Payment Model Reform: The Effects on Healthcare Information Technology

7/27/2019 Payment Model Reform: The Effects on Healthcare Information Technology

http://slidepdf.com/reader/full/payment-model-reform-the-effects-on-healthcare-information-technology 1/25

of 25

Payment Model Reform: The Effects on Healthcare Information Technology

Mark LucidoThe University of Texas at Dallas

HMGT 4321Mehmet Ayvaci



of 25



of 25

Table of ContentsIntroduction .................................................................................................................................................. 5

Payment Model Overview ............................................................................................................................ 5

History of Payment Models .......................................................................................................................... 7

1900-1930 ................................................................................................................................................. 7

1931-1964 ................................................................................................................................................. 8

1965-1994 ................................................................................................................................................. 8

1995-2008 ................................................................................................................................................. 9

2009 – Present ........................................................................................................................................ 10

Healthcare Reform and Effects ................................................................................................................... 11

Risk Reduction Overview ............................................................................................................................ 12

Risk Reduction by Payer Type ................................................................................................................. 13

Commercial Payers ............................................................................................................................. 13

Government Payers ............................................................................................................................ 13

Affordable Care Act ..................................................................................................................................... 14

Coverage Options .................................................................................................................................... 14

Catastrophic ........................................................................................................................................ 14

Bronze (60%) ....................................................................................................................................... 14

Silver (70%) ......................................................................................................................................... 14

Gold (80%) ........................................................................................................................................... 15

Platinum (90%) .................................................................................................................................... 15

Payment Models ..................................................................................................................................... 15

Macroeconomic Effects .......................................................................................................................... 17

Providers ............................................................................................................................................. 18

Vendors ............................................................................................................................................... 19

Healthcare Revenue Cycle .......................................................................................................................... 19

Revenue Cycle Management ...................................................................................................................... 20

Patient Access ......................................................................................................................................... 21

Patient Encounter ................................................................................................................................... 22

Billing Cycle/Payment Management ....................................................................................................... 22

A/R Management .................................................................................................................................... 23



of 25

Collections Management ........................................................................................................................ 23

Conclusion ................................................................................................................................................... 24

Works Cited ................................................................................................................................................. 25



of 25

Introduction

Since the introduction of Medicare in the mid-Sixties, healthcare costs in the United States have risen

exponentially. In the decades that followed, each subsequent legislative action brings with it the

promise of lower costs beginning with the passage of the HMO Act in the Seventies. Costs have

continued to escalate; now upwards of $3 Trillion dollars, healthcare spending comprises nearly 18% of

GDP. Now with implementation of the Affordable Care Act in full swing, the introduction of new

payment models promises to change the incentives that drive healthcare costs and place the emphasis

on quality and outcomes. These payment models will come at a price to providers however both in

terms of risk and the technology outlay to manage day-to-day operations.

Payment Model Overview

There are a variety of payment models in use today in the United States. Most models fall under one of

two categories: Retrospective, or Prospective. Retrospective payment models reimburse a provider

after services have been rendered at the provider’s prevailing rates (Casto and Layman). Payment

models that fall under this category include:

Cost based – reimburses the provider based on provider’s cost

Fee For Service – reimburses the provider based on a fee schedule or discounted fee schedule

Prospective payment models on the other hand, compensate the provider based on pre-established

rates (Casto and Layman). Payment models in this category include:

Per Diem/Per Case – compensated on a per-day flat rate or on average resource levels for a

particular diagnosis with variations for levels of severity



of 25

Value Based Purchasing (VBP)/Pay For Performance (P4P) – As the name implies, this payment

arrangement rewards providers through incentive payments based on certain predetermined

quality measures and patient outcomes. As opposed to some payment models that incent on

cost reductions, VBP/P4P incents providers to improve patient outcomes thus delivering value

for the healthcare dollar hence the name.

Episode of Care – also known as bundled payment. This compensation method remunerates a

group of providers for a single patient’s episode of care which spans the time horizon from

initial diagnosis to post-acute rehabilitation

A newer trend in healthcare reform known as Population Health is beginning to gather momentum.

Although this isn’t a payment model per se, we chose to categorize a few models that technically fall

under the Prospective Payment category, separately under Population Health for this research to

emphasize the shift away from the per-patient reimbursement methods of our past.

