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46 CFO / FINANCE 25 Things to Know About RCM in 2017 By Brooke Murphy G rowing consumer demand for conve- nience and transparency has created new opportunities and presented sig- nificant challenges for those involved in hos- pital revenue cycle management. Here are 25 things to know about hospital RCM in 2017. 1. Under the ACA, hospitals' uncompensated care costs dropped to the lowest levels nation- ally in decades. From 2000 to 2015, national uncompensated care costs reached a high of $45.9 billion in 2012, which represented 6.1 percent of total healthcare expenses. In 2015, uncompensated care costs totaled $35.7 bil- lion, representing 4.2 percent of total expens- es — the lowest level in 26 years. 2. Several leading U.S. providers have created their own revenue cycle management arms or formed exclusive long-term contracts with RCM companies. • Conifer Health Solutions was developed initially by Dallas-based Tenet Healthcare be- fore securing a contract with Catholic Health Initiatives in 2015. • Nashville, Tenn.-based Hospital Corpora- tion of America launched Parallon Business Solutions to serve as HCA's self-owned reve- nue cycle arm. • Dignity Health in San Francisco formed a joint venture revenue cycle management com- pany with health IT provider Optum in 2013. 3. e latest numbers available show revenue cycle inefficiencies accounted for 15 percent of $2.7 trillion spent on healthcare in 2013, or about $400 billion, according to McKinsey & Company. 4. Seventy percent of providers reported it takes one month or longer on average to col- lect payment from a patient. 5. Almost two-thirds of consumers ex- pressed interest in using mobile payment systems, like Apple Pay, for healthcare bills. More than 75 percent of consumers choose to pay their household bills through online payment channels. Yet 87 percent of con- sumers said they received healthcare bills in the mail. Revenue cycle transactions and valuations 6. In 2016, revenue cycle management M&A consisted of 93 transactions worth nearly $15.7 billion. 7. Revenue cycle management deal activity increased 47 percent in 2016 over the year prior. Revenue cycle deal value increased 314 percent over the same period. 8. e highest-value deals from 2016 included Pamplona Capital's $2.75 billion acquisition of MedAssets, which closed Jan. 27, 2016, and IBM Watson's $2.6 billion purchase of Truven Health Analytics. 9. e market for revenue cycle management services providers continues to expand. Outsourcing trends 10. Black Book projected the market for out- sourced revenue cycle management services to grow at a compound annual growth rate of 26.5 percent in the next two years, reaching a market value of $9.7 billion by 2018. 11. Hospital CFOs who reported outsourcing complex medical claims to specialized ven- dors rose from 20.4 percent in 2013 to 39.8 percent in 2016. 12. Nearly 50 percent of hospital CFOs ac- knowledged outsourcing, including to off- shore firms, has become a more viable alter- native to in-house management in 2017. 13. Hospital and physician practices' prof- it margins are negatively impacted by highly manual revenue cycle processes. Sixty percent of providers and 86 percent of hospitals plan to automate time-intensive, error-prone manual backend processes by the third quarter of 2017. Patient medical debt and hospital bad debt 14. One in five (20 percent) of insured pa- tients reported experiencing difficulty afford- ing medical expenses during the past year, according to the Kaiser Family Foundation. 15. KFF reports the average annual out-of- pocket costs per worker rose almost 230 per- cent between 2006 and 2015. Patient out-of- pocket spending totaled $416 billion in 2014 and is expected to reach $608 billion by 2019. 16. Medical debt is the most common type of past-due bill for which consumers are contacted by collection agencies. About 59 percent of consumers contacted by a debt collection agency between December 2014 and March 2015 said it concerned a past-due medical payment. 17. Negative financial interactions affect pa- tients' payment behavior. A 2016 study by Con- nance found 74 percent of satisfied patients paid their medical bills in full, compared to 33 per- cent of their lesser-satisfied counterparts. 18. For insured patients, management con- sulting firm McKinsey & Company estimated the rate of bad debt is increasing at well over 30 percent each year in some hospitals. Hospital price transparency efforts 19. As consumers shoulder greater portions of their medical costs, consumers and law- makers alike have demanded action against surprise medical bills through increased price transparency and policy change. 20. Some patient advocates have pushed for increased medical price transparency to im- prove both collections and patient financial experience. Last year's Catalyst for Payment Reform and Health Care Incentives Improve- ment report graded each state according to its price transparency laws. Only three states earned "A" grades: Colorado, Maine and New Hampshire. Oregon received a "B" grade, two states — Virginia and Vermont — received "C" grades and Arkansas received a "D". e remaining 43 states earned "F" grades. Regulatory developments in the Recovery Audit Contractor program 21. e RAC program aims to correct im- proper Medicare payments by identifying and collecting over- and underpayments. Health- care providers have the option of appealing recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals admin- isters hearings concerning denied Medicare claims. Claim denials that reach the third level (of five possible levels) of the appeals process are brought before administrative law judges, who issue decisions regarding cover- age determination. 22. e number of requests at the ALJ level of appeal increased 1,222 percent from fiscal year 2009 through 2014, according the latest available numbers. As of Sept. 30, 2016, more than 650,000 appeals were pending at OMHA for adjudication. 23. Hospitals reported appealing about 45 percent of all RAC denials in the third quarter of 2016, according to American Hospital As- sociation's RACTrac survey. 24. About 60 percent of claims reviewed by RAC appeals judges were found not to have an overpayment in the third quarter of 2016. 25. A federal judge ordered HHS to clear its backlog of Medicare reimbursement appeals by the end of 2020. Specifically, he ordered the agency to cut the backlog by 30 percent by the end of 2017; 60 percent by the end of 2018; 90 percent by the end of 2019; and to completely eliminate the back- log by Dec. 31, 2020. n