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Revenue Cycle Massage, Anyone?

Philip Betbeze, for HealthLeaders Media, April 21, 2008

In very few, if any, other businesses do we hear so much about the “revenue cycle.” Maximizing the revenue cycle. Transforming the revenue cycle. Massaging the revenue cycle?

Maybe not. But all I know from the amount of noise on the matter is that the revenue cycle is darn important. You CFOs know that too.

I had a lot of trouble when I first started covering healthcare figuring out why the “revenue cycle” held such an exalted place in the business (judged from the incessant marketing about it in trade shows) when in other businesses, it was so prosaic that it didn’t even have a sexy and exotic name like revenue cycle. Revenue and expense or profit and loss seemed to cover things.

But in healthcare, those two words are all I hear about some days. What do they even mean? Accounts payable and accounts receivable do the trick of describing what you’re talking about just fine, but don’t cover it in healthcare. Collect the money you’re owed (as quickly as possible) and pay the money you owe (as slowly as possible) and you have a thriving business. Not so in healthcare.

In healthcare, it’s complicated. You know, third-party payment system and all that. Rare is the day that I don’t get a pitch (or six) from some consultant or company that claims their clients, which are usually hospitals, have realized huge gains from “transformation of the revenue cycle.” The message I get loud and clear is that getting paid what you’re owed for providing healthcare is complicated, and you—CFOs, directors of finance, and other leaders in the department that brings the money into hospitals—need help.

I have no problem with that. Revenue cycle companies and consultants pay the freight for much of this magazine and many of the sponsored ads you see on the finance pillar of HealthLeaders Media. And sometimes their results are impressive. Many of these companies boast sophisticated computer programs that are easy to use. Many of them can lend you an excellent consultant (or group of consultants, if necessary) who work on engagements for short or long terms, helping hospitals train new employees and retrain old ones on how to bring in the cash your institution is owed for goods and services rendered.

But why is it so complicated? Isn’t a lot of money wasted in administration? Absolutely. Between 15% and 30%, depending on whom you believe, of the healthcare dollar is spent on often-redundant administration of payment from payers to providers.

Many are calling for reform of the payment system so that both government and commercial payers pay based on a continuum of care rather than for individual procedures. It’s an interesting idea that has lots of moving parts that could fail and derail the whole machine. But if it ever comes to pass, it will be great for the simplification of payment and for a lot of other, health-related reasons—which, after all, is why we’re all here, right?

It might not be so great for the revenue cycle industry. In the meantime, anyone for a revenue cycle massage?

I didn’t think so.


Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.

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