Under Population Health, the reimbursement rates are pre-negotiated based on a variety of variables

such as quality, cost, and average care utilization however the underlying basis for remuneration is a

group or population of insured members assigned to the provider.

Shared Savings – Bonus payments to ACO providers that incent coordination of care and cost

reduction across a population of patients and healthcare services by meeting predetermined

cost and quality measures

Capitation – a predetermined compensation amount paid to an individual provider or group of

providers based on a flat per member per month arrangement for the number of covered

members assigned to that provider



of 25

History of Payment Models

To better put these various payment models into perspective, a historical review of the issuing

legislature is important to understand. Exhibit 1 provides a graphical overview:

12/8/2003

Medicare Prescription Drug,

Improvement, and Modernization Act

3/23/2010

PPACA - Obamacare4/20/1983

S.S. Amendments of 1983

Prospective Payments1942

Stabilization Act of 1942

Employer Sponsored

Health Insurance

1965

Medicare1930

Blue Shield

1900 2050

1929

Baylor Health Plan

(Blue Cross)

Retrospective Prospective

Cost Reimbursement Fee For Service Per Diem/Per Case P4P Episode Capitation

Exhibit 1: Payment Model and Legislative Timeline

1900-1930

Prior to the 1920’s, the medical field had very low overhead based on a low technology curve and the

comparatively small amount of medical knowledge for the time. Because of these factors, a physician’s

only real cost was their time therefore payments to providers were for their cost. This changed starting

in 1929 however when Baylor Hospital in Dallas, Texas developed the first form of Hospital insurance for

Texas teachers which would become known as Blue Cross. The following year, Blue Shield plans began

to emerge and the Health Insurance market was established which would form the basis for our existing

system of misaligned incentives associated with third-party payers.



of 25

1931-1964

The next significant development in Healthcare Reimbursement came during World War II when

America was forced to make important economic tradeoff in both raw materials and labor. Specifically,

on October 2, 1942, in an attempt to curve inflationary pressures, President Franklin D. Roosevelt

enacted the Stabilization Act of 1942 which established wage price controls or wage ceilings. As is

common with most attempts of Government to intervene, the unintended consequences became what

we know and love today as Employer Sponsored Health Insurance.

As our medical knowledge and technology grew, so did a provider’s cost curve. Provider’s fee schedules

were implemented to reflect these changes and insurance companies reimbursed based on these fee

schedules or variants of them discounted however for what was usual and customary within a region.

1965-1994

The 1960’s brought about many social changes in American culture which extended into our politics and

healthcare system. On July 30, 1965, President Lyndon Johnson signed into law the Medicare bill which

would dramatically change the landscape of the American Healthcare system forever. From this point

forward, healthcare spending in the United States would grow exponentially.

The introduction of Medicare Insurance is important to note in a review of reimbursement models

because since its introduction, Medicare not only serves as the gold standard in how commercial

insurance companies reimburse providers but also the Medicare reimbursement affects Commercial

payers through Hospital cost-shifting.

When Medicare was first implemented, the system reimbursed at the prevailing Fee for Service rates. In

the years and decades that followed there would be continued legislative attempts at controlling costs

by controlling reimbursement. The first of these came on December 29, 1973 with the enactment of the



of 25

Health Maintenance Organization Act of 1973. Although this regulation didn’t directly affect the way

providers were remunerated, it is important to mention here because the HMO model of Managed Care

serves as the predecessor for our current ACO model which does have remuneration tied to it.

From a reimbursement perspective, the more important legislation to note is the Social Security

Amendments of 1983. This law became the milestone change in provider reimbursement through the

creation of the Prospective Payment system which effectively eliminated a direct Cost-Based or Fee for

Service reimbursement in exchange for one based on average costs across providers within a similar

grouping.

The other milestone event from this period that is important to mention in this research is the Health

Security Act of 1993. The proposals originally offered by the Clinton Administration never actually

passed to become law however, similar to the HMO Act of 1973, many of the elements from this reform

were used as the foundation for the Patient Protection and Affordable Care Act.

1995-2008

The 1990’s also saw another dramatic change in Healthcare with the passage of the Health Insurance

Portability and Accountability Act in 1996. As part of this act, a demonstration project was approved for

the Archer Medical Savings Account. This demonstration project however would not become

mainstream until December 8, 2003 with the enactment of The Medicare Prescription Drug,

Improvement, and Modernization Act which formalized the concept of Consumer Driven Health Care

through the creation of the Health Savings Account (HSA) (United States Congress).

