Latest / Becker’s Healthcare Podcast / How Healthcare Organizations Can Strengthen Revenue Cycle Integration to Maximize the Value of Mergers and Acquisitions
Transcript
- 0:00- Hi, everyone. This is Brian Zimmerman with Becker's
- 0:02- Healthcare. Thank you so much for tuning into
- 0:04- the Becker's Healthcare podcast.
- 0:06- Today, we're gonna talk about how healthcare organizations
- 0:09- can strengthen revenue cycle integration to maximize
- 0:12- the value of mergers and acquisitions.
- 0:15- Joining me for today's discussion is Joe Davi,
- 0:17- CEO of MedMetrics.
- 0:19- Joe, thanks for being here. Hi. Thanks for
- 0:21- having me. It's a pleasure. So to to
- 0:24- start here, maybe we can, get into some
- 0:25- of your personal experience with mergers and acquisitions
- 0:28- so listeners can really get a a sense
- 0:30- of where you're coming from here, what what
- 0:31- your perspective is. Sure. Sure. I've been fortunate
- 0:35- to participate in many mergers and acquisitions over
- 0:38- the course of my career. I've been both
- 0:40- a buyer and a seller along the way.
- 0:43- I have certainly
- 0:45- been on the,
- 0:46- periphery of, a lot of the m and
- 0:48- a activity out of the provider marketplace
- 0:50- as anybody that's in the health care industry
- 0:52- is no stranger. There's been a tremendous amount
- 0:54- of consolidation
- 0:56- among providers,
- 0:57- large organizations
- 0:59- at significant scale that have come to fruition
- 1:02- over the last, ten, fifteen years, and,
- 1:05- you know, those trends, continue. We see the
- 1:08- large organizations
- 1:09- getting larger, and, you know, there's a fewer
- 1:12- number of independent organizations out in the landscape
- 1:15- today. It's just the, the economics are such
- 1:18- that it's really difficult to remain a smaller
- 1:21- independent community based provider these days, and so
- 1:24- we we expect those trends to continue.
- 1:27- Yeah. And can can you unpack those economics
- 1:30- for for for listeners just a bit? The
- 1:32- so much of the increased acquisitions, that inability
- 1:35- to to be an independent smaller organization
- 1:38- is really getting tough. Can you just sort
- 1:40- of give listeners a lay of the land
- 1:42- here in terms of the financial challenges you're
- 1:45- seeing health care leaders face?
- 1:47- Well, we're seeing some of the more sophisticated
- 1:50- organizations
- 1:51- that have achieved scale in different geographies,
- 1:54- start to deploy some of their capital
- 1:57- in areas,
- 1:58- out in the community with community based assets,
- 2:01- ASCs,
- 2:03- things that they're meeting patients where they're at
- 2:05- rather than waiting for the traditional referral patterns
- 2:09- through the ED, certain inpatient admissions. And so,
- 2:12- you know, it's a difficult dance because
- 2:15- hospital systems are large capital intensive organizations,
- 2:19- and they can't pivot away from what was
- 2:21- largely an inpatient
- 2:23- centric model
- 2:25- overnight. But because of different trends in reimbursement
- 2:28- and also
- 2:29- improvements in technology
- 2:31- and evidence based
- 2:33- care trends where people can be effectively treated
- 2:36- in an outpatient or ambulatory
- 2:38- setting today for many types of procedures
- 2:41- that historically would have required a a lengthier
- 2:44- stay in an inpatient environment. People are moving
- 2:46- more into ambulatory
- 2:48- and community based medicine
- 2:50- that is a little bit of a change
- 2:53- to the to the historical model where, you
- 2:55- know, people are getting
- 2:57- big to get big.
- 2:58- Yeah. And
- 2:59- and the reimbursement landscape is changing there too.
- 3:02- Right? The CMS is adding more procedures to
- 3:04- the list. Commercial payers are are kinda going
- 3:07- in that direction as well.
- 3:09- But as you said, this is a this
- 3:10- is a difficult dance. There's a lot of
- 3:13- a lot of moving parts here to do
- 3:14- this effectively.
- 3:15- So where from your point of view are
- 3:17- are maybe the watch out? You know, like,
- 3:19- where where are the places where
- 3:21- organizations might fall short in in the merger
- 3:24- process specifically?
