Everything you need to know about Revenue Cycle Management

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Cash is king. The issue is collecting it right away. Or as an SAP-sponsored white paper puts it, the primary business challenge remains reducing Days Sales Outstanding (DSO). “Without automation tools, there is no way to sufficiently increase productivity to reduce overhead and improve performance at the same time,” write the authors at PayStream Advisors, a research and consulting firm.

That’s the promise of Revenue Cycle Management (RCM) software: automate cash collection to heighten productivity, reduce costs and increase performance simultaneously…especially for B2B SMEs, including many small hospitals and medical practices.

DSO and A/R

According to Investopedia, low DSO means it takes fewer days to collect accounts receivable (A/R). High DSO shows a company is selling on credit and taking longer to collect money. In other words, it takes money to make money.

However, in healthcare the term DSO is not used commonly, according to Lea Chatham, content marketing manager at Kareo, a provider of medical office software and solutions. For healthcare, “some key best practice metrics are: Average Days in A/R less than 40, Net Collection of 96 percent or higher, Average Days in A/R over 120 of 15 percent or less,” she says. “The industry best practice is to achieve Average Days in A/R of 40 or less.”

Cloud-based RCM

To help track A/R, Kareo built a cloud-based Software-as-a-Service (SaaS) solution that includes what it calls Payment Velocity. It is basically a tool on the dashboard that shows the average claim payment turnaround, Chatham says. “It is a little different from Days in A/R. It measures the actual time it takes for an average dollar to be collected from the date you see the patient until the date you receive payment, and therefore, more accurate.”

In addition to specialist SaaS medical RCM vendors, there are broader providers servicing this industry niche. “Incorporating solutions such as Apttus allows medical providers to use the cloud to oversee every step via one platform—from initial quote to the sales process to revenue management and billing,” says Gopkiran Rao, associate vice president, vertical markets, Apttus, provider of enterprise-class SaaS applications. “This not only provides efficiency and speed but also eliminates errors while keeping control of the process within the practice.”

Legacy RCM solutions

For all the hype and trendiness of cloud-based SaaS solutions, generally speaking, healthcare providers and other highly regulated SMEs remain somewhat wary of these new technologies.

“Because of compliance responsibilities, CFOs are often hesitant to adopt SaaS,” says Shail Khiyara, CMO, Model N, provider of revenue management solutions to the life sciences. “Compliance factors play a huge role in SaaS adoption and particularly compliance consistency for global organizations.” That’s because while all or most SaaS applications adhere to U.S. and Canadian requirements others might not conform to other country-specific regulations.

In addition to regulatory and compliance concerns, healthcare and other SMEs worry about provisions for data privacy and protection in the wake of online breaches like Sony and Target. “Most of our clients have been pretty suspicious of cloud-based RCMs due to security risks and system failures, which are likely to affect their operations,” says Tabish Naeem, senior manager, healthcare solutions MENA, MI Dynamics, an RCM integrator. There can also be “associated risks if the SaaS service provider is ever hacked and patient information is leaked.”

Outsourcing Revenue Cycle Management

While healthcare providers and other SMEs often consider a cloud-based or a legacy RCM solution, others have opted to outsource their entire Revenue Cycle Management, or Business Office, function. “Since my departure from my previous position, my former boss opted to outsource the entire Business Office,” says Jeff Popp, director, business development and consulting, RevSpring, developer of revenue cycle solutions. As a former revenue cycle director at a hospital serving the Cleveland area, he was privy to the pros and cons of making such a move.

“This was a path we were considering,” Popp says. “Our goal was to reduce our overall cost-to-collect and obtain improved financial performance.” He goes on to say that a large number of people in the Business Office RCM function were retiring and there was not trained staff behind them nor was the hospital in a position to recruit replacements due to budgetary concerns.

Coincidentally, the hospital’s renewal for its remote-hosted Patient Accounting system was coming up. “Understanding that we had a choice of a significant capital outlay for a new system or an equally large expense to continue with our current system, we wondered what options existed,” Popp says.

In the end, the hospital determined an outsourced solution existed. “At this moment, the due diligence is underway,” he says. “But this appears to be a growing trend for small healthcare systems as well as larger multi-hospital systems.”


Photo of Shail Khiyara via ModelN

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Derek Handova

Derek Handova

Derek Handova is a veteran journalist writing on various B2B vertical beats. He started out as associate editor of Micro Publishing News, a pioneer in coverage of the desktop publishing space and more recently as a freelance writer for Digital Journal, Economy Lead (finance and IR beats) and Intelligent Utility (electrical transmission and distribution beats).



Thanks for your coverage of the important area of Revenue Management. At Revitas, we find that interest in this area is expanding across many vertical industries – from life sciences and healthcare, to high tech and commercial – for much the same reasons that you describe: the need to accelerate revenue while reducing cost overhead. Your readers might find it helpful to read information about how channel teams, like hospitals, suffer from lack of automation in the Revenue Management area – and often are forced to select between increasing revenue performance or reducing costs and overhead; we offer an educational white paper at: http://www.revitasinc.com/resources/white-papers/wp-008_understanding-the-channel-paradox/
Thanks very much and please keep up the great coverage!
Best regards,
Kelly Baig – Industry Development, Commercial Markets, Revitas

I am agreeing with you without automation you can’t improve you performance
and generate sufficient amount of money. A good RCM is going to basic need of
every physician practices nowadays. Its helps to keep your cash flow in running
and reduce the chances of denials. http://goo.gl/VKy8G8

Alex Tate
Interesting read. In my
humble opinion I believe that Medical billing is a full-time task which can
take up huge investments of not only money but time! Time which is very valuable
for a healthy patient-provider relationship-the very fabric of this profession-
Outsourcing your billing to a third-party provider takes this burden off your
shoulders so you can focus on providing your patients with the absolute best
care. Not only that, it takes only a fraction of what you have to pay to keep
these operations in-house. Read more The Importance of RCM http://goo.gl/t3NJCJ


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