As defined by the IRS, a Health Savings Account is a tax-exempt trust or custodial account that you set

up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur (U.S.

Department of the Treasury, Internal Revenue Service). Funds can be directly contributed to an HSA



of 25

either by you, on your behalf, or by your employer. Tax benefits apply provided they are used for

qualified medical expenses as outlined by the IRS. All contributions by you, on your behalf, or by your

employer are exempt from income taxes and excluded from Gross Income. Contributions are subject to

annual contribution limits to qualify for deductions. For 2013, the maximum allowable amount is $3,250

for single coverage and $6,450 for family coverage. Interest and earnings on the assets in the account

grow tax free. Funds remain in the account for future years. You own the account and account

holdings; therefore the account is portable or transferrable if you should change jobs or employers.

The importance of the HSA to Healthcare Reimbursement is that it was the first dramatic shift away

from a provider-driven consumption and a third-party-payer reimbursement system to one of patient

accountability. It places healthcare utilization in the hands of the consumer to determine their rate of

consumption through rational decision making. It also creates more risk for the provider to collect a

greater portion of their reimbursement directly from the consumer who is often stretched thin and is

not accustomed to planning ahead for catastrophic events. In addition to the Medicare Prescription

Drug, Improvement, and Modernization Act of 2003, the 2005 Deficit Reduction Act established Quality

Reporting standards that would later be built upon for Reimbursement Models adopted under the

PPACA in 2010.

2009 – Present

Fast forward our discussion now to March 23, 2010 and the passage of The Patient Protection and

Affordable Care Act (PPACA). With the exception of Medicare creation in 1965, all subsequent

legislature since has accomplished only small changes in healthcare primarily around reimbursement.

That is until The Affordable Care Act, which is a sweeping overhaul to address access, coverage and

quality of coverage and care. Additionally, there are both direct and indirect effects on provider

remuneration. Briefly postponing the indirect effects for a moment, the direct reimbursement changes



of 25

outlined in the legislature include the creation of Accountable Care Organizations, CMS’ demonstration

project for the Shared Savings Program and the goals for Value Based Purchasing and Bundled

Payments.

Healthcare Reform and Effects

Just as we’ve seen with the establishment of price controls in 1942, Government regulations usually

involve some form of unintended consequences and considering the overarching goals of the PPACA,

there are bound to be many.

The three primary goals accomplished by The Affordable Care Act are:

Improve Quality and Affordability of Coverage

Increased Access and the role of Government programs

Improved Quality of Healthcare Services

In addition to the direct reimbursement changes previously outlined, there are indirect effects on

provider remuneration through the creation of inexpensive coverage options to expand covered lives.

Many of those lives will be covered under CDHP options in the exchanges which will result in significant

upside risk for providers to collect directly from patients.



of 25

Risk Reduction Overview

Traditionally, the idea of insurance is to reduce the risk of an unexpected catastrophic event. By

collecting variable premiums from many individuals, an insurance company is able to spread that risk

across large groups of people. In our current system of reimbursement, provider remuneration comes

from one of two sources; Government Insurers or Commercial insurers who assume nearly all the risk

while the provider and patient or insured assumes very little risk. Over the years, with each change in

reimbursement, whether direct or indirect, the balance of risk is shifted away from the insurer and onto

both the provider and patient as illustrated in Exhibit 2 (Fleming, Forney W. MD, MBA).

Exhibit 2: Payment Models and Risk Transfer Over Time



of 25

Risk Reduction by Payer Type

Commercial Payers

Traditionally, Commercial payers have been able to shift the risk onto their members by increasing some

combination of their premiums, copayments, deductibles or coverage limits. With the introduction of

the Health Savings Account, an even greater portion of risk has been shifted onto patients directly

through a combination of higher first-dollar deductibles, lower coverage limits and higher premiums. As

this risk is shifted to patients, an equal amount of risk is shifted to providers in that it requires greater

administrative processing and tools to collect directly from patients. Many of the provider’s Practice

Management and Patient Accounting systems do not incorporate the necessary tools to verify coverage,

verify propensity to pay and collect payment directly from patients therefore providers must rely on

third-party vendors to provide bolt-on solutions.

Government Payers

Risk reduction for Government payers is significantly different from that of Commercial payers.

