Doctors are fond of complaining that they didn’t go to medical school in order to practice business, but independent physicians do spend much of their time on their practices’ finances.
That requires mastering revenue cycle management (RCM), the financial process practices use to administer all the functions associated with claims processing, payment, and revenue generation.
At the level of the individual patient, RCM begins when that patient makes an appointment and ends when all claims and payments resulting from the appointment and subsequent services have been settled. At a higher level, it means ensuring that the practice generates enough income to pay expenses and yield a profit.
Revenue cycle management has never been easy, but the move to value-based care and reimbursement, as well as more risk-based payer contracts, has made it harder than ever. A 2016 survey by research firm Black Book found that 90 percent of small, independent practices were unprepared
financially and technologically to implement value-based care.
Difficult thought it may be, efficient and disciplined RCM is key to an independent practice’s ability to remain so. “Effective revenue cycle management isn’t going to guarantee your practice’s financial success, but neglecting revenue cycle management might result in its failure,” says Melissa Lucarelli, MD, a family physician in Randolph, Wis., and a member of the Medical Economics editorial advisory board.
A move to outsourcing
As RCM becomes increasingly demanding, more practices are turning to vendors to handle part or all of it.
The Black Book study predicted that the U.S. market for physician and ambulatory RCM outsourcing and extended business office services would grow by 42 percent between the end of 2016 and the beginning of 2019. The same survey of 2,000 independent physician practices found that 59 percent of providers intended to outsource some or all of their billing.
“High-impact drivers of the physicians practice outsourcing market include the increasing emphasis on compliance and risk management, and the need for more efficient and cost-effective processes,” Black Book managing partner Doug Brown says in the study.
The rising costs of operating a practice also underscore the importance of RCM. A 2018 Medical Group Management Association study found that over the past five years median operating costs for primary care practices have risen by 13 percent, from $391,798 to $441,559 per physician. And while revenue can fluctuate, expenses such as salaries, rent, insurance, and equipment payments must be paid on a regular schedule.
Outsourcing RCM is comparable to a primary care physician referring a patient to a specialist, says Todd Van Meter, senior vice president, ambulatory care, for Optum360, a revenue cycle management firm based in Eden Prairie, Minn.
The specialist has greater resources, knowledge, and expertise to handle the task than does the generalist, he says. And unlike a practice whose primary mission is providing healthcare, a vendor is focused solely on RCM, making it easier for them to stay current on regulatory and reporting requirements while discovering new efficiencies.