Four Ways RCM Must Transform for the Shift to Value-Based RCM

Value-based care is driving transformation of many established operations within medical groups—and the revenue cycle is no different.

It is likely that 2018 will be remembered as the year that value-based care became a financial reality for most U.S. medical practices. Those participating in MIPS (the Merit-based Incentive Payment System) received their first round of results and a view of the impact on future reimbursement rates.

Specialists taking part in advanced alternative payment models (APMs) such as the Oncology Care Model (OCM) program were also provided performance reports from CMS, in some cases accompanied by unexpected claw back demands. Finally, commercial payers such as UnitedHealthcare and Aetna promoted research and forecasts attesting to the increasing influence of value-based contracts in the reimbursement mix.

A recurring theme of value-based care is the need for practices to undergo transformation and adjust their practices, clinically and operationally. But how should they transform financially?

Revenue cycle management (RCM) has been the primary process by which practices ensure they are fairly and fully reimbursed for the care they provide to patients. In a fee-for-service system, the process is straightforward at a high level—ensure encounters are properly documented in the electronic health record (EHR), submit corresponding claims and follow through to payment. Now, with revenue streams dependent on new quality and cost performance measures, benchmarks compiled from peer groups, episode costs beyond practice walls and more, forecasting payment has become much more challenging. While fee-for-service reimbursement is not going to vanish, the shift to value-based care requires practices to revisit their existing RCM approaches and evolve them in four primary areas:

Optimize based on value, not just volume. Practice financial performance once depended primarily on the “top line” of patient encounters, both the number of them and the type of services delivered. This, in turn, led to a focus on the up-front accuracy of claims, not to mention the efficiency of provider and office workflows.

By contrast, value-based programs including MIPS and APMs identify specific quality, cost, and other output measures upon which reimbursement levels depend. Therefore, optimization now also involves: 1) facilitating the accurate capture of the inputs from which measures are calculated and ensuring complete and timely submissions; 2) noting payer or peer group benchmarks, when also considered as part of performance; 3) partnering with clinical peers to identify those measures for which the practice is likely to over- or under-perform and creating financial scenarios based on likely outcomes; and 4) for areas of under-performance, working with clinical peers to address the root cause of negative outliers and drive continuous quality improvement.

Minimize risk, not just denials. Financial downside in fee-for-service RCM often presented in the form of unwarranted payer denials. As a result, practice teams took pains to ensure clean claims up front and continued engagement through the approval process.

As value-based contracts grow, financial leaders must also anticipate and model the new risk factors that could negatively influence future practice revenue. Actions include projecting reimbursement levels as a result of various performance scenarios under MIPS; potentially putting aside bundled payment income until payer reconciliation is complete; or invoking stop-loss insurance as protection in two-sided risk models.

Shift focus from in-office encounters to care delivered across all settings and conditions. For the most part, fee-for-service revenue cycles focused on the encounters between providers and patients that occurred between a practice’s four walls. Many value-based care models instead involve accountability for total episode costs, which can be driven by patient visits to other settings (e.g., EDs and urgent care), other providers (in the case of co-morbidities) and other treatments, including those received in the home. Revenue cycle teams will be important drivers in ensuring that proper integrations and interfaces are established to other systems in which such data resides, as well as partnering with clinicians in establishing the financial need for new practice capabilities that increase performance in the areas of expanded scope – for example, care management efforts that will focus on treating patients based on risk and with a holistic view of their “whole person” care.

Move from retrospective to real-time reporting and action. The primary KPIs by which practices measured revenue cycle performance were largely retrospective in nature: net collections, days in A/R, denial rates, and cost to collect, to name a few. Dashboards, therefore, also looked back and compared historic performance across defined periods of time—with an eye on future improvements. Practices could remediate issues with the next group of claims.

Value-based care models often involve sizeable performance periods with high revenue impact—for example, six months in an APM such as the Oncology Care Model—and payers share results long after practices have any ability to address issues. The revenue cycle therefore needs to implement the ability to monitor performance at a detailed level in real-time. This speaks to the need for a new foundation of data management that pulls from all the relevant clinical and financial sources that impact quality measure performance, harmonizes it and enables a layer of advanced analytics. These analytics should include both timely dashboards and the ability to run custom reports, all with the ability to drill down to the level of individual patients, providers, and practice locations to permit the identification and targeting of interventions when needed.

Value-based care is driving transformation of many established operations within medical groups—and the revenue cycle is no different. Taken together, the four steps outlined in this article point to an expanded role for the financial leaders in medical practices. The tendency for some to treat RCM as a back-office function will give way to a new collaboration with clinical peers at the forefront of the practice, modeling, tracking, and designing responses to the scenarios upon which overall financial health will depend.

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