Government payers are unable to simply raise prices on consumers as their overarching goal is a fair and

equitable entitlement for all citizens. This leaves only the provider community from which to choose

whom to shift the costs to. Traditionally, this has been managed by changing the payment models and

how providers are reimbursed and with each change brings with it more risk assumed by the provider.

This trend continues with the passage of The Affordable Care Act where three new payment models will

be adopted across the industry. The legislation doesn’t stop there however. With the introduction of

the Insurance Exchanges and the five coverage options, many of the lower cost plans offered will be

Consumer Driven, high-deductible plans. A large influx of previously uninsured patients will be entering

the system who is constrained by income limitations. There is a strong probability that a substantial

portion of the plans sold through the exchanges to the newly insured will fall under CDHPs creating a



of 25

significant percentage of provider revenue that will need to be collected directly from patients who are

not accustomed to planning for catastrophic events. In addition, as has been discussed in the media

recently, many existing plans do not meet the minimum coverage requirements outlined in the PPACA

due to their low cost. Due to the popularity and low-cost nature of CDHPs, there is a high likelihood

those plans will be replaced with CDHPs further compounding the risk for providers.

Affordable Care Act

Coverage Options

There are 5 distinct health plan options offered through the Insurance Exchanges each ranging in

premium costs and coverage levels based on the actuarial value of the plan (United States Congress).

Catastrophic

Catastrophic plans are the least costly of all plans offered in the exchanges however these plans are

limited to only eligible individuals 29 and under or qualify for hardship exemptions. Plans in this level

provide coverage that is designed to provide benefits that are actuarially equivalent to less than 60

percent of the full actuarial value of the benefits provided under the plan.

Bronze (60%)

Bronze plans are the lowest premium cost of the standard plan options but the highest cost for total out

of pocket expense. Plans in this level provide coverage that is designed to provide benefits that are

actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the plan.

Silver (70%)

Silver plans are the next lowest premium cost of the standard plan options with the next highest cost for

total out of pocket expense. These plans provide coverage that is designed to provide benefits that are

actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the plan.



of 25

Gold (80%)

Gold plans are the next most costly in premiums of the standard plan options with the next lowest cost

for total out of pocket expense of all plans. These plans provide coverage that is designed to provide

benefits that are actuarially equivalent to 80 percent of the full actuarial value of the benefits provided

under the plan.

Platinum (90%)

The most costly in premiums of all plan options, however offer the lowest total cost for out of pocket

expense. Platinum plans provide coverage that is designed to provide benefits that are actuarially

equivalent to 90 percent of the full actuarial value of the benefits provided under the plan.

Payment Models

As previously mentioned, there are three distinct payment models introduced in the Affordable Care Act

that should be considered: 1) Shared Savings Program, 2) Value-Based Purchasing and 3) Bundled

Payments. Following is a closer analysis of each:

Shared Savings Program - The CMS Shared Savings Program provides incentive bonus payments

to ACOs based on their provider’s combined ability to meet predetermined cost reductions and

quality performance standards (American College of Physicians) (RTI International). While this

model attempts to realign incentives within the industry to facilitate care coordination, in order

for providers to benefit from this model a clear and solid understanding of their colleague’s

performance is important when making care coordination decisions in order to maximize

revenue potential. To participate, providers must organize under an ACO which is a group of

providers and suppliers of services that work together to coordinate care for Medicare FFS

patients. ACOs must meet all eligibility and program requirements and must serve at least

5,000 Medicare FFS patients and agree to participate for three years and cannot participate in

any other shared savings program. Standard FFS payment arrangements continue however



of 25

benchmarks are established that ACOs agree to perform against. There are 2 distinct

benchmark models: 1) One-sided in which sharing savings, but not losses for the entire term of

the first agreement and 2) two-sided model where both savings and losses for the entire term

are shared. Under both models, an ACO must meet quality standards, achieve savings and also

meet or exceed a Minimum Savings Rate. Savings are calculated based on the ACO quality

score. There are 33 quality measures across 4 domains: 1) Patient/caregiver experiences (7

measures), 2) Care coordination/patient safety (6 measures), 3) Preventive Health (8

measures), 4) At-risk populations (diabetes, hypertension, Ischemic Vascular Disease, Heart

failure, Coronary Artery Disease). Quality measures will be reported through a combination of

CMS claims and administrative data, the ACO GPRO web interface for clinical quality measure

reporting, and patient experience of care surveys.

