Revenue Cycle Resolutions: New Year, New Opportunities in Healthcare Finance

On average, health system operating margins improved from 2023 to 2024. However, margins are still falling short of 2021 pre-pandemic levels. There is also a disparity in financial health, with 40% of health systems reporting negative operating margins. One key factor separating poor from good or great health systems is optimizing revenue cycle management (RCM). High-performing RCM teams maximize revenues, reduce administrative overhead through efficient operations, and enhance the patient experience across many revenue cycle touch points. In 2025, RCM leaders will focus on addressing RCM workforce challenges, increasing the adoption of RCM technology, strengthening cybersecurity resiliency, and finding the optimal balance of internal, outsourcing, and partnerships for RCM operations.

RCM Workforce: Investing in People

The cornerstone of successful RCM teams is their people. Unfortunately, like other areas of the health system, workforce shortages plague RCM teams. The pipeline supplying RCM workers is insufficient and exacerbated by high employee turnover. To attract and retain RCM employees, health systems support hybrid or remote work, flexible hours for improved work-life balance, and support for continuing education, including tuition reimbursement and certification programs. Additionally, health systems are developing clear pathways for career advancement that offer employees distinct growth opportunities. Technology is increasing the efficiency of RCM. However, the complexity of information and workflows will require human expertise and involvement for the foreseeable future.

RCM Outsourcing & Partnerships

Historically, all aspects of RCM were managed by in-house teams. However, the complexity of payer-specific policies, frequently evolving regulations, growing patient cost share, and increasing use of alternative payment models are driving the increasing use of external RCM assistance.

• Consulting and Advisory: Engaging consultants to assess, redesign, and optimize RCM workflows and strategies.
• Staff Augmentation: Temporary or ongoing engagement of external staff to support internal RCM teams.
• Technology: Partnering with technology vendors to use software-as-a-service solutions.
• Managed Services: Using an external vendor to take on day-to-day management of part(s) or all RCM functions.

Outsourcing Benefits

• Economies of scale can decrease administrative costs by improving efficiency
• Access to technology without significant capital investment or use of internal information services resources
• Offers flexibility to handle fluctuating workloads, reduces recruitment and onboarding costs
• Expertise on regulatory changes, payer policies, and best practices

Outsourcing Challenges

• Ensuring data security and privacy
• Establishing performance expectations, vendor-client communications, and reporting to provide necessary oversight and accountability
• Integrating technology and workflows between vendor and client
• Aligning standards for patient interactions to maintain health system reputation when interacting with patients

Overall, enlisting external help is an emerging strategy for RCM optimization. However, successful partnerships are contingent on finding the right external partner(s). Selection criteria should include the vendor’s expertise, experience, data security and privacy measures, scalability, cultural fit, performance metrics, technology, patient experience, and ability to meet short and long-term RCM goals.

Revenue Cycle Management Technology and Automation

Technology and automation use are increasing throughout all facets of the revenue cycle, including patient registration and eligibility verification, claims processing, denials management, payment posting, and patient collections. Benefits include cost reduction (e.g., lower labor costs), increased efficiency (e.g., faster claim submissions, fewer errors, fewer denials), and an improved patient payment experience.

Change Healthcare Cyber Attack

The cyberattack on Change Healthcare revealed serious vulnerabilities in healthcare RCM systems, and many providers are still recovering from its impacts. When RCM systems are compromised, it leads to delays in processing claims, increases in denials, and disruptions in cash flow. The financial fallout includes not only delayed or reduced revenue but also the costs of remediation, as well as reputational damage. To mitigate risks of RCM system outages, leaders should strengthen cybersecurity and operational resilience through enhanced security measures, effective third-party risk management, regular data backups, incident response plans, cyber insurance, and diversified systems that do not rely on a single RCM vendor. A proactive, layered approach to security ensures operational continuity, protects organizational reputation, and minimizes the financial impact of future cyberattacks.

Medical Benefit Billing of Medications

In 2023, 12% of all drug and non-drug claims had been denied, and 1.5% were not recoverable. Furthermore, 84% of denials were preventable at different stages of the revenue cycle with a breakdown of 44% front-end (registration, prior authorization, medical necessity), 16% mid-cycle (medical coding, service not covered), 32% back-end (missing or invalid claim data, medical documentation, untimely filing), and 8% unknown. Denial rates specific to medications and infusions are unknown. Billing for medications and infusion therapies brings additional challenges to medical claims that include:

• Coding Complexities: optimizing reimbursement requires the accurate assignment of J-codes and billing units and newer (more costly) medicines are given temporary miscellaneous codes that are routinely automatically denied.
• Manual Processes: the need to submit prior authorization and claims manually increases opportunities for errors and increases the administrative burden of tracking and reconciling claims.
• Delayed Responses: medical benefit claims data typically becomes available days or weeks after providing services. This delay contrasts with the near real-time availability of pharmacy benefit claims adjudication and creates additional challenges in reconciling and tracking claims.
• Challenges with “White-Bagging”: At times, drugs associated with an infusion must be billed under the pharmacy benefit, while the related infusion services (e.g., administration and facility charges) are re-billed to the medical benefit. This practice increases administrative complexity and can lead to delays in reimbursement.
• Multiple RCM teams and handoffs: RCM processes span many stages (front-end, mid-cycle, back-end), and claim handoffs lead to opportunities for errors and delays.
• Payor algorithms and automation: even claims without errors at the time of submission are at risk of denials due to errors during payer processing requiring processes to identify and appeal these denials.
• Payor communication: Denial codes often do not align with the actual reason for denial, requiring RCM staff to investigate and reach out to the payor for clarification.
• Payment-contract misalignment: even when claims are successful, payments may not align with contracted reimbursement terms
• Analytics and reporting: The manual processes and the multiple claim submissions to resolve denials creates problems with databases. A significant investment of analytics and reporting resources is needed to create and maintain meaningful metrics and dashboards of operation and financial performance.

Addressing these challenges requires a multifaceted approach that combines technology adoption, staff training, and process standardization. To be successful requires strong collaboration amongst RCM, pharmacy, and information services teams.

Pharmacist Provider Status

The authority for pharmacists to provide and bill for patient care services beyond prescription dispensing continues to expand. Pharmacists providing these services can be a new source of revenue for health systems. Capturing this revenue may require credentialing pharmacists as providers with payers and developing workflows that support the necessary documentation and coding of services. Collaboration among revenue cycle, managed care contracting, and government affairs teams is key to success.

Calls to Action

1. Evaluate how external help could improve organizational RCM performance, particularly in pharmacy (e.g., medical benefit billing of medications).
2. Assess organizational resilience to revenue cycle management cybercrime.
3. Audit the effectiveness of billing medications and infusion therapies to the medical benefit for opportunities to improve collaboration across teams and increase revenue capture.

Looking for more information or assistance for your organization? Reach out to Visante today!

Subject Matter Experts: Maxie Friemel and Heather Schrant