The Role of Revenue Cycle Management in Supporting Health System Laboratory Standardization and Centralization

Over the years health systems have gone through cycles of selling off their outreach labs for quick financial gains, only to re-establish them in later years to meet the immediate needs of the health system. This trend is shifting as hospital systems and hospital executives are realizing the value outreach labs have to both the cost structure and quality performance of their overall organization.

There are two points of view when it comes to outreach labs:

1. One view is that outreach labs are simply a cost center and the revenue they drive is a negligible amount compared to the revenue of the health system.
2. The second view, which is growing in popularity, is that outreach labs have the ability to reduce overall healthcare costs, open new revenue opportunities, and increase efficiency and quality through lab centers of excellence while directly supporting patient outcomes, patient engagement, and physician loyalty initiatives.

As a result, many health system executives are considering centralizing and standardizing their lab operations. For example, Modern Healthcare reported last year that Ascension CEO Anthony Tersigni indicated that by the end of 2019, Ascension will shift its work to its central lab, with efficiency noted as a primary driver of that consolidation, as well as the possibility of offering contract services to other providers as a new revenue channel.¹

Mr. Anthony Tersigni’s strategy and vision are further championed by Dr. James Crawford, senior vice president and executive director of laboratory services at Northwell Health. Northwell Health, along with four other progressive organizations (namely Geisinger Health, Kaiser Permanente-Northern California, Henry Ford Health, and TriCore Reference Laboratories), have come together to create and help drive the new frontiers that will define the future economic valuation and placement of laboratory diagnostic services in American healthcare – through a program called Project Santa Fe. Dr. Crawford within a Dark Report article pointed out that recognizing the value of the outreach lab to the rest of the health system must be driven by the decision makers of the health system.²

Once the health system leadership sets the strategy for centralization and standardization, it is imperative to think through all of the operational implications. One such consideration is whether your revenue cycle management (RCM) system is sophisticated enough to provide the data and analytical information that supports your plan. Many outreach laboratories are still using the hospital’s RCM system. With patient registration and health or medical record systems at their core, these systems don’t have the logic or workflow required to collect all the reimbursements that the outreach labs are working, resulting in a lack of visibility to test level revenue and volume, information essential to optimizing a centralized reference lab.

As well, there are regulatory and compliance risks associated with not having the right logic or employing clerical team members who are not aware of lab-specific rules and regulations. In short, by not using a lab-specific RCM, outreach labs leave money on the table and suffer from higher costs and lower efficiencies. This is only compounded when consolidating regional or hospital-affiliated outreach labs into a single or small group of labs, and further multiplies lost revenue and lost margin.

RCM plays an important role in improving the efficiency and effectiveness of a health system’s outreach laboratories during and after the centralization and standardization process. In fact, as our CEO, Lâle White, and chief strategy officer, Vicki DiFrancesco, are fond of saying, it is one of the fastest routes to financial performance improvement. XiFin’s experience with more than 20 outreach lab customers bears this out.

Not only can improving a health system’s outreach laboratory’s RCM processes improve financial and operational performance, it can also help organizations successfully determine the appropriate services that can be internally referenced to a central site and those that need to be externally referenced, while navigating the increasingly complex regulatory and compliance environment, improving patient engagement, and expanding physician loyalty.

When it comes to centralization and standardization, it’s worth considering whether your current RCM system has the flexible logic that allows facility specific or company level payment gateways, bank accounts, and bank identification numbers. Does it support different brands in places like the physician and patient engagement portals and for reporting? Does it work with different banks for financial reporting and reconciliation?

Getting your health system labs standardized onto a comprehensive platform designed specifically for laboratories will facilitate your centralization goals, today and in the future. Choosing a cloud-based SaaS solution makes it easy to keep the RCM system continuously up to date, which supports your operational, financial, and compliance goals. We find that the essential capabilities for a comprehensive revenue cycle management system include:

• Visibility – Detailed operational and financial reporting and insight into which clients drive profit and which drive excess cost through errors and missing data.
• Intelligent automation – Upfront, clean, and trackable claim submissions and automated workflows for denials and appeals.
• Connectivity – Support for bidirectional data exchanges in real time and integration with other hospital systems.
• Financial integrity – Timely, accurate data enables compliant billing and business performance tracking.
• Managed Services – Automatically keep current on lab-specific industry changes, regulatory requirements, and payor payment logic edits.
• Patient and Client Engagement – Enabling providers to help patients better understand their out-of-pocket costs for tests and provide pre-payment options.
• Regulatory Compliance – Delivering a FASB, GAAP and SOX compliant and GL-ready financial package.
• Visibility into Key Business Drivers – Providing business intelligence capabilities such as data visualization and analytics to help providers better understand and make use of their data and financial information, including benchmark performance to enhance business decision-making.

Lab centralization and standardization is happening all over the healthcare industry. Hospital system outreach laboratories are no exception. To make that process as smooth and efficient as possible, your RCM strategy and capabilities play an important role. To learn more about how XiFin can support your plans, contact us.

Sources:

1. https://www.modernhealthcare.com/article/20170110/NEWS/170119971

2. https://www.darkintelligencegroup.com/the-dark-report/laboratory-management/message-to-labs-improve-outcomes-get-paid-more-money/