Value-based Purchasing – Hospital providers who participate in the VBP incentive program will

receive bonus incentive payments for delivering quality of care to Medicare patients. For

participation in the program, providers must agree to an annual reduction in base operating

DRGs, as illustrated in Exhibit 3, in order to fund the incentive payments (Centers for Medicare

and Medicaid Services). To determine payment, hospitals will be measured on two domains, 1)

Clinical Process of Care and 2) Patient Experience of care starting with a benchmarking period

followed by subsequent performance periods. To measure hospital providers, CMS will use a

combination of claims data and thirteen Clinical Process of Care measures which were selected

from Hospital Inpatient Quality Reporting Program for Fiscal Year 2013.

FY 2013 FY 2014 FY 2015 FY 2016 FY 2017Subsequent

Years

DRG %

Reduction 1.00% 1.25% 1.50% 1.75% 2.00% 2.00%

Exhibit 3: Base Operating DRG Reduction Percentages



of 25

Bundled Payments – According to the CMS website, there are four models being tested for

Bundled Payments (Centers for Medicare and Medicaid Services). They vary in nature from

retrospective based to prospective based. Model 1 emphasizes the Acute Inpatient setting

with a discounted prospective rate during the inpatient stay and separate payments to

individual physicians. Providers are permitted to share gains under certain circumstances

however. Model 2 has a retrospective basis that reconciles the hospital’s costs against a target

price for the particular episode of care. A single bundled payment is issued for the entire

episode of care based on up to 48 different clinical conditions selected by participants. Model

3 emphasizes the post-acute episode of care and is triggered by an acute care discharge. A

singled bundled payment is issued for the entire rehabilitation period based on up to 48

different clinical conditions selected by participants. Model 4 is a bundled payment that

applies to all services furnished during the entire episode for an inpatient stay only. All

physicians must submit zero dollar claims and will subsequently be paid by the hospital from

the bundled payment based on up to 48 different clinical conditions selected by the

participants.

Macroeconomic Effects

In order to understand what technology is affected by new payment models, one must first understand

the macroeconomic impacts. Patients will assume new risks of higher prices; however they will have

little influence over the technology other than the sheer increase in patient volumes coming from

increased access. Therefore in our research we only considered the impact to certain groups such as to

Providers and the impacts to software Vendors.



of 25

Providers

Providers are the most impacted by payment model reform for many reasons. First, they are assuming

new risks of payment based on patient populations with little previous experience in actuarially

calculating that risk. There will soon be demand to develop solutions that assist with these actuarial

calculations. Secondly, providers are assuming more financial risk associated with a change in their

payer mix; a greater portion of their revenue is coming now from patients as opposed to third-party

payers. Stronger processes and solutions will be needed to reduce this risk through upfront eligibility

and verification checking in addition to propensity to pay, upfront patient collections and payment plan

solutions. Thirdly, when sharing revenue with multiple providers, a portion of that revenue is at risk

based on the performance of other providers whom you have no control over. Solutions in the clinical

setting will be needed to help identify and match high-performing providers/specialists in close

proximity to the patients they serve when referring patients. Next, there is the risk associated with the

technological constraints of these new models. Providers are increasingly becoming reliant on the

vendor community to offer solutions to the new models which will require a thorough understanding of

quality reporting and the types of data, mostly clinical in nature, needed to facilitate reimbursement

while much of that is unknown. Also there are currently Contract Management systems that are not

built to support these new contract types. Contract Management enables a provider to not only store

the providers contracts from the various commercial payers, but also model what if scenarios as they

approach contract renegotiations. These systems will have to be modified. Lastly, there has been a

significant trend over the last few years to acquire and consolidate among providers. Physician practices

have been consolidating while others have been acquired by hospitals to form larger ACOs. Each

acquisition or consolidation brings with it the technical challenge of integration and interoperability.

Solutions of all type will be needed to reduce this integration curve.



of 25

Vendors

As a result of the shifts in payment models, vendors too have been affected indirectly for many of the

same reasons providers have. First, due to the bolt-on nature of the industry, many of the solutions are

fragmented, not only across the revenue cycle but also between physicians and hospitals. There are

many vendors who specialize serving the hospital market and others who specialize serving the

physician market. As provider acquisitions and consolidations continue, this is creating an environment

where some vendors are becoming disintermediated forcing them to make defensive moves into other

verticals (vertical integration) or acquire and consolidate amongst themselves forcing solution

integration. In both cases, this serves as a detractor from innovation and organic growth in solutions at

a time when innovation and integration are both at a premium.

