Tag: Revenue Cycle Management

Economic Oasis: How Revenue Cycle Management is Emerging as an Investment Beacon | Blog

Amid healthcare providers’ ongoing struggles with Revenue Cycle Management (RCM) inefficiencies, a new wave of outsourcing is emerging, centered around value and technology-driven solutions like AI and analytics. This surge in demand is propelling significant growth in RCM operations outsourcing, presenting an attractive opportunity for investors and Private Equity (PE) firms and underscoring its potential for high returns in an economically turbulent environment. Explore the driving factors behind this trend and strategies for investors to capitalize on this burgeoning growth for optimal benefits. Reach out to discuss this topic.

Despite the economic uncertainty, the RCM operations outsourcing market has poised itself as a growth star, increasing at a compound annual growth rate (CAGR) of more than 12% from 2021-23.

New sourcing deals requiring providers to support multiple areas have continued to increase, driven by healthcare providers’ long-standing challenges of lower revenue collection, higher denials, and suboptimal patient experience. These issues have reduced margins and escalated providers’ workloads.

Research indicates that nearly 50% of providers witnessed an overall increase in denials in 2023 compared to the previous year, while patient collections sharply dropped to 47.8% in 2022 and 2023 from 54.8% in 2021.

Recognizing this pressure to optimize revenues, hospitals increasingly turn to RCM vendors that offer expertise to streamline administrative processes and help healthcare providers achieve much-needed financial stability while improving patient experience.

While multiple drivers beyond labor shortages are pushing providers to outsource, a few factors stand out. These include regulatory the push toward digital transformation of operations, enhancing patient experience and value-based care, and aligning with changing regulations as illustrated below:

Changing regulations

  1. Regulatory push due to interoperability measures: Healthcare providers are increasingly turning to digital solutions to manage revenue cycles effectively while investing in interoperable systems. SC Health System recently invested $40M in Epic EHR Platform to enhance interoperability. Outsourcing to specialized vendors with compliance and digital solutions expertise enables healthcare providers to leverage advanced technology beyond their internal capabilities, increasing efficiency and financial performance
  2. Thinning hospital margins: While hospitals have witnessed slight top-line improvements due to pent-up demand, the squeezed margins resulting from excessive administrative spending still require strong cost optimization strategies to improve RCM efficiency
  3. Focus on patient experience and value-based care: The healthcare industry’s shift to value-based care prioritizes quality outcomes and patient experience. RCM vendors can play a crucial role by optimizing billing processes, minimizing errors, and enhancing patient communication. RCM providers can contribute directly to improved patient experiences and support providers in the value-based reimbursement mode
  4. End-to-end integration through AI/analytics: Hospitals with sizeable investments in legacy technologies are prioritizing platform-based end-to-end integration encompassing AI and analytics to futureproof their systems against regulatory, cybersecurity, or other shocks

Driven by these factors, RCM outsourcing has matured into second-generation deals focused on value creation through advanced analytics/AI, support for platform integration, and data-led transformation, coupled with strong domain expertise.

Shift of the RCM outsourcing market towards second-generation deals focused on advanced analytics, AI, and transformation

Shift of RCM outsourcing

Seeing the marketplace potential, firms started investing in the RCM ecosystem over the past few years, and the market is now ripe for a fresh wave of capital infusion.

Is RCM the next big thing? PE investors think so

In 2022, private equity firms took a significant interest in revenue cycle management companies, with RCM companies involved in 21 private equity deals – 18 add-ons and three buyouts.

The following three factors are driving this surge in PE interest:

  1. Stable revenues amid economic uncertainty: Due to the factors discussed above, the healthcare industry’s accelerating trend towards RCM outsourcing has resulted in the emergence of fast-growing RCM vendors. For private equity firms seeking predictable returns, especially with economic fluctuation, these vendors with recurring billing models and stable revenue streams have been a key area of interest
  2. Increasing leverage of digital tools to drive margin profiles: RCM vendors are actively investing in technologies like artificial intelligence, robotic process automation (RPA), and advanced analytics. These innovations streamline operations, reduce costs, and improve efficiency, ultimately enhancing profitability margins. R1 RCM’s acquisition of Cloudmed in 2022 to advance its revenue intelligence and automation capabilities is one of many examples. PE firms recognize the potential of these tech investments to drive maximum profits in shorter periods
  3. Consolidation opportunities: With a fragmented market ecosystem and many companies with specialized capabilities operating independently, the race to become an end-to-end vendor is real. PE firms see the potential to acquire and merge these companies to create powerhouse vendors with broader service offerings and a larger client base, promising rapid growth and scalability. An example is Veritas Capital consolidating Coronis Health and MiraMed Global Services to create a multi-specialty RCM platform providing end-to-end technology-enabled solutions to diverse clients across the US

Below is a recap of some of the private equity activity in RCM from late 2023 through this year:

With RCM vendors accelerating toward advanced technologies like automation, advanced analytics, and AI, the adoption of cutting-edge technology will likely increase further. The potential of these digital elements in RCM processes is highlighted below:

Future potential of tech

Generative AI’s potential to unlock new revenue streams

Generative AI (gen AI) can disrupt the RCM industry and impact existing business models despite its nascent enterprise adoption. Investors remain interested in this segment even with the potential risks.

