26 percent of hospitals don’t have an effective RCM system in place even as virtually all hospitals are using an EHR.

How can that be?

The explanation for any perceived discrepancy is definitional. An unsophisticated billing system is not a robust RCM suite, and not all EHR platforms incorporate RCMs or started out as anything more than simple billing applications. Also, RCM software is often insufficient without robust billing services AND other organizational initiatives.

With that said, what remains undeniable is that CMS, the largest payer in the nation, will continue to promote and reimburse for value-based care and payments, and that hospitals and clinics that don’t invest in RCM applications and support services are leaving a lot of money on the table.

How much money? A 2017 study by The Advisory Board says the average 350-bed hospital is losing $22 million annually by focusing on costs at the expense of revenue.

In an era of decreasing reimbursements, most hospitals and clinics can’t afford to lose anywhere near that much money. Certainly, smaller facilities are losing less, but the smaller the facility, the more vulnerable it is to the loss of any revenue at all. As smaller, more rural facilities systematically disappear, quality RCM products and strategies look more and more like one solution to a growing crisis for many healthcare facilities.

How to Improve Hospital RCM

Administrators can put their organization on firm financial footing by following these steps:

Put the tools in place. Black Book says at least a quarter of the hospitals out there are operating without a good RCM system, which virtually guarantees that they’re undermining their own revenue. While it’s time for that to end, it’s also crucial that hospitals not put too much faith in rudimentary applications built into an EHR or technology that’s just plain old.

One RCM expert suggest looking to other industries for guidance. Direct patient communication through chat applications spurs patients to pay more quickly. Analytics and automated outreach through other digital communication formats like email also improve patient response.\

Beyond that, a comprehensive RCM suite should include, at a minimum, applications that enable insurance eligibility checking, point-of-care collections, payments through a patient portal, universal billing and coding, and claims management.

Limit the number of RCM solutions in use. A HIMSS Analytics survey from last year revealed that denials are the number one RCM challenge hospitals face. Among those who had the most difficulty with denials, 72.5 percent used an electronic health record (EHR) with three or more RCM solutions.

Ubiquity of solutions is a complicator because it makes it harder to get normalized data and, hence, full reimbursement. Nearly all hospitals polled by HIMSS Analytics said gathering necessary data was either moderately (65 percent) or extremely (33 percent) challenging.\

Admittedly, putting a limit on the number of RCM systems used is a challenge, making interoperability and established data exchange standards just as much a priority in the RCM world as it is with EHRs.

See the RCM system as a tool to support strategy. There may always be the tendency to mistakenly see technology as having some kind of miraculous power that takes over after we implement. In truth, the effectiveness of technology depends almost wholly on how it is used.

“Having a strategic understanding and a broader understanding of the areas outside of billing and collections is important,” says David Boggs, who heads up executive search firm WK Advisors. “Getting the bill out and collecting it are critical, but so are having the analytics in place to ensure you are collecting what you’re supposed to collect, making sure contracts are paid at the level they’re supposed to be paid, and ensuring that coding is accurate so it won’t be denied later. It’s a big-picture role.”

Knowledge of a great deal more than a robust RCM system is essential in a revenue cycle leader. The best have both technical and personnel skills, as well as a knowledge of different types of reimbursement approaches. Approaching RCM acquisition or transition with specific goals elevates the probability of finding the right system.

Round up and aggregate the data. San Diego’s Sharp Healthcare has an enterprise data warehouse solution they use to centralize and aggregate patient and organizational information. In a perfect world, that warehouse would automatically incorporate data from all the disparate systems Sharp uses. Because we don’t live in that world, Sharp knows that any data they look at won’t include information from a commercial coding application they employ because the coding vendor has not responded to integration requests. Information blocking, as it turns out, is not limited to EHR data.

“Just like we have seen with clinical solutions at health systems, one of the big challenges that exist for advanced analytics on the financial side is that there are also many different solutions involved in revenue cycle management,” said Bryan Fiekers, senior director, research services at HIMSS Analytics.

It’s frustrating for Sharp and others, yes, but it isn’t a strong argument for not aggregating data. Indeed, aggregation may be the only realistic way to deal with disparate data from many sources. There may be snags with individual vendors, but your organization can still be ready when those snags are untangled in the near future.

Check in regularly. Especially if it’s not possible to really limit the number of RCM systems in use, it’s crucial to conduct regular audits and determine where dollars might be falling through the cracks created by human error and poor system design. Audits can enable your organization to identify missed revenue opportunities, which the technology can then be configured to never miss again.

Much attention has been paid to the issue of interoperability among EHRs. Indeed, many in healthcare may not know that the consternation could be equally applied to RCM systems. As such, these recommended approaches to effective RCM use will be subject to the same limitations and frustrations as with EHR adoption.

Is that an acceptable reason not to engage now in better RCM strategies? Of course it isn’t. If you’re a 350-bed community hospital without good RCM support now, you’ve got 22 million reasons each year to deal with the frustration.


Learn about Medsphere’s RCM Cloud, a robust RCM solution that empowers healthcare organizations to drive sustained change and profitability through a combination of knowledge, solutions, and experienced RCM experts that act as an extension of your organization.

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