If you have ever taken a long drive across the Midwest in the fall, you likely caught a glimpse of a fascinating ritual that is a tip of the cap in tribute to Hiram Moore. Several combines, stacked shoulder to shoulder, crawl through a sprawling wheat field like slow moving locusts as they capture the harvest.
In 1838, Moore conceived and patented the combine, so named because it combined the jobs of the header and the thresher into one machine. While it took a few decades to catch on broadly, the combine set in motion a fundamental disruption in grain farming. Where previous manual methods required a crew of 30 men and 30 horses to harvest a couple hundred acres per season, Moore’s machine, using three men and six horses, could process 40 acres per day. Today, a single farmer driving a self-propelled tractor, complete with Wi-Fi and stereo system, can do that in an hour.
Like similar technology-driven disruptions, the combine swapped labor for capital, but in the process drove radical jumps in productivity that resulted in lower food prices for Americans even to this day. One inevitable change was that farms had get bigger to offset the capital investment in the equipment. There was increased productivity, but it required a lot of acres to make the machine pay off.
Which brings us to the first of three reasons why, today, it generally makes more sense for independent physician practices, even those with some size and scale, to outsource their revenue cycle management (RCM). It is all about the exchange of labor for capital, of the transition from a predominantly manual process to an increasingly technology-enabled one.
Not long ago, the physician billing process was a lot like wheat harvesting in the pre-combine days. We had our equivalent of the header and thresher—rudimentary tools—in the practice management system and the claims clearinghouse. Though we had started the move away from paper claims, it still took a large crew of workers, and maybe even a horse or two, to do billing. While almost all of the focus on physician automation over the last decade has been on the EMR, the technology innovations in the RCM world have quietly produced major breakthroughs.
Increasingly, the RCM process is not managed a claim at a time as it was just 10 years ago, whether on the front end by coders reviewing charts, or on the backend with billers ‘dialing for dollars’ to ask why a claim was not paid. Technology now automates many steps in the RCM process, from failing claims prior to submission so they can be corrected before they are denied, to regularly checking the status of the claim in the payer’s adjudication system.
The result is comparable to what the combine did for the farm. Despite the fact that physician reimbursement per claim is generally flat or dropping, and payers have made the RCM process more complex, the cost of billing has remained flat or declined. This is because of the productivity gains that technology provides—not as many people are needed in the process, and those who are require a higher skill set than the days of old.
But as with the combine, it takes a lot of capital to invest in the right technology, which requires an increase in acres – or in our case, claims processed – to make that investment pay off. Outsourced RCM providers are able to make the investments in both technology and people with the specialized talent to leverage the technology that even relatively large practices cannot.
This drives down cost and improves the performance of claims processing, the transaction part of the revenue cycle. That capital gain allows RCM providers to invest in two other areas that create more value for their clients. These two advantages, working denials to maximize cash flow and providing insightful data and analytics to help the practice make business decisions, will be the subjects of the two final posts in this series.