Revenue Cycle Management is So Popular Because Most Physicians Aren’t Business People

In a previous post, I asked the really important question: Is Revenue Cycle Management Sexy? I was amazed and impressed by the discussion that spurred out of that post. People were talking revenue cycle management details in the comments, on Twitter and even on their own blogs about how revenue cycle management is indeed sexy.

Turns out that a number of doctors wouldn’t be practicing medicine today if it weren’t for revenue cycle management companies that support these doctors. Keeping doctors in business is sexy to me. I know that the media often spins revenue cycle management as the rich (doctors) getting richer. They also love to talk about revenue cycle management companies taking such a huge chunk of a physician’s reimbursement. Let’s look at these two factors.

Are Doctors Rich?
First, it’s a little bit of a misnomer that doctors are all rich. Doctors don’t do anything to help this image since so many of them drive around in their high priced Mercedes and BMWs. There are many doctors (specialists top this list) that do make a very large amount of money. Many primary care doctors and certain specialties make much less. Don’t get me wrong. Every doctor I know is making plenty of money to live and live well. In fact, they’re making more than the average American. Although, when you look at their overhead, medical school expenses, etc you wouldn’t classify most doctors as rich.

Plus, let’s be honest for a minute. Many doctors are great at caring for patients and terrible at running their practice. Most physicians aren’t business people. There’s nothing wrong with this. In fact, some of the very best doctors are terrible business people. In these cases, many doctors turn to revenue cycle management to help them improve the business side of things. In some examples, no revenue cycle management assistance for a practice means the practice goes out of business. Hard to classify a practice that can’t collect money and goes out of business as someone that’s rich.

Revenue Cycle Management Company Fees
I’m sure if we looked across the spectrum of revenue cycle management companies, we could likely find some bad actors that are really gouging doctors more than they should because the doctor is in a vulnerable position. However, I think this is more the exception than the rule from what I’ve seen. In most cases where I see revenue cycle management in play, it’s because the practice for one reason or another couldn’t keep up with the demands required to do good revenue processing or didn’t have the expertise to do it well.

The problem is those doctors who are great business men don’t understand why their colleagues would allow a company to take a percentage of their reimbursement. What these great businessmen/doctors seem to miss is the choice that most doctors are really making when they choose to get assistance with their revenue cycle from another company.

The real choice for many doctors is whether they’re ok paying 7% of their reimbursement in return for a huge increase in how much reimbursement they actually receive. It’s just basic math really. If I can increase a doctors reimbursement more than the percentage I take, then it’s a good choice for many (definitely not all) doctors.

Could the doctor just increase the reimbursement themselves without having to pay a fee to someone else? Sure they could. In fact, many try this approach over an extended period. Then, many realize that they’re not very good at that part of the business. They realize that an outside revenue cycle management company can help them find missed claims that will now get paid. They realize that revenue cycle management companies can help those providers get paid faster.

Revenue Cycle Management and EHR
Some of the most popular EHR companies are built around this fact and offer the EHR for free or nearly free as a compliment to the core revenue cycle management. Plus, more and more EHR companies are building in some sort of revenue cycle management component. In many cases this is a good way for an EHR company to generate revenue, but for many practices it’s also a great service for them.

Of course, I’ve also heard from the many EHR vendors who don’t provide these revenue cycle management services to their providers. They usually give me an exasperated “How can doctors pay of their reimbursement to these companies?” A part of me understands this exasperation completely since I’m an entrepreneur like these EHR executives. If I were in a physician’s shoes I’d figure out the business process myself instead of giving a big chunk of my reimbursement to another company. This just ignores that many doctors can’t (or in many cases don’t want to) figure out the business process. In these cases, a percentage of their reimbursement is a better business decision.

Conclusion
The biggest challenge to revenue cycle management is doctors don’t want to admit that they need a revenue cycle management company. By doing so, they’d be admitting their not business people and that’s a really hard thing to do. Although, in many cases it is the best business decision.

Next up in my series on revenue cycle management I’ll talk more about the relationship of EHR and RCM.

About the author

John Lynn

John Lynn

John Lynn is the Founder of the HealthcareScene.com, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference, EXPO.health, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.

5 Comments

  • Doctors are scientists. They are educated in science and they practice it every day. Very few have formal business education and training… although one could learn a lot about business quickly as a physician in a solo/small practice.

  • I agree with Evan, most physicians in small practices do learn alot about business. The vast majority of them actually do their own billing etc., successfully with one or two extra employees. Although there are many of outside companies who are getting rich of managing practices’ revenue, I don’t believe most solo practices see this as an attractive option. In my experience talking with our EMR clients, most prefer to manage this aspect themselves, and wouldn’t necessarily trust someone from the outside to do so.

  • Brenna,
    The small offices more than others do often end up doing their own billing. Also, if you have a great office manager you’ll often end up doing your own billing as well. Although, when those things don’t line up, many turn for some help.

  • […] In contrast to this comment though is that I haven’t seen an uproar of people complaining about implementing an EHR and their billing going down the tubes. Does this mean that medical billing software has basically become a commodity that every EHR vendor has done to a reasonably sufficient level that no one has a problem? Or maybe we don’t hear about it much because most doctors aren’t business people. […]

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