Quarterly Insights

CAS has created specialized industry insights for each of our main outsourced business services sectors (Accounts Recievable Management, Revenue Cycle Management, Customer Relationship Management, and FinTech/Debt Settlement) to provide easier access to relevant information for our publics. 

Read the full RCM insights here.

CAS sees technology and continued shift to outsourcing non-core competencies to fuel growth in the revenue cycle sector.

As the US healthcare industry approaches a new era characterized by digitized and consumer-focused care, the RCM sector is one of the top areas in healthcare ripe for innovation and disruptions.

The substantial disruptions to healthcare related to the COVID-19 pandemic, e.g. hospital revenue inconsistencies, contactless patient engagement, and an emphasis on consumer preference, have pushed the industry into what experts have dubbed the “Future of Health.” Overall, healthcare spending is projected to slow and ultimately decline in light of emerging technologies, the ability to cure and prevent disease, and engaged healthcare consumers – estimated to be $83 trillion by 2040, about $3.5 trillion less than CMS actuaries estimations.

Going forward, healthcare revenues will be driven by new business models, scientific and technological breakthroughs, consumers armed with highly personalized data, equitable access to care, virtual health, digital patient engagement, advances in data sharing, interoperable data, and regulations that encourage change. As technology and consumer preference become focal points in healthcare, industry revenues are expected to change in four paramount ways: first, experts predict a shift from the general hospital to more specialized care sites that are less expensive and more conveniently located with lower acuity. Second, virtual, preventative care supported by digital and patient engagement tools such as in-home monitoring and telehealth will increasingly displace one-stop, on-premise care. Third, experts predict a shift from mass-produced therapies to personalized medicine to decrease economic waste, treatment expenditures, and risk across covered individuals. Finally, the Value-Based Care Model will manifest with the focus on well-being, care delivery, data and platforms, and care enablement aligned with consumer preferences. These points mark the end of the general hospital, less mass-produced therapies, and a change in how healthcare is financed, which will drive 85% of healthcare revenue, experts predict. In this environment, health systems and clinicians that invest in next-gen capabilities and technologies will likely experience growth while those that continue to invest in traditional infrastructure and talent could be left behind.

As healthcare systems adjust to these technological, regulatory, and market changes, RCM is named one of the top areas in healthcare ripe for innovation and disruption. Poised to grow significantly, the RCM market is predicted to surpass $135.1 billion in the next decade, despite the predicted shrinkage in healthcare spending. This is because hospitals face immediate challenges going into 2021, including staffing, cost and revenue, practice transformation, technology, and operation. As such, health systems increasingly turn toward outsourcing to streamline patient collections, decrease administrative burden and cost, and optimize claims management in the era of complex coding, higher claim denials, increasing regulation, and resource constraints.

The top revenue cycle-related challenges driving RCM growth in 2021 include a 23% uptick in claims denials, non-current Accounts Receivable, and billing complications; an estimated $122 billion in hospital revenue losses in 2021 in addition to the $323 billion loss in 2020 due to the lagging recovery of patient volumes this year, particularly for physician specialties; and a variety of political and regulatory developments.

The current political environment is having direct impacts on the RCM industry. The latest $1.9 trillion COVID-19 relief package includes several provisions advantageous to healthcare providers but will leave them facing significant Medicare spending cuts in the future ($36 billion in 2022). Passed in March 2021, the American Rescue Plan Act of 2021 will funnel $8.5 billion to reimburse rural healthcare providers for expenses and lost revenues attributable to COVID-19. The bill also has been praised for its expansion of Medicare eligibility and coverage, however the AHA is disappointed that the bill does not deliver more overall funding for the Provider Relief Fund, which has been crucial in supplying hospitals, health systems and other providers with resources during the pandemic. Furthermore, the relief package prohibited some surprise medical billing, a movement that will become permanent on January 1, 2022 under the No Surprises Act.

Upon election, President Biden indicated he plans to reform Medicare and Medicaid eligibility, surprise billing, drug pricing, value-based care (VBC), and more during his tenure. Throughout the pandemic, providers in value-based contracts were more prepared to handle the reduction in patient volumes and establish new, unconventional care pathways, such as telehealth. In order to build a more resilient organization moving forward, leaders will be more interested in value-based contracts and the flexibility they offer. So far, though, the Biden administration has paused several prominent VBC models, while Medicare continues to push toward VBC as the CMS has announced that it is now accepting applications for cohort two of the Medicare Primary Care First value-based payment model. Meanwhile, many hospitals are independently turning to VBC payer contracting systems to maintain consistent revenue streams, with physician practices trailing hospitals in VBC readiness. This inevitable transition to VBC will require the outsourced support of service and technology-based experts in RCM.

Another regulatory challenge within the RCM sector lies in the demand for price transparency. As discussed in CAS’ Q4 2020 Newsletter, the Transparency in Coverage rule requires plans to provide members with real-time access to relevant patient pricing information via online self-service tools, including in-network rates, out-of-network charges and allowed amounts, and prescription drug pricing effective January 1, 2021. This prioritization of price transparency, while optimal for consumers, puts financial pressure on hospital pricing and presents logistical challenges. As of Q1 2021, months after the rule went into effect, nearly two thirds of the largest hospitals are still not complying due to resource constraints associated with the pandemic. Although price transparency may ultimately save $8.7 billion to $26.6 billion annually in hospital spending, the transition is costly and comes at a particularly challenging time for health systems.

Other key regulatory updates within the RCM sector include the progress made by many states to institute permanent telehealth reimbursement legislation, as well as Biden’s appointments of some key officials including HHS Secretary Xavier Becerra, known for heavy involvement in challenging major hospital mergers and acquisitions and anticompetitive practices leading to higher healthcare costs. See here for more information on Biden’s healthcare team.

Technological automation across all steps of the revenue cycle have surged in automation rates this quarter. From telehealth, to claims automation, to patient engagement, digitization of all processes is only resulting in substantial savings for hospitals but is deemed by many as crucial for survival in 2021. 2020 was among the most challenging years for coding and medical billing staff. Just as physicians revolutionized healthcare, those involved in RCM innovated strategies to support clinical transformations on the administrative side of healthcare. This involved the digital revamping of EHR, practice management, claims management, scheduling, and patient monitoring, leading to an estimated $122 billion in savings, with $3 billion in annual savings still to be tapped in the move from manual RCM. Q1 also saw the growth of strategic health IT partnerships between health systems and IT vendors, a trend that is projected to continue as we enter Q2. Whether systems are developed internally or outsourced, the digitization of the revenue cycle is on track to become a leading driver of growth within the healthcare industry.

As the U.S. healthcare system enters the “Future of Health,” enabled by political, technological, and consumer-based drivers of change, RCM is well-positioned to grow in the era of substantial and lasting transformation.

Continue to the full RCM insights here.

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