Investors and service providers should prioritize and plan portfolio updates in emerging opportunities like prompt engineering services, gen AI model training, and data contextualization. This will help future-proof their offerings portfolio and identify high-value use cases to deliver better services to clients from the existing RCM portfolio.

What key factors should investors consider for an RCM asset?

This influx of investments in the RCM space presents investors with numerous opportunities to kickstart their asset hunt. While a ripe opportunity, they must strategically approach investing in RCM. Beyond the financial and talent profile, investors should assess the following:

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Let’s take a look at the major players involved in RCM operations and platforms:

Everest Group Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment 2023

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Everest Group Revenue Cycle Management (RCM) Platforms PEAK Matrix® Assessment 2023

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The RCM industry is on the cusp of transformation as vendors push boundaries to differentiate themselves in a largely fragmented market. While this provides a ray of hope to all stakeholders, waiting and watching how the market progresses in the next couple of years is essential.

To discuss the Revenue Cycle Management outsourcing market, contact Abhishek AK, Ankur Verma, and Ishita Aggarwal.

See the RCM Platforms PEAK Matrix® Assessment 2023 and the Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment 2023 to see market trends for RCM platforms and the RCM platform providers in the market.

Revenue Cycle Management (RCM) Platforms PEAK Matrix® Assessment 2023

Revenue Cycle Management (RCM) Platforms

Revenue Cycle Management (RCM) platforms automate financial processes in the healthcare industry. These platforms optimize the revenue cycle, from patient registration and appointment scheduling to the final bill payment. Healthcare organizations are increasingly evaluating RCM platform providers based on the functionalities, features, and technical support they provide. Solutions such as patient engagement, denial management, and medical coding are in demand as healthcare providers are expected to continue prioritizing solutions that not only address current challenges but also provide flexibility for future developments in the healthcare landscape.

Revenue Cycle Management

What is in this PEAK Matrix® Report

In this research, we assess 20 RCM platform providers on the RCM Platforms PEAK Matrix®. The study will enable buyers to choose best-fit providers based on their sourcing considerations, while providers will be able to benchmark their performance against the competition.
 

In this report, we:

  • Evaluate market trends for RCM platforms
  • Assess 20 RCM platform providers on capability- and market success-related parameters
  • Analyze enterprise sourcing considerations, highlighting the strengths and limitations of each RCM platform provider 

Scope

  • Industry: healthcare
  • Geography: US
  • The assessment is based on Everest Group’s annual RFI process for calendar year 2023, interactions with leading RCM platform providers, client reference checks, and an ongoing analysis of the RCM platforms market

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Economic Oasis: How Revenue Cycle Management is Emerging as an Investment Beacon

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What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment 2023

Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment

2022 was a tumultuous year for the US healthcare provider landscape. With patient volumes still below pre-pandemic levels, an increase in the average length of stay, severe talent shortages, and escalating costs, nearly half of the hospitals in the country faced negative margins. As healthcare providers face mounting revenue pressures, they are prioritizing the futureproofing of their revenue cycle operations. To overcome the current challenges, healthcare providers are seeking the support of third-party providers to optimize and streamline their revenue cycle processes.

RCM Peak

What is in this PEAK Matrix® Report

In this report, we assess 31 providers featured on the Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment 2023. Each profile offers a comprehensive picture of the provider’s service focus through a snapshot of its key strengths and limitations.

In this report, we examine:

  • The RCM Operations PEAK Matrix® Assessment 2023
  • Key insights into PEAK Matrix® dimensions
  • The RCM BPS provider landscape
  • Providers’ capabilities and market shares
  • Providers’ key strengths and limitations

Scope:

  • Industry: healthcare
  • Geography: global
  • Service: RCM Business Process Services (BPS)
  • The assessment is based on Everest Group’s annual RFI process for the calendar year 2023, interactions with leading RCM providers, client reference checks, and an ongoing analysis of the RCM services market

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Payment Integrity Solutions
PEAK Matrix®

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Revenue Cycle Management
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Revenue Cycle Management (RCM) Platforms PEAK Matrix® Assessment 2023

Patient Engagement Platforms
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What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Revenue Cycle Management RCM Operations PEAK Matrix® Assessment 2022

Top Revenue Cycle Management RCM Operations Services

The COVID-19 pandemic added to the financial burden of healthcare providers as footfall reduced and elective surgeries were postponed. Today, although volumes are steadily reaching pre-pandemic levels, healthcare providers are facing strong headwinds due to an unprecedented talent shortage.

