The U.S. health care industry is about to undergo one of the most dramatic periods of change it has ever seen — perhaps since the advent of Medicare and Medicaid in the 1960s.

The economic crisis of 2008 led to a significant growth in federal deficits, underwater budgets in many states, and a more aggressive business community. Against this economic backdrop, purchasers of care are taking new, far-reaching steps to tackle care cost and quality issues.

These steps are taking many forms, such as financial penalties for high readmission rates, incentives for prescribing generic medication, and denial of payment for never events. At the center of this shift is the Affordable Care Act and its many programs designed to hold providers more accountable for the care they deliver.

Although we are not yet able to map out all the nuances of the transformation, we should acknowledge that three significant realities await us:

  • The absolute amount hospitals and care providers are paid will be lower relative to inflation. Margin pressures will increase.
  • Providers and health care facilities will have to prove the quality of their outcomes as well as their processes under requirements with higher risk relative to performance.
  • Health care providers will move toward more holistic care, focusing not solely on the instance of care, but also on the total care provided.

Certainly, success within the various payment reforms will build on the meaningful use of certified and interoperable EHR systems — and the country is making good progress implementing the required technology. But it's the revenue cycle system that will form the foundation of an organization's response to payment reform.

Ramifications of Accountability on Revenue Cycle Systems

An organization's revenue cycle system will need to support a provider's management of financial, administrative and clinical processes. It will require software that groups charges into bundles and episodes, and supports definitions of bundles and episodes that vary among purchasers. The RCS must allow an organization to disburse a single capitated payment to the various providers that treated a patient with multiple chronic diseases.

While these capabilities are critical, the RCS also will take on several fundamental features:

  • supporting revenue diversity and complexity;
  • enabling greater process efficiency;
  • serving the full continuum of care;
  • acknowledging the ascendance of data;
  • interoperating within a larger ecosystem;
  • improving organizational agility.

Support of revenue diversity and complexity. Fee-for-service payments will continue to exist in the era of accountability. Not all encounters can be packaged neatly into bundles or episodes that can be defined clearly by evidence-based guidelines and unambiguous measures of quality. We are unlikely to see a “trauma bundle,” and it can be very difficult to define the outcomes of psychiatric care.

Different purchasers will have different definitions of bundles and episodes. These purchasers likely will develop similar but different measures of quality and arrive at similar but different statements of care guidelines.

The RCS must manage this diversity, which encompasses both old and new payment methods, an explosion in the number of salient quality measures, and a burgeoning set of guidelines that define acceptable and unacceptable treatment procedures, medications and tests.

The RCS also must shield, as much as possible, its complexity from the staff who perform front-line registration and the clinicians who are focused on doing what is best for the patient.

Process efficiency. With the pressure on reimbursement, revenue cycle processes must become more efficient, a particular challenge given the growing diversity and complexity of reimbursement.

Improving process efficiency requires, at its core, organizational prowess in understanding and reengineering processes. This prowess is not easy to develop and sustain. The RCS can support these process-improvement efforts.

Workflow and rules engines can monitor process performance and alert staff when steps are not taken, or when they occur in an incorrect sequence or take too long. These engines can ensure that communication among staff occur and can suggest subsequent steps.

Analytics for these engines can help managers understand whether the organization is doing a good job of following its reengineered processes. These analytics can point out processes that seem to have uneven performance and can suggest additional training or further reengineering.

Continuum of care. The health care industry already has revenue cycle applications that support the hospital and different applications for physician practices and long-term care facilities. Now, to improve accountability, the industry needs better care coordination between care settings.

The RCS will need to support the full continuum of care. In effect, the industry shifts from a portfolio of diverse revenue cycle systems to a core RCS that is extended into these different settings, with the extension possessing features unique to that setting while preserving an integrated core set of capabilities, data and engines.

Ascendance of data. The industry is fairly primitive in its ability to look at data, to understand what it means and to take actions based on that understanding. The role of data and the importance of data management likely will grow significantly after payment reform. If you don't know whether you're making or losing money on a particular bundle or episode, you could wind up in a lot of trouble quickly, even if your clinical staff are using a top-notch electronic health record.

Thus, organizations will need to make sure they have business intelligence technologies, including one that will assess their quality and their costs not only for internal consumption, but also for reporting purposes. There also will be a significant need to look at variations in practice and understand where providers are falling short, or whether a particular provider or set of providers has uncovered a new or better way to deliver care.

In addition to reporting, the RCS data environment will need to handle a range of modeling. For example, we might do an assessment to determine whether some of the care could be delivered by a nurse practitioner rather than a physician, or if care should be moved from one specialty group to another specialty group to improve quality while managing or lowering costs.

The RCS will need to enable predictive modeling to, for example, identify those patients who are likely to experience significant distress or additional care needs in the months and years ahead. We might also want to determine if healthy patients are at risk of becoming unhealthy.

Interoperating within a larger ecosystem. Revenue cycle systems have had to live with interfaces since their inception: Registration data flowed to clinical and departmental systems and charges flowed back. But now the RCS will need to interoperate within a larger ecosystem.

Charges may flow from EHRs and ancillary systems that are outside of the organization. An organization may contract with a group of cardiologists, for example, to provide care for a capitated population. As a result, the RCS will need to receive charges from an EHR outside of the organization's direct control.

Virtually all revenue cycle systems have a master patient index in their foundation. With accountability models, it becomes much more important to track a patient visiting different care settings. If a patient has been seen in four or five different provider organizations, we need the means to link that patient with the different medical record numbers he or she has been assigned by these organizations. The goal is to roll up all the clinical data, not only for the purposes of treating the patient, but also to have an estimate of both the cost and quality of that care.

New businesses will pop up that offer accountability functions to hospitals and health systems. These new businesses will offer to negotiate rates, assist in population management, perform predictive analyses to identify high-risk patients, and assist with process reengineering efforts. In many cases, these new businesses will provide a valuable service to providers. The provider RCS must interoperate with the systems used by these businesses.

Organizational agility. While the overall emphasis on increasing accountability is clear, the mature form and effectiveness of proposed new care delivery organizational models and payment strategies is unclear. No one really knows, for example, whether an accountable care organization, based on a collection of affiliated providers, will really bend the cost curve.

The country is in for a lengthy period of experimentation and uncertainty. It is not possible to know the mature form of these delivery models and payment approaches. Hence, provider organizations and their revenue cycle systems must be able to adapt to the inevitable tuning and course correction.

Application systems can be designed to be agile. Service-oriented architecture, tools that enable adding new types of data and changes in computer-based forms and rules, and workflow engines that allow editing of workflows and rules — all of these support, albeit imperfectly, agility.

Focus on the Fundamentals

It's impossible to anticipate every detail of how the future will unfold. While a provider may decide to wait until the future becomes clearer, this is a mistake.

Whatever course reform takes, quality measures will be integral to payment reform. Focusing on quality improvement today will serve health care organizations well, as will reducing costs and streamlining processes. Improving data quality and the organization's skill at using data is always worthwhile. Organizations should keep moving forward with their EHR and quality data efforts and track the progress of their plans.

The future does not have to be fully clear to prepare for it. Many of these initiatives take several years to accomplish, and an organization can wait too long and be forced into a mode of hasty catch-up.

RCS Checklist

Managing the risk and financial responsibilities of more accountable care will require a significant reorientation of traditional revenue cycle activities. As the reimbursement environment becomes more complex, revenue cycle systems must evolve to support payments based on quality and performance of the clinical enterprise.

The system will need logic that groups charges into different bundles and episodes. It will need analytics that bring clinical performance and revenue cycle data together in real time so leaders can understand whether variations in clinical performance will have an immediate impact on expected reimbursement. Support for a high degree of interoperability will be paramount. Additionally, the system must be able to manage increasingly complex processes via workflow and rules engines in a setting that will have less and less tolerance for inefficient and ineffective processes. These new capabilities must complement such routine activities as registering patients, scheduling appointments and administering patient billing.

To ensure that a fully functioning revenue cycle is in place, providers and their IT vendors need to collaborate. The two groups must work together to manage a complex information technology infrastructure and application base, and share a strategic perspective on the evolution of the technology being implemented. The partnership must work in lockstep to support the provider's strategic plan, with the vendor having a broad understanding of the organization's long-term clinical, financial and administrative goals.

Health care providers will have to respond not only to changes regarding the best way to achieve efficient, high-quality care through new reimbursement strategies, but also carefully hone their own information management processes to ensure that they thrive as the industry changes around them. A well-thought-out and carefully constructed approach to revenue cycle management is crucial to successfully navigating uncharted territory.

John Glaser, Ph.D., is the CEO of Siemens Health Services in Malvern, Pa. He is also a regular contributor to H&HN Daily.