- 3:26- Well, I'll touch on that. I did I
- 3:28- did wanna circle back to one of the
- 3:30- comments that you made, Brian, about some of
- 3:32- the, you know, financial challenges that, the providers
- 3:35- are facing.
- 3:36- They really are
- 3:38- struggling with a shifting landscape on a number
- 3:41- of fronts, and there's not really any easy
- 3:43- money to be had anymore.
- 3:45- And, you really have to be at the
- 3:47- top of your game from an execution
- 3:49- standpoint.
- 3:51- And you've got to stick to your knitting
- 3:53- and make sure that you are really performing
- 3:56- well in the areas that you're best positioned
- 3:58- to perform well. And so a lot of
- 4:01- folks are trying
- 4:02- to move into more specialized,
- 4:04- delivery mechanisms, and they're not trying to keep
- 4:07- up with everybody on all fronts.
- 4:10- We're seeing the places that are successful, not
- 4:12- try to get in a space race and
- 4:14- pay all things to all people.
- 4:16- And, the folks that that have a strategy
- 4:18- there are successful because
- 4:21- you have a
- 4:23- relentless,
- 4:24- inexorable
- 4:25- march towards
- 4:26- declining reimbursement
- 4:28- coupled with a landscape where labor expenses have
- 4:31- been growing faster than inflation for a number
- 4:33- of years,
- 4:35- and those trends only accelerated coming out of
- 4:37- the pandemic. One data point that we've noted
- 4:40- working with providers across the country is that
- 4:43- denial rates spark spiked markedly coming out of
- 4:46- the pandemic. And even after they've settled down
- 4:49- to a lower level, they're still about 200
- 4:51- basis points than they were pre pandemic.
- 4:54- And if you think about the payers, you
- 4:56- know, they're struggling themselves. You look at the
- 4:58- publicly traded insurers. Right? All of their margins
- 5:01- have come in. Many of them take have
- 5:02- taken a beating at Medicare Advantage and and
- 5:05- other plans that they jumped in on and
- 5:07- underestimated
- 5:08- the utilization. And so their medical loss ratios
- 5:11- have come under pressure and, you know, they've
- 5:13- passed along some of that pressure downstream to
- 5:15- the providers.
- 5:16- You couple that practical
- 5:18- environment
- 5:20- with the optics
- 5:21- where providers,
- 5:22- unfortunately,
- 5:23- don't have the dollars to spend in a
- 5:26- lobbying environment
- 5:27- similar to big pharma or the payers.
- 5:30- And it's those latter two
- 5:32- components,
- 5:33- or portions of the of the industry that
- 5:35- have really more effectively shaped
- 5:38- the public's perception,
- 5:40- on the optics. And so oftentimes,
- 5:42- large not for profit health care providers get
- 5:45- painted unfairly with a brush that they're not
- 5:48- executing efficiently.
- 5:49- There's a lot of administrative bloat.
- 5:52- There is waste, and they pass along some
- 5:56- of those inefficiencies
- 5:57- in the form of higher costs to their
- 5:59- patients. And
- 6:01- that's not true, but the court of public
- 6:03- opinion,
- 6:04- has been skewed against them because
- 6:06- those other participants in health care have have
- 6:09- a bigger pocketbook to help shape that narrative
- 6:12- on Capitol Hill and and with public opinion.
- 6:15- So it's a tough time, but we find
- 6:17- that a lot of our clients are up
- 6:19- for the challenge. They are investing aggressively in
- 6:22- their in their businesses, and they're revolutionizing
- 6:25- how they deliver care so that they can
- 6:27- be more efficient in the landscape as it
- 6:29- evolves.
- 6:30- When you think about that through the lens
- 6:32- of of M and A,
- 6:34- you know, we see
- 6:35- a lot of that activity regularly. Some organizations
- 6:39- are relatively more successful than others when it
- 6:42- comes to executing
- 6:44- on those mergers. Right? When you're going through
- 6:46- the process of evaluating the potential synergies on
- 6:50- paper,
- 6:51- there's a lot of daylight between
- 6:53- the abstract and the practical. And capturing a
- 6:56- lot of the synergies and the value that
- 6:58- people expect in an acquisition
- 7:02- really comes down to execution.
