In our last podcast, we discussed revenue cycle management (RCM) departments or companies that operate like body shops. This applies whether they are in-house departments or external RCM companies, and it isn’t directly related to pricing, although we did suggest some ways this could manifest.
Body shops are organizations that throw bodies at the problem, essentially operating on a staffing model. They charge per head per month or, in the case of in-house billing organizations, track metrics and KPIs around productivity. These metrics might include how many charges were entered, how many payments were posted, lines posted per period per person, or, in the case of accounts receivable reps, how many claims were worked or statuses checked. We believe this is not a good approach—this is the body shop mentality.
Defining Performance in RCM
In our previous discussion, we proposed an alternative to the body shop model: performance. But what does performance really mean? According to Webster’s Dictionary, performance can be defined as “execution of an action.” However, this definition doesn’t fully capture what we mean by performance in RCM. Performing an action in RCM may mean posting a payment, entering a charge, or working a claim. But simply executing tasks isn’t the type of performance we should focus on, and many organizations aren’t even performing these functions correctly.
For example, over the past year, we encountered a $30 million physician practice that asked us to review their data. When we inquired about how they were inputting data from paper EOBs, it quickly became apparent that no payments had been posted from EOBs for an entire year. During the implementation of a new billing system, they figured out how to post payments from ERAs but neglected EOBs. While EOBs represent a relatively small percentage of payments, this is still a basic function that wasn’t being executed—this is not what we mean by performance.
Measuring Accomplishment in RCM
Webster’s second definition of performance is “something accomplished.” Again, this isn’t quite what we’re aiming for. When we talk about performance, we’re generally referring to financial performance or the revenue generated for a healthcare provider. This involves tracking data around specific metrics and KPIs, baselining, and monitoring improvement.
Focusing on performance means you have to quantify it. There are many factors involved in this process, but the key is to ensure that you can measure performance to know if your organization, department, or team is performing well. Unfortunately, this is rarely done in the RCM industry. The reason for this is the difficulty—almost impossibility—of doing so with the current status quo technology. Off-the-shelf EHR practice management systems and LIS simply aren’t set up to support these types of quantifications. You can’t easily extract the data needed to do this manually, even with an analyst.
The Importance of Data and Analytics
To illustrate the mindset that prevails in many organizations and why they may lose out competitively in the next 5–10 years, consider this: I recently spoke to an RCM company with 4,000 employees using about 50 different billing systems internally. I asked them about their data extraction processes, data warehousing, and whether they were putting analytics on top of this data to achieve economies of scale. Their answer was that they had nothing like that. I asked if they were in the process of developing such capabilities, and they said no.
To my surprise, they had no plan and no interest in implementing centralized data analytics and workflow across their systems to gain the benefits of scale. This was despite the fact that the person I was speaking to had an MBA from a top 10 program in the United States. This organization is essentially just a body shop, competing on price per head per month, with no differentiation from others in the industry.
They claimed to perform better than anyone else, but without data and analytics to back this up, it’s just marketing. If you’re not performance-based and simply a body shop, you’re not doing anything that your competitors aren’t doing—or at least, you can’t prove that you are.
The Future of RCM: Moving Beyond the Body Shop
The key to breaking away from the body shop mentality is embracing data and analytics. Whether you’re an in-house RCM department or an external RCM company, moving toward a performance-based model is the way to go. We will likely see continued pressure in this direction over the next 5–10 years, and those who fail to adapt may be left behind.