Healthcare Revenue Cycle

Considering most healthcare IT investments emphasize the billing process, the industry has created

specific acronyms and terminology to describe this and communicate effectively. As illustrated in

Exhibit 4, the Healthcare Revenue Cycle describes the cyclical process surrounding reimbursement for a

patient encounter (Lucido, Mark). Since provider reimbursement and payment models are the core

focus of reform, it is appropriate to understand the Revenue Cycle and Revenue Cycle Management to

understand what systems are affected.

The process often begins prior to a patient’s arrival, also called Patient Access, proceeds with the patient

encounter and treatment, is followed by the billing cycle and concludes with payment and Accounts

Receivables management.



of 25

Exhibit 4: The Healthcare Revenue Cycle

The Revenue Cycle is mostly similar between a physician’s practice and a hospital however there are

slight differences when comparing the two. For example, in the physician’s practice, these tasks are

consolidated across a select few individuals and handled within the four walls of the practice. In larger

multi-physician/multi-office practices and hospitals, these tasks are often departmentalized due to the

volume of patients and greater risk of revenue leakage.

Revenue Cycle Management

Administrative software in the healthcare environment is still predominantly a series of bolt-on

solutions to the core Practice Management or Health Information System. Bolt-on solutions solve for

specific niche problems and because of this, a more horizontal view of the Revenue Cycle, as illustrated



of 25

in Exhibit 5, is necessary which allows Healthcare Administrators to consider each segment more

granularly which subsequently enables deeper workflow analysis (Lucido, Mark).

Exhibit 5: Hospital Revenue Cycle Management

Patient Access

Patient Access is the provider’s process of Patient Intake which also includes pre-intake activities.

Although these processes vary slightly between provider types, for the most part they are similar.

Scheduling and pre-registration/pre-arrival tasks emphasize scheduling, benefit verification and pre-

authorization while registration and check-in serve as a stop-gap for any missed activities in scheduling

and pre-registration. As a patient is admitted or checked-in to an office, there might be a few patient

collection activities or establishment of a payment plan. This vertical is a high area of impact for

payment reform.



of 25

Patient Encounter

More recently because of healthcare reform, healthcare administrators are considering clinical tasks

within the provider’s revenue cycle primarily in order to share clinical information which is becoming a

required interdependency to making more sophisticated reimbursement decisions. This vertical is a

medium to high area of impact for payment reform for several reasons. First, new quality reporting

standards are required which is dependent on information generated during the patient encounter.

Secondly, there is a greater need to share this information across the revenue cycle creating a strong

demand for integration and new ways to use this information.

Billing Cycle/Payment Management

The most fragmented and sophisticated of the revenue cycle segments in terms of bolt-on solutions, the

billing cycle encompasses all tasks associated with coding, claims processing, claim validation and

payment tracking and can often include 7 or more different vendors servicing a single provider type.

The process begins with charge entry and validates correct coding with ancillary solutions that audit

coding practices to ensure revenue maximization. Once a patient encounter has been coded, a claim is

often dropped from the appropriate patient accounting system and scrubbed with HIPAA and payer

edits to ensure a high acceptance and first-pass payment by the payer. Once a claim has been

submitted, automated processes routinely check the payment status and retrieve payment information

to automatically post into the patient accounting system. More recently, comparative analytics is

becoming more important to understand a provider’s performance against their peers of equivalent

characteristics. Considering the solutions in this vertical are all developed to service a Fee For Service

payment model and the trend is to move away from Fee For Service, this vertical is highly impacted by

payment reform.



of 25

A/R Management

The A/R Management segment of a provider’s revenue cycle is most prominent in large physician’s

offices and hospitals where greater revenue leakage is at risk and departmentalization is necessary to

reduce that risk. Most notably, provider types of this magnitude incorporate contract management

solutions into their revenue cycle so they can evaluate upcoming contract renegotiations and

underpayment against the contract. Denials Management is also an important component for this

segment to identify claims that require correction and resubmittal for reclamation of reimbursements

that are rightfully owed the provider. When these solutions are not integrated into a provider’s

revenue cycle, a greater portion of revenue is written off from receivables. Contract Management

solutions are highly impacted by payment reform and will need to be redesigned to service new

population health based payment models.

Collections Management

The last segment in the revenue cycle, Collections Management emphasizes the billing, collections and

write-off process after remuneration from all responsible insurance companies. Patient direct billing

usually involves frequent communications that are automated and timed throughout the revenue cycle.

This implies a tightly integrated set of solutions to coordinate letters and statements, especially when a

commitment to pay has been secured by the patient and a payment plan has been established. If a

provider does not maintain sufficient staffing for internal collections, outsourcing to a third-party

collections vendor is required which further demands integration externally with the vendor. Lastly, if a

payment commitment cannot be secured from a patient, an automated and thorough write-off and

charity process is necessary. This vertical is a medium to high area of impact for payment reform as

there will be greater demand for charity screening to avoid fraud, and providers will emphasize a more

efficient and stringent post-encounter patient communications and collection process.



of 25

Conclusion

Over the last decade, the Healthcare IT field has seen a host of unlikely players entering the Revenue

Cycle segment. In 2007, MedAssets, a leader in Group Purchasing, began its expansion with the

acquisition of XactiMed for Claims Processing and later Accuro, a leader in Contract Management

solutions. In 2008, Experian, a leader in Consumer Credit Scoring, acquired SearchAmerica, a leader in

Healthcare Skip Tracing followed by its acquisition of Medical Present Value for Revenue Cycle

Management solutions in 2011 and most recently the acquisition of Passport Healthcare an even more

significant leader in Revenue Cycle Patient Access and Clearinghouse solutions. In 2011, Trizetto, a

leader in payer membership and claim adjudication systems, acquired Gateway EDI followed by its

acquisition of ClaimLogic in 2012 expanding its footprint into the Provider Revenue Cycle market. These

are just a few of the most substantial consolidations occurring in the industry to address not only

payment reform but more importantly innovative ways to consolidate a provider’s workflow processes

for gains in efficiency, economies of scale and cash flow.

While consolidation creates a strong competitive environment among vendors, the benefits to providers

are substantial. Our Healthcare system may be the most expensive in the world and is fraught with

waste, fraud and abuse resulting in low quality and outcomes. Payment reform addresses many of

these problems, but at the expense of the provider. Ultimately, Providers in the end maintain the

knowledge and skills required to treat, comfort and cure. If we remove all profit and marginalize the

provider, there remains no incentive to practice medicine.



Works CitedAmerican College of Physicians. "Accountable Care Organizations (ACOs)." n.d. PDF. 12 2013.

<http://www.acponline.org/advocacy/where_we_stand/assets/aco.pdf>.

Casto, Anne B. and Elizabeth Layman. Principals of Healthcare Reimbursement . Chicago: AmericanHealth Information Management Associations, 2006. Web.

Centers for Medicare and Medicaid Services. "Bundled Payments for Care Improvement (BPCI) Initiative:

General Information." Centers for Medicare and Medicaid Services, 2013. Web Page. 7 12 2013.

<http://innovation.cms.gov/initiatives/bundled-payments/>.

—. "Frequently Asked Questions: Hospital Value-Based Purchasing Program." 2012. PDF. 7 12 2013.

<http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-

value-based-purchasing/Downloads/FY-2013-Program-Frequently-Asked-Questions-about-

Hospital-VBP-3-9-12.pdf>.

Fleming, Forney W. MD, MBA. "The American Healthcare System: Healthcare Payment Reform."

Richardson: University of Texas at Dallas, 2012.

Lucido, Mark. "Hospital Revenue Cycle Management." Richardson: Availity, LLC, 2012.

RTI International. "Accountable Care Organization 2013 ." Baltimore: Centers for Medicare and Medicaid

Services, 2012. PDF.

U.S. Department of the Treasury, Internal Revenue Service. "Health Savings Accounts and Other Tax-

Favored Health Plans." IRS Publication 969. Washington: GPO, 2011.

<http://www.irs.gov/pub/irs-pdf/p969.pdf >.

United States Congress. "Medicare Prescription Drug, Improvement, and Modernization Act of 2003."

United States Public Law . Washington: GPO, 2003. <http://www.gpo.gov/fdsys/pkg/PLAW-

108publ173/pdf/PLAW-108publ173.pdf>.

—. "Patient Protection and Affordable Care Act." United States Public Law . Washington: GPO, 2010.

Payment Model Reform: The Effects on Healthcare Information Technology

Documents

Transcript of Payment Model Reform: The Effects on Healthcare Information Technology