Decentralized Operations: How MSOs Can Centralize the Revenue Cycle

You probably remember that, in 2014, the Veterans Health Administration faced a major scandal over excessive wait times for medical appointments. An internal VA audit found that over 120,000 veterans waited for months or years or never got the care they needed. The VA ended up paying nearly $200 million for nearly 1,000 veterans' wrongful deaths. 

Partially underlying the VA’s operational breakdown was decentralized operations. Variations in processes and technology were rampant. This decentralized approach led to inefficiencies, missed revenue opportunities, and difficulties in standardizing best practices across the system. 

To address these issues, the VA embarked on a comprehensive transformation of all operations, including revenue cycle management (RCM). The duplicate and inefficient RCM processes occurring over each of the organization's 170 medical centers were depleting the organization of critical revenue.

Facing intense criticism, the organization consolidated and centralized all operations and revenue cycle approaches into just seven regional patient account centers. This shift involved developing a standardized model for revenue cycle activities that could be replicated across all centers in each region. The VA also implemented new technology solutions, including an updated electronic health record (EHR) system, to support RCM. 

Over time, the VA’s centralization of revenue cycle operations not only shored up their reputation, it led to: 

• 36% increase in collections
• 68% increase in standardization in key RCM process areas
• 113% increase in inpatient insurance verification and authorization review

Here, we cover the differences between centralized and decentralized RCM operations. Since we just shared a case study of the benefits of centralization, you’ve probably already guessed that, particularly for MSOs, we’re fans of centralization. Use this article to build out and back up your RCM centralization decisions and processes. 

What are decentralized operations in healthcare RCM? 

Decentralized RCM operations are a revenue cycle management approach where individual entities within a healthcare system maintain separate billing and revenue cycle processes. In this model, different departments, facilities, or practices within an organization retain control over their own RCM functions rather than consolidating them under a centralized system.

This decentralized approach allows for more flexibility and customization at the local level. Each entity can tailor its RCM processes to its specific needs and historical practices. While decentralization enables more autonomy, it can present challenges in coordination, standardization, and achieving economies of scale. 

When decentralized operations work

Decentralized healthcare operations may be appropriate or the best choice in the following circumstances:

 When addressing local population needs 

Decentralization gives individual health organizations the flexibility to address specific local population needs and health priorities. Specificity allows for customization of care. Further, for countries or regions with significant geographic diversity, decentralization can help expand the reach of health services beyond large cities to diverse rural areas.

When fast decision-making is key 

Decentralized structures can increase the speed of decision-making because local leaders can avoid bureaucracy layers. In regions with climate catastrophes or high emergency usage, decentralization allows leadership to be nimble and quick. 

In situations requiring innovation and flexibility

Decentralized systems can respond more quickly to sudden changes in the market and avoid some bureaucratic inefficiencies.

During public health emergencies

As seen during the COVID-19 pandemic, decentralized clinical trials and healthcare delivery became necessary to meet increasing patient demand for digital health services.

Despite these use cases, it's important to note that the effectiveness of decentralization depends on various contextual factors, including institutional capacity, mechanisms of accountability, and the specific design of the decentralization process. It can take a combination of elements of both centralization and decentralization to build the most efficient systems that also meet community needs.

Risks of decentralized operations

Threats to alignment

The business manager from the MSO looking to establish some control over RCM processes may face the practice or physician group leader who’s accustomed to dealing with these tasks themselves. With decentralization, finding the optimal level of delegation and coordination can be difficult, potentially undermining the effectiveness or efficiency of the organization.

As we discuss at length in Medical Practice Integration: A Guide for MSOs, one of the first tasks the business manager must tackle is establishing a shared vision and goals for the practice or physician group in its incarnation as an MSO asset. Everyone needs to line up behind this vision. Upon acquisition, you must communicate that the practice will become part of a larger system rather than remaining an independent entity. Otherwise, there’s a risk that different units or levels of the organization may pursue their own interests or agendas rather than the overall strategic objectives of the partnership. Practice and physician group leadership must make final decisions that benefit both the practice and the MSO. 

Increased costs

Decentralization can lead to duplication of efforts and resources across different units, potentially increasing overall costs.

Organizational silos

When teams or units become isolated from the overall business plan, focusing on their own objectives to the detriment of the organization as a whole, the MSO takes a hit.

Information fragmentation

In a decentralized RCM system, information, analytics, and knowledge may be fragmented, incomplete, or inaccessible by the system leader or MSO business manager. Unreliable data leads to poor decisions, duplication of efforts, or missed opportunities. The more data, the better the analyses. 

Inconsistency

Without proper RCM guidelines and guidance from a central authority, decentralized teams might make decisions that conflict with the company's core strategy or change the fundamental offer to customers.

