Beyond bolt-ons: breakthroughs in revenue cycle information systems: next-generation revenue cycle information systems go well beyond niche functionality

Healthcare Financial Management, Feb, 2008 by David Hammer, Debra Franklin

Lower Total Cost of Ownership

Today's generally accepted definition of "cost to collect" includes the direct departmental costs of patient access and patient financial services, plus the fees charged by outsourcing vendors such as collection agencies. Because the hospital accounts receivable analysis (HARA) report from Aspen Publishers--the industry standard reference source for revenue cycle KPIs--does not include the costs of the HIM department, this revenue cycle cost is often excluded from the calculation. And very few organizations include annual revenue cycle software maintenance fees in their cost-to-collect calculations.

Nevertheless, these are the real costs of collecting healthcare bills, and some providers have begun to adopt this total cost of ownership (TCO) calculation as a standard revenue cycle KPI. For example, Catholic Health Initiatives' Savini says, "the annual maintenance costs of every core HIS and bolt-on system are charged to our revenue cycle departments." When viewed through this lens, cost-to-collect figures that usually range between 2 percent and 3 percent of total collections can double or even triple. Thus, next-generation system vendors have begun to use TCO when calculating the ROI that providers can expect to achieve when these systems are fully implemented and functional.

How can strong ROI numbers be obtained, particularly when system conversions are known to be challenging? The combined effect of all the features and functions of next-generation systems supplies the answer. Obviously, there can be significantly lower annual maintenance fees for bolt-on systems, once their functionality is part of a new core HIS. Then, when workflow rules-driven processes are fully deployed, revenue cycle quality control will shift from inspection to exception. When the system does the monitoring, fewer patient access and patient financial services FTEs will be required. As bills begin to be created from the intrinsically encoded clinical documentation of single-database systems, correspondingly fewer FTEs will be required in HIM departments.

These cost-reduction benefits may not be achieved without internal political considerations; in fact, some providers have asked vendors to explicitly exclude FTE-reduction savings from ROI calculations. Of course, these savings claims may be met with skepticism by seasoned revenue cycle leaders who have "seen it all before." As Evins puts it, "Don't make the revenue cycle give up people unless and until staff cuts can be substantiated with real-world performance improvements." Nonetheless, providers who have installed next-generation systems are anecdotally reporting increased efficiency and reduced costs, sometimes on the order of 15 percent to 20 percent. It will be up to future studies to document the extent of the TCO savings achieved after the implementation of full-blown next-generation revenue cycle information systems.

Stand Pat--or Upgrade?

Revenue cycle leaders face a challenging environment. Their networks of bolt-on applications have become very complex and costly. Many core HISs were implemented in the 1980s and 1990s, and are due for replacement. Meanwhile, consumerism is becoming a significant market shaper. Capital dollars are scarce and competition for them between clinical and financial interests is fierce. And the pressure to reduce costs and improve ROI is unrelenting.