- 7:04- And the folks that that execute well
- 7:07- generally become the platforms
- 7:09- and consolidate and further their scale and dominance
- 7:12- in a given geography.
- 7:14- Yeah. And and and for those folks that
- 7:16- that become successful for those organizations that
- 7:19- get that execution component right, what are some
- 7:23- common traits characteristics,
- 7:25- either organizationally speaking or from the leaders sort
- 7:28- of helming the transition? What what stands out
- 7:31- to you from from from those organizations that
- 7:33- find success here?
- 7:35- Well, it comes down to to a number
- 7:37- of factors. I don't know that there's a
- 7:39- a single discipline that that that chunks out.
- 7:41- You know, some of them
- 7:43- are qualitative,
- 7:44- some are quantitative.
- 7:46- On the qualitative side,
- 7:48- it doesn't get as much attention,
- 7:50- but it's a very important aspect when you're
- 7:53- bringing together two different organizations
- 7:56- with
- 7:57- different cultures. Particularly, if you have the joining
- 8:00- of a faith based not for profit with
- 8:02- a secular organization, there's additional challenges. But
- 8:06- people use the term m and a.
- 8:09- It's
- 8:10- less frequently a merger of equals these days.
- 8:13- It's more of of an acquisition.
- 8:15- And
- 8:16- oftentimes,
- 8:17- a target health system or provider group
- 8:20- can feel disenfranchised
- 8:22- that they're subordinate to the acquirers, that they
- 8:24- don't have as many people in positions of
- 8:27- influence among the executive leadership.
- 8:30- When it comes to integration, page one from
- 8:32- the playbook should be about a coherent and
- 8:34- specific plan around centralization
- 8:37- of corporate functions,
- 8:39- technology being the biggest one,
- 8:41- finance,
- 8:42- human resources,
- 8:44- getting people together, capitalizing on some of the
- 8:47- synergies there as well as, you know, people
- 8:49- getting comfortable with a uniform set of processes
- 8:52- for those corporate functions or important criteria
- 8:55- and a good predictor for success for people
- 8:57- that have that as part of their playbook.
- 9:00- I appreciate you you laying out the the
- 9:02- the page one, sort of what that playbook
- 9:04- should should should look like here. What
- 9:06- we're drilling down to the revenue cycle specifically,
- 9:09- I guess, what what what should people be
- 9:11- doing to shore things up there and and
- 9:13- get get ready to to to really drive
- 9:15- success post merger?
- 9:18- Yeah. You know, that is an area that
- 9:20- can sometimes
- 9:22- not have the same level of attention and
- 9:25- focus assigned to it than other areas of
- 9:28- the integration playbook. But make no mistake, it
- 9:31- is a critical component.
- 9:33- And when you think about the cash flow
- 9:35- and the revenue stream in an organization, that
- 9:38- is the lifeblood.
- 9:39- And so people that have a disciplined approach
- 9:43- for revenue cycle management and an integration plan
- 9:46- are well served.
- 9:48- And I'll tell you by way of example,
- 9:49- I was talking with a large health system
- 9:52- just yesterday. They're a $10,000,000,000
- 9:54- health system, and they've done many, many acquisitions.
- 9:57- And they've got a pretty solid plan, a
- 9:59- great team of integration and process improvement folks.
- 10:03- But they're
- 10:04- also limited by the practical reality on the
- 10:06- ground of their targets. And, you know, they
- 10:09- acquired,
- 10:10- a health system recently that is on a
- 10:12- different platform.
- 10:14- They have many disparate functions that have not
- 10:16- been centralized.
- 10:18- And as a result, their overall
- 10:21- cost to collect for the combined organization increased
- 10:24- by about 50 basis points, which is a
- 10:27- very significant increase. And while it can be
- 10:30- temporary in nature, if there's not a good
- 10:32- plan
- 10:33- for moving on to the consolidated
- 10:36- IT platform
- 10:38- to streamlining and centralizing
- 10:40- what are disparate functions.
- 10:42- Those increased costs can hang around and create
- 10:45- a real drag on the organization's
- 10:47- financial
- 10:48- performance.
- 10:49- And so
- 10:51- they have a very developed playbook
- 10:53- around assimilation
- 10:55- of people into a shared culture.
- 10:58- They have a policy
- 11:00- of,
- 11:01- regular town halls with folks from the target
- 11:04- organization as well as from their legacy team
- 11:07- so that folks quickly
- 11:09- begin to feel that they are one group
- 11:12- working towards a common set of goals, that
- 11:15- they're celebrating the wins together,
- 11:17- that everybody feels that they're a part of
- 11:20- the team.
- 11:21- And that really
- 11:22- goes a long way towards
- 11:25- improving people's
- 11:26- psychological perspective, and and everybody is able to
- 11:29- derive a lot of psychic income from that.
- 11:31- And you get everybody's best when they feel
- 11:34- like they're all in it together, they're part
- 11:36- of the same team, and they're celebrating those
- 11:38- wins together.
- 11:39- You couple that qualitative approach
- 11:42- with a strong approach from integration
- 11:45- with project management wrapped tightly around it to
- 11:48- keep people singing from the same hymnal, if
- 11:51- you will, and executing to a codified
- 11:54- set of goals
- 11:55- with timelines and deliverables associated,
- 11:58- you've got a recipe for success.
- 12:01- Yeah. And and, yeah, you're gonna when you
- 12:02- have that buy in, that sort of synergy,
- 12:04- you're gonna be better equipped to solve maybe
- 12:07- some challenges you didn't see coming right right
- 12:09- away, right, than, like, the the specific example
- 12:11- you shared, Joe.
- 12:13- Indeed. And as it relates to some of
- 12:15- the revenue cycle functions specifically,
- 12:17- having been in this space for the better
- 12:19- part of thirty years now, what I've learned
- 12:22- is that the revenue cycle
- 12:25- is a very linear set of functions, and
- 12:27- you can solve
- 12:28- for the finite
- 12:30- set of actions that management would like
- 12:35- the team members to execute upon at every
- 12:38- step along the way.
- 12:40- And if you have a strong EMR and
- 12:43- financial system
- 12:44- like an epic, which is a workflow system,
- 12:47- it allows management to codify the set of
- 12:49- rules
- 12:51- by which they want the team members to
- 12:52- execute.
- 12:53- And so
- 12:55- you think about a series of if, then,
- 12:56- and, or statements. You can solve with technology
- 13:00- how you want people to work. And in
- 13:02- the revenue cycle,
- 13:04- the people that are most successful in our
- 13:07- experience are those
- 13:09- that create a homogenized
- 13:11- set
- 13:13- of rules around specific functions so that the
- 13:16- same things are done the same way at
- 13:19- scale and everything is centralized. You should not
- 13:22- have pockets of disparate processes
- 13:24- by way of example
- 13:26- in the patient access functions around scheduling and
- 13:29- registration.
- 13:30- The top decile performing organizations
- 13:33- are those who have
- 13:35- created a centralized
- 13:38- set of functions for each of those different
- 13:40- areas
- 13:41- according to a codified playbook,
- 13:44- and they're measuring themselves
- 13:46- regularly
- 13:47- against
- 13:48- best practice metrics.
- 13:51- Excellent. And and and wanna ask this final
- 13:54- question here. I I think it's probably a
- 13:55- rule now on the podcast where we can't
- 13:57- have a podcast guest on and not have
- 13:59- them speak about AI. So so wanna get
- 14:02- to
- 14:03- what you think about because there is there
- 14:05- does seem to be a lot of of
- 14:07- possibility here, when you when you think about
- 14:09- AI, the RCM functions, some of these RCM
- 14:12- integration pain points to really resolve those issues
- 14:15- as they come up. What are you seeing
- 14:16- there? How are you thinking about that sort
- 14:19- of AI helping helping to aid in this
- 14:21- integration process?
- 14:23- Yeah. And, you know, Brian, you used a,
- 14:26- I think, a very relevant turn of phrase,
- 14:29- AI helping.
- 14:30- And we very much view
- 14:32- AI as a
- 14:34- new
- 14:35- type of technology that
- 14:37- is gonna redefine how a lot of work
- 14:39- happens in society. You know, you had a
- 14:42- a couple of big
- 14:44- watershed
- 14:45- advances in technology
- 14:47- over the years going way back to the
- 14:49- industrial age and and the advent of the
- 14:51- combustion engine and mass manufacturing.