Capacity issues

Decentralized, local managers may not have sufficient capacity or training to take on new roles and responsibilities, potentially leading to poor management of services.

Inequality in resource allocation

 In some cases, poorer local units may not be able to raise necessary revenues, resulting in inadequate allocation of funds for essential services.

These risks highlight the importance of careful planning and management when implementing decentralized operations to maximize benefits while mitigating potential drawbacks.

What are centralized RCM operations? 

Centralized revenue cycle operations refer to a consolidated approach to managing the financial processes of all entities within an MSO’s portfolio. In this model, all revenue cycle functions - from patient registration and insurance verification to billing, collections, and reporting - are consolidated into a single, unified system operated with the same technology for each RCM task. These tasks are typically managed from a central location. 

As we discuss in EMR Integration after Acquisitions: A Guide for MSOs, MSOs must insist that every new practice shift to their EMR. We’ve seen that MSOs introduce more robust EMRs than what the provider was limping along with. More discerning MSO business managers select comprehensive EMRs that extend beyond basic functionalities to support complex clinical, administrative, and financial requirements.  On the provider side, despite some initial hesitancy, clinicians and staff appreciate working with state-of-the-art systems that can improve their practice management and patient care capabilities.

A centralized approach aims to streamline workflows, reduce redundancies, and improve overall efficiency across the revenue cycle. By bringing together disparate processes and teams under one umbrella, healthcare organizations can standardize best practices, leverage economies of scale, and gain better visibility into their financial performance. Centralization often involves implementing common technology platforms, establishing uniform policies and procedures, and creating centralized teams of specialists to handle various aspects of the revenue cycle. This model can lead to improved accuracy in billing and coding, faster claims processing, reduced denials, and ultimately, enhanced revenue capture and cash flow for the healthcare organization.

Further, centralization helps to unlock the goldmine of patient data and clinical outcomes. In Healthcare Data Integration of Multiple PM Systems, we cover how it takes data to achieve the convenience, loyalty, and health outcomes patients today expect. MSOs that locate and integrate data sources, hammer out system interoperability, and centralize data for robust analysis stand to reap clinical, financial, administrative, and reputational benefits.

When Intermountain Healthcare integrated clinical, financial, and operational data from across its health system, it achieved a 21% drop in heart failure readmissions and $30 million in annual savings via an optimized supply chain. 

Benefits of centralized operations

The appeal of centralized RCM operations helps MSOs get past the barriers to integration. They look forward to: 

Improved efficiency 

Centralization reduces duplication of effort and streamlines workflows across departments. The standardization of processes creates consistent best practices across the organization. It also enables more efficient use of staff and other resources across the organization.

Cost reduction

 Centralizing administrative and management functions creates economies of scale, lowering operational costs.

Enhanced financial performance

Centralization can increase revenue capture, reduce accounts receivable days, and improve cash flow management.

Better data analytics and reporting

 Centralized systems provide comprehensive insights for informed decision-making and performance optimization.

Improved compliance 

Centralization helps ensure adherence to regulatory requirements and billing regulations.

Enhanced patient experience

A unified approach to billing and financial communication can improve patient satisfaction.

Reduced errors

Centralized processes and automation minimize manual errors in coding, billing, and claims submission.

Faster reimbursements

 Streamlined processes can accelerate claims processing and payment collection.

Improved coordination

 Centralization facilitates better communication between departments and with payers and patients.

Better flexibility to scale

Centralized RCM can more easily accommodate the growth and expansion of healthcare organizations.

Enhanced talent acquisition and retention

Centralization can attract stronger talent by offering improved compensation and career development opportunities.

Keep in mind that all of these potential benefits depend on the specific MSO, the healthcare provider's needs, and how well the partnership is managed.

Centralizing all operations is MSO Job #1

Decentralized and centralized operations for the healthcare revenue cycle both have advantages and disadvantages. For MSOs, however, the best approach is centralization.

Significant challenges to healthcare industry revenue have driven the consolidation of physician groups, often under the umbrella of management services organizations. Most healthcare thought leaders see this trend continuing through 2025. MSOs most important task is achieving operational excellence.  

When MSOs handle the operations and administration,  healthcare providers can focus on their primary mission: delivering high-quality patient care in a healthcare landscape growing ever more complex. In an environment ravaged by inflation, payer bullying, and increased governmental regulations, healthcare organizations must optimize their revenue cycles via centralization. 

How to centralize RCM operations

MSOs can centralize their revenue cycle management (RCM) operations with these steps. We admit: 20 is a lot of steps, but we’ve broken them down into self-contained, limited tasks. Delegate to your own and the provider's staff. 

