Monday, June 30, 2008

Revenue Cycle Management Reformation

Earlier this month, KLAS announced the release of their report on “Revenue Cycle Management Reformation: Will Software Solutions Keep Up?”. KLAS interviewed hospital executives in 171 organizations to understand their revenue cycle management (RCM) plans and their views on RCM software vendors.

Paul Pitcher, KLAS’s Revenue Cycle Research Director, sat down with me to talk about the study and its implications.

Q. Why is the report entitled “Reformation”? This leaves the impression that RCM is just now leaving Medieval times.

RCM is a newer term. We used to focus more narrowly on patient accounting. The need now is to support the entire revenue cycle. There are a number of other components and deeper levels of technologies that need to be applied. And to that end, there needs to be a reformation for those vendors to plan on providing functionality to every point in the revenue cycle.

Q. About 6 years ago, an RCM survey found that 25% of hospitals were planning to replace their RCM systems. Do you think the 38% you found in your study seems like a statistically significant increase?

I would say it’s probably statistically significant. Six years ago the need was clinical systems. While that need hasn’t changed for many, for others, they have addressed the clinical systems gap and are now coming around to address their oldest technologies. For many, that is the revenue cycle.

Q. Half (of the 38%) are planning on staying with their current vendor and half will switch. And those replacements will begin in the next 2 years. That sounds like an extraordinarily high level of RCM activity. About 10 years after the last major wave (pre Y2K). Why are these changes happening now? What are the drivers for changing the revenue cycle systems?

For some, clinicals are solved and now it is time to address financials. For others, it is an opportunity to address clinicals and financials as part of a single vendor solution. The vision there is for an integrated solution with clinicals, financials and optimally even ambulatory. The drivers vary but in large part, it is a desire to bring additional levels of technology to improve revenues. It might be to displace bolt-ons in favor of an all encompassing integrated solution. It might be to offer greater levels of technology through workflow, minimizing what are currently manual processes. All of this has to be weighed against the question of whether these changes to the revenue cycle will ultimately yield an ROI.

Q. Of the 38% replacing RCM, half will change RCM vendors. What percentage of those will change to their CIS vendor?

The question asked during the study is “What impact will your current CIS vendor have on the decision to purchase the next generation RCM solution” 55% of respondents said the impact was high. Additionally, about a quarter of respondents said they were likely to replace their core clinical systems in the future.

Q. There’s a striking difference in Desired Features between those that rated “clinical/financial integration” (16%) vs. “overall integration” (45%). Does this suggest that the clinically-driven revenue cycle is over-hyped? And how does pay for performance (P4P) enter into the integration considerations?

Best of breed RCM still has a clear place – those vendors are still getting wins. As to P4P, this tends to be more of a decision support challenge and still in the early stages.

Q. Strikingly, the vendor performance overviews suggest that each of the top 8 major vendors are struggling with aspects of their next generation solutions. Enterprise vendors with the largest current PA install base also seem to be generally lagging in delivery on their next-gen product. Will this slow down actual conversions, as the market waits for “their own” vendor to have a solution?

Some customers have indicated a willingness to wait for their core vendor to deliver. Other customers are clearly not going to wait. One item that clearly will slow down conversions will be an inability to show progress and completeness of design with the technologies that are being delivered. One comment I frequently hear from providers is a desire to avoid the negative experiences associated with a product that is not ready for prime time.

Q. What are the innovations that seemed to drive the most value (for healthcare organizations) and greatest differentiation (for vendors) in the RCM market?

Differentiators will be a centralized or coordinated business office solution versus a single entity hospital solution or a solution that uses technology to maximize the revenues at every opportunity while minimizing the FTE requirements

Differentiators will be an integrated financial and clinical hospital information system or an HIS that also solves the needs of the ambulatory environment.

Differentiators will be process driven workflow functionality that is customer designed

Differentiators may be revenue cycle management solutions that satisfy many of the revenue cycle requirements that are now being left to third party vendors to solve by way of bolt on solutions; in effect, integrated solutions.

No comments: