Revenue Cycle Professionals Now the Smartest People in the Room

Patient advocates may not want to admit it, but healthcare reform is all about money. Most of the changes are about controlling costs, not improving healthcare. By increasing regulation and demanding more reporting, the government is looking to reduce medical costs, and more specifically, decreasing government spending on healthcare.

One can argue about whether this is an effective approach to improve medical care for patients, but it has elevated revenue cycle professionals into, arguably, the most important people in the healthcare industry.

In this age of healthcare reform, it’s all about finding the money, either by locating sources that were previously untapped, or exploiting those areas of healthcare that have the highest margins. And revenue cycle professionals are getting better and better at doing this.

A recent study  published in the Archives of Internal Medicine proves this point. In 2010 CMS enacted new regulations designed to boost compensation for primary care physicians, who are perceived as underpaid, and cut compensation to specialists by eliminating consultation payments from Medicare Part B. The end result? Primary care physicians did get increased compensation, but so did specialists. Instead of coming up with a budget neutral solution, CMS ended up spending more.

Specialists were able to avoid the impact of the Part B changes by changing how they saw patients and coded for their visits. This tactic was born and is managed within the revenue cycle side of the business.

The government, however, is undeterred, and also has some very smart people working for it. To alter business processes to counteract government regulation requires resources, and the vast majority of healthcare providers, be they hospitals or physicians’ practices, do not have the revenue cycle expertise or resources to make the changes necessary to overcome new regulation. But this is a battle the government is also losing, by way of consolidation.

As physicians and small hospitals find themselves buried under expanded regulation (such as the forthcoming transition to ICD-10), they are being acquired or merging with larger systems which can offer the resources they need to prevent drowning in red tape.

The sum effect of consolidation is, once again, higher medical expense. According to one recent study  by the Catalyst for Payment Reform, consolidation increased healthcare costs by as much 3 percent. “Health care costs are going up, not only because we are using more care, but also because providers have had the market power to raise their prices,” says Robert Murray, former executive director of the Maryland Health Services Cost Review Commission, who was the lead author on the study. “Consolidation is the leading source of their market power.”

The important thing is that the medical industry will go where the money is. As BusinessWeek recently observed, when Medicare cuts reimbursements to physicians groups, these groups join hospitals, which are compensated at a higher rate for the same service.

Another example are RAC audits: the big stick CMS uses to control spiraling costs. As we reported last week, large providers are getting smarter about the appeals process.

New laws and regulation are like squeezing a balloon. The government may be able control spending in one area, but only to have it explode somewhere else. Laws and regulation, unfortunately, are the only tools they have at their disposal. And as long as that is the case, revenue cycle professionals will continue to be the most important people in the healthcare industry.