What are the “Pros & Cons” of Centralized Revenue Cycle Processing, You Ask?

Jim Matthews RCM & Healthcare Financial Management Consultant
Jim Matthews, Principal, Nearterm Corporation

Hospitals and other healthcare provider organizations that have become multi-facility entities often consider centralizing RC Processing and/or AR processing. The strategy is usually aimed at lowering operating cost, improving financial management performance and better customer service.

As a Revenue Cycle Management (RCM) consulting company, Nearterm has a lot of experience assisting clients with centralization (and decentralization) initiatives and so we could write volumes on this topic, but in lieu of that, this article offers a just few “bite sized” observations that you might find interesting.

Homogeneous vs Heterogeneous Transaction Volumes

Banking, financial services, retail industries and others have been very successful with centralized billing, payroll, collection processing. If they can do it, we can do it, right? Not so fast. Every transaction processed through their clearing houses looks the same.

A VISA charge transaction is the same (or alike) in every state and for that matter, all over the world – these are homogeneous transaction volumes. However, when two or more hospitals having different operating systems, contracts, policies and patient types consolidate, the volumes are different – they are heterogeneous.

There are technical solutions for both types of transaction volumes, but cost, lead time and maintenance of these conduits can be material to the centralization decision. If the organization does not achieve homogeneous volumes in the proposed processing environment, arguably, it has just combined things under the same roof, still functioning as before and with little or no gain of efficiency.

Benefits of Centralization

There are two critical areas where centralization of hospital revenue cycle processing offers benefits; Revenue Cycle Management (RCM) and Health Information Management (HIM) technology.

Both RCM and HIM consolidation yields budget savings that can be applied to improving compensation offerings available to build new RCM and HIM teams. You can attract stronger talent that will enable you to benefit further from their expertise across the newly centralized operation.

Impact on Internal Business Relationships & Communication

Relationship challenges are often underestimated. We are referring to the multiple relationship and accountability changes that occur when for example a hospital moves billing and collections to a centralized business office (CBO).

Ask yourself:

  • Who is responsible for AR performance?
  • If the hospital is allocated CBO expense, does it have control over CBO budget?
  • How are data collection and data entry problems that begin at patient access handled to the extent that they impact CBO performance?

Indeed, there are many more questions to resolve well ahead of the decision to centralize. Our RCM Consultants and Strategists recommend report design that clearly delineates accountabilities between entities and detailed policy statements about accountability. Drafting these and using them as compatibility “tests” prior to the decision may reveal crucial development opportunities that if addressed, promote a harmonious and successful transition.

Summary

Centralization and consolidation of revenue cycle processing can be a very effective way to meet the challenges facing provider organizations in these changing times. Many have done it successfully.

We also know that many “centralized” organizations would like to “decentralize” and would say they should never have done it in the first place. Here, the key is to have consensus about expectations, timeline and accountability, as a critical piece of the decision process, and not part of the implementation process when it would threaten the success of the transition.

The above are intended as a broad overview. Nearterm Revenue Cycle Consultants and Strategists are always ready to work with you in considering the pros and cons of centralization or decentralization, and any other Revenue Cycle initiatives under consideration.

Jim Matthews
Principal, Nearterm Corporation

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