How better vendor management can help improve a health system's revenue cycle

The terminology itself makes it pretty obvious: You can't have a strong revenue cycle without strong revenue. It's an elementary concept, yet many hospitals and health systems have a slippery handle on their revenue cycle due to poor vendor management. They're juggling too many outside parties, which creates needless complexity.

It also adds costs for a system. That's why, in an industry where the current hallmark is digital transformation, it pays to have strategies in place to mitigate the reliance on vendors and strengthen a system's brand. After all, traditional providers are now competing with retail outpatient services and new care models like telehealth. New approaches are needed.

Digital transformation should not involve adding more products or services that complicate a health system's vendor management responsibilities, according to Alan Nalle, chief patient officer of Patientco, which sells patient payment technologies.

Being in the payment market, of course, gives Nalle both a bias toward the tools available and insights into the challenges hospitals face for which they can either purchase products or develop software in-house to ease the data problem.

"If you look at the secular trend in the industry, managing vendors creates overhead costs,"  Nalle said. "If you look at health systems' department data and their biomeds, managing that takes a tremendous amount of time and effort. Systems have been trying to reduce the size and amount of vendors. You don't have to look very far to find systems like Epic and Cerner, where in Epic's case they're creating a lot of integration."

Any coherent approach should have, at its core, a philosophy about giving care back to patients. And the best way to do that, said Nalle, is to reduce the burden.

REPORTING AND PERFORMANCE MANAGEMENT

Simplifying vendor management within the revenue cycle is really about two things: Reporting and performance management. If a system can get a handle on reporting in particular, it can make a lot of difference in terms of rev cycle performance.

"Most health systems, if you ask them how many patient dollars came in, they have a hard time answering that," said Nalle, "because they have to look at how many came in through merchant accounts, how many came in through an online bill pay portal … and getting their hands around how many came out is difficult. "

They also must understand precisely how many bills they sent.

"It's very hard for them to have a coherent view of their actual payment performance," Nalle explained. "If you're not able to measure, it's hard to focus on it and improve it."

Without institutional focus, organizations tend to think their current financial performance is something they're cursed to live with. The reporting allows for accountability and identifies what's working and what's not working. It's about having a complete view of the picture.

It also involves trying to understand what patients want. It's a virtual cycle -- a better financial experience predictably yields more patient dollars for the system, but also yields loyalty among the patient population.

"The financial experience is intimate," said Nalle. "They're putting their hand in your wallet. More than half of Americans have received a bill they could not afford. A lot of patients have deferred care or avoided care because of their concerns out-of-pocket. (Reporting) makes for a healthier community and increases revenue because it's the payer who reimburses."

CONSUMERISM

Creating affordable options and exposing them to patients both before and after care is a solid strategy for strengthening loyalty because it addresses patients' top concerns, said Nalle. A system should make things understandable, and with affordable options.

It also pays to craft messaging in ways that the patient prefers. For example, there's been a shift in the typical healthcare office from paper to digital, but most of their outbound communications to patients are still paper-based. Some patients may prefer it that way. Increasingly, though, digital communications are gaining inroads among younger generations, and simply offering those types of communications can harden the patient-provider bond and ultimately strengthen the revenue cycle.

This mindset also keeps traditional providers competitive in an increasingly complex market landscape. Not all of a hospital's' competitors are the providers down the street. There's been a shift in recent years from inpatient to outpatient utilization. Outpatient surgical centers that specialize in noninvasive surgery are now competitors. Same with telehealth providers. There are even some virtual health entrants who are picking up on specialty services such as dermatology.

"Because so many people have high-deductible plans, there are a lot of virtual visit type of offerings," said Nalle. "That dermatologist might have been in the health system's network for referrals, but now the health system is losing that source of referral. People are seeking them out on their own. They've lost control of that local catchment area.

"When the consumer has to pay that first $1,000, we see behavior where they seek care elsewhere," he said.

Creating brand loyalty in healthcare should look more like Netflix, Nalle said. Netflix knows what its customers watch and makes recommendations based on that information; they even create content based on what they expect their audience will want, creating extra "stickiness" and retention. Consumers have been trained by non-healthcare industries to expect certain things.

"Consumers are getting these great experiences outside of healthcare, and then they seek care and they say, 'Gosh, it feels like I'm back in 1994," Nalle said.

A UNIFIED APPROACH

It's critically important for health systems to have a unified approach when it comes to payments, said Nalle. According to Patientco data, 92 percent of people opt in for e-bills, but a significant chunk will never even open that email.

Their implied preference, based on their actions, is for a paper bill, and so if a health system reviews its data and finds that retaining paper communication creates more dollars, they should do so for the sake of their revenue cycle's health.

"You can link the cause-and-effect of communication to payment," said Nalle. "The data is critically important to help deliver that better experience. It matters because consumer preferences matter."