1. Implement a centralized organizational structure with clear roles and responsibilities for each team member.

2. Develop standardized processes and best practices across all departments and locations.

3. Consolidate billing and coding processes to ensure accurate and timely claim submissions.

4. Integrate technology systems to ensure data accuracy and integrity across the organization.

5. Establish a unified patient financial experience, including consolidated billing statements.

6. Centralize vendor management to optimize performance and reduce costs.

7. Create a single, centralized revenue cycle leadership team overseeing both hospital and physician enterprises.

8. Implement common metrics and performance standards across all revenue cycle functions.

9. Develop support services for performance management, data analytics, and training.

10. Leverage automation and AI applications to enhance efficiency in areas like time entry, client billing, and patient scheduling.

11. Build out operational playbooks to streamline processes and reduce administrative burden on staff.

12. Focus on same-store growth and operational efficiency to maximize existing resources.

13. Form strategic partnerships and consider outsourcing non-core functions to control costs during growth phases.

14. Develop an integrations playbook to create standards and consolidate key functions across multiple locations.

15. Transition to cloud-based systems for easier data access and consolidation, while ensuring proper security measures.

16. Implement robust data analytics capabilities to monitor key metrics and drive performance improvements.

17. Establish clear communication channels and protocols across the organization.

18. Provide comprehensive training and support to ensure staff understand their roles in the centralized model.

19. Regularly assess and optimize the revenue cycle processes to adapt to changing healthcare landscapes.

20. Focus on building a culture that prioritizes enterprise success over local preferences.

Of course, centralizing RCM operations is a comprehensive process that requires a strategy. Throughout this transformation, it's vital to focus on change management, providing comprehensive training, and fostering a culture that prioritizes enterprise success. By following these steps, MSOs can create an overall RCM system that can effectively respond to the evolving healthcare landscape while improving financial performance and patient satisfaction.

Raising the prospect of RCM operations centralization pre-acquisition 

 When promoting RCM centralization during the provider evaluation or acquisition process, it's crucial to convince your target that centralization is the best option.

Impress upon them that the efficiencies achieved through centralization will help the organization improve its use of modern technology, including automation and AI in RCM. Specific technologies like AI-driven claims processing, automated billing systems, and advanced data analytics tools are essential in supporting centralization efforts. These technologies can help consolidate disparate systems across multiple practices or locations, although this process may present challenges. The benefits, however, often outweigh the difficulties.

Share that you’re well aware that you will take careful steps to navigate and execute cultural alignment and change management in healthcare – both critical components of successful RCM centralization. It's essential to develop strategies for managing resistance to change and gain buy-in from stakeholders across the organization. Building a culture that prioritizes enterprise success over local preferences is crucial in a centralized model. Approaches for training and supporting staff through the transition to centralized RCM operations should be tailored to address staff’s specific concerns.

Convince the acquisition that you’ll be monitoring cost-savings and improved revenue via monitoring of RCM performance metrics so you can demonstrate the advantages of a centralized RCM model. Using data-driven insights to continuously optimize RCM processes and drive performance improvements ensures that the centralized model remains effective and adapts to changing needs over time.

Finally, as providers are laser-focused on patient outcomes and satisfaction, bringing up patient experience and financial engagement should not be overlooked. A centralized RCM can significantly fuel a unified, patient-centered approach. Potential benefits of centralization for patient billing, communication, and financial counseling include more consistent and clear financial information for patients across all touchpoints.

Contract management: a key aspect of centralization operations for the healthcare revenue cycle

In the great healthcare digital transformation happening now, efficiency is a top priority. That means the centralization of healthcare RCM systems. Investors, buyers, patients, and staff want streamlined, clear billing and collections. All of these features are achieved more easily via operational centralization.

A key aspect of conducting the business of healthcare is proactive contract management. As an MSO, you're likely to be dealing with multiple entities, each of which juggles a dozen or more payer contracts. Many MSOs today are finding the advantages in centralizing all agreements via one contract management solution that evaluates payer performance via analytics and automates many contract tasks.

MD Clarity's RevFind offers powerful automation capabilities to help MSOs maximize their revenue potential. By centralizing all payer contracts in one place, RevFind enables MSOs to conduct a comprehensive analysis of payment data against contracted terms across their entire provider network. The system automatically flags any discrepancies between actual payments received and expected reimbursements based on contract stipulations for all managed practices. With these underpayments revealed, MSOs can notify payers and start the process of recouping earned revenue. By automating the tedious process of manually reviewing payments against contract terms, RevFind frees up MSO executive time and improves overall productivity across the organization.

The system simplifies contract comparison and benchmarking, allowing MSOs to easily assess how reimbursement rates for their managed practices stack up against industry standards like Medicare. This data-driven approach empowers MSOs to engage in more strategic and assertive payer negotiations on behalf of their entire provider network.

Schedule a demo to see how RevFind can simplify and optimize your contract management and modeling processes. 

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