The surge in talent demand has intensified financial pressures on providers as they battle to match soaring wages and retain talent. Healthcare providers are overhauling their strategies and future-proofing their operations by becoming more receptive to outsourcing operations to alleviate cost pressures and ensure business continuity. Healthcare providers are also adopting technologies such as automation and analytics to reduce their dependency on talent and streamline operations.

DOWNLOAD THE FULL REPORT: Revenue Cycle Management (RCM) Operations PEAK Matrix® Assessment 2022

What is in this PEAK Matrix® Report:

  • A relative positioning of the providers on Everest Group’s PEAK Matrix® for RCM Operations

  • An analysis of the providers’ capabilities and market shares

  • Everest Group’s analysis of the providers’ strengths and limitations

In this research, we present a detailed view of 31 Revenue Cycle Management (RCM) operations service providers featured on the RCM Operations PEAK Matrix®. We provide a relative positioning and analysis of the providers’ market shares and our evaluation of their strengths and limitations. The study will enable healthcare providers to identify suitable partners to transform their business processes.

LEARN MORE ABOUT RCM OPERATIONS Providers

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Blog

Economic Oasis: How Revenue Cycle Management is Emerging as an Investment Beacon

An Example of Outcome based Pricing in Revenue Cycle Management
Market Insights™

An Example of Outcome-based Pricing in Revenue Cycle Management

Revenue Cycle Management Trailblazers FINAL
Market Insights™

Revenue Cycle Management Trailblazers

The Next Era of Sales Marketing Customer Success Functions Revenue Operations 1
Market Insights™

The Next Era of Sales, Marketing, & Customer Success Functions: Revenue Operations

What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Increased Deal Activity in Revenue Cycle Management (RCM): What is the Winning Formula? | Blog

Health systems are increasingly seeking competitive proposals post-pandemic to outsource Revenue Cycle Management (RCM) and get the best prices and innovation in contracts. Learn what enterprises want and how providers can win these RFPs. 

Why has outsourcing gained traction in the Revenue Cycle Management (RCM) market?

The hospital revenue cycle process was not immune to the many changes COVID-19 brought to the US healthcare provider ecosystem, causing health systems to significantly shift operations to survive.

Challenges such as financial pressure, regulatory changes, the quality care and patient experience focus, and digital penetration pushed health systems – who traditionally prefer to keep operations in-house – to look outside for support. This drove more than 10% year-over-year growth in sourcing in the RCM market in 2021, and the strong contracting activity continues to gain traction this year.

Several health systems, including MarinHealth, Baptist Health, SSM Health, and Bassett Healthcare, have entered into outsourcing agreements with third-party vendors. However, unlike most past arrangements when sole-source was the dominant sourcing model, RFP-led sourcing is now the preferred model for healthcare providers in the post-pandemic world.

Exhibit 1: Split of new Revenue Cycle Management (RCM) services deals in 2021 – sole-sourced versus RFP-led

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Source: Everest Group’s coverage of 32 major RCM services outsourcing providers

Why do healthcare providers prefer RFPs?

Key factors driving health systems towards a competitive route over sole-sourced are:

  1. Unlike the pre-COVID era, when outsourcing was, typically, limited to a revenue cycle function or segment, the new deals coming in the Revenue Cycle Management (RCM) market are broad-based and many times encompass the end-to-end revenue cycle needs of healthcare providers. Given the size and scale of such deals, healthcare providers prefer the competitive route to get the best possible deal
  2. While cost used to be the primary decision-making driver, health systems are now emphasizing deal aspects such as innovative pricing (wanting third-party providers to have skin in the game) and offering diversified delivery network, innovation pool commitment, and compatibility with existing infrastructure, including experience of working with platforms such as Epic
  3. With hundreds of outsourcing providers in the RCM market, health systems know they can shop around to get the best deal

Key decision-making parameters for health systems in a competitive bid

Healthcare provider enterprises are looking for service providers who can provide end-to-end services covering the entire gamut of Revenue Cycle Management (RCM), rather than discrete, siloed services.

From a decision-making perspective, below are some of the key parameters that enterprises look for when selecting a potential service provider, along with their relative importance rated on a scale of 1 to 10:

Exhibit 2: Level of importance of key buyer decision-making parameters for outsourcing Revenue Cycle Management (2021)

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Source: Everest Group’s coverage of major Revenue Cycle Management (RCM) providing enterprises

Service providers need to pay special attention to how they position themselves effectively in the extremely competitive RCM market. The two main levers determining a winning proposal are:

  1. High-quality, well-structured proposals that demonstrate a deep understanding of the client’s needs
  2. Commercial proposals that are well aligned with the client’s budget and offer flexible payment terms

 

As competitive RFPs rise in the RCM market, providers who can create a differentiated value proposition and align their strategies with the enterprise’s vision will succeed in securing these lucrative deals.

To discuss Revenue Cycle Management (RCM) reach out to us at [email protected], [email protected], or contact us.

Learn more about RCM operations in the healthcare industry in our video, Revenue Cycle Management RCM Operations – Emerging Opportunities & Strategies.

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