- 14:54- I'm not gonna take us all through all
- 14:55- those advances over the years, but, you know,
- 14:58- in my lifetime,
- 14:59- the last very significant technology development was the
- 15:02- advent of the Internet. And there was a
- 15:05- a similar today, you know, that ubiquitous feeling
- 15:08- of wherever you turn around, people are adding
- 15:10- .com to their name. And it took a
- 15:12- little bit longer
- 15:14- for a lot of the hype to become
- 15:17- reality
- 15:18- with the Internet, but it did.
- 15:20- I expect with artificial intelligence that, like many
- 15:23- things in our lives, the iterations and the
- 15:25- speed with which evolution happens, is going to
- 15:28- be geometrically faster.
- 15:30- But it doesn't change the reality,
- 15:33- in my opinion, that AI are tools,
- 15:37- and they're designed to help people be more
- 15:39- efficient. But at the end of the day,
- 15:41- it's not just the tools,
- 15:43- it's the operators
- 15:45- that together, collectively,
- 15:47- will help realize,
- 15:48- the tremendous productivity and efficiency gains that people
- 15:52- are touting. And we do think that's going
- 15:54- to become a reality.
- 15:55- But, anecdotally,
- 15:57- sometimes I'll say to people, you know, using
- 15:59- that that tool metaphor,
- 16:01- I enjoy playing golf. And I'm not very
- 16:03- good at it, but, I'm always trying to
- 16:06- find the next, you know, great product or
- 16:08- tool or putter. And I say to people,
- 16:10- you know, if Rory McIlroy gave me his
- 16:12- driver, I might hit it a little bit
- 16:14- better
- 16:15- than I hit mine, but I won't hit
- 16:16- it as good as he does. It's not
- 16:18- just the tool, it's the operator.
- 16:20- And so the subject matter expertise
- 16:23- and the
- 16:25- practical
- 16:26- know how that people have developed over the
- 16:29- course of their careers
- 16:30- will not be a wasted resource. I think
- 16:33- that
- 16:34- the technology will be a great augmenter and
- 16:37- enabler to unlock people to work at higher
- 16:40- levels of proficiency and realize their full potential
- 16:43- of productivity.
- 16:44- But we very much believe in the human
- 16:46- in the loop as a meaningful part of
- 16:49- AI
- 16:51- realizing its its potential, in the months and
- 16:53- years to come. And like everybody else, we're
- 16:56- sprinting down the path
- 16:58- of embracing machine learning and large language models.
- 17:01- And there are a lot of practical use
- 17:03- cases where we're deploying
- 17:05- that technology. And as it becomes more sophisticated,
- 17:09- we expect that some of the more nuanced
- 17:11- complex functions will lend themselves to additional automation,
- 17:15- and we're really excited about the potential there.
- 17:19- Yeah. And and speaking to your point too
- 17:20- about it,
- 17:22- all that expertise, all that all that stuff
- 17:24- is gonna be come in handy, but people
- 17:25- are gonna have to change the way they
- 17:27- work a little bit.
- 17:28- Do you do you think about that in
- 17:29- terms of I I think sometimes
- 17:32- people can get kind of,
- 17:34- addicted might be the a strong word, but
- 17:36- really into, like, those checkbox
- 17:38- tasks.
- 17:39- Like, did that, did that, did that, and
- 17:41- now it's gonna be the the task is
- 17:43- gonna be a little bit more robust,
- 17:45- bigger, more judgment. Is that a fair sort
- 17:47- of assessment,
- 17:49- in terms of of how you're thinking about
- 17:51- the use of these tools and how people
- 17:53- will use them?
- 17:54- I think it is. I've made plenty of
- 17:56- mistakes in my career, and I hope that
- 17:57- I continue to make them because,
- 17:59- if I'm not, it means that I'm not
- 18:01- challenging myself enough. And, you know, we as
- 18:04- an organization
- 18:05- lean into and embrace change. And in a
- 18:08- dynamic
- 18:09- landscape like what we have today with AI,
- 18:12- you really need to be pursuing,
- 18:14- multiple venues and applications of this technology and
- 18:18- seeing where it bears the most fruit and
- 18:20- where the tools themselves today are mature enough
- 18:23- to perform some of these functions.
- 18:26- And there's a lot of other things that
- 18:27- need to sort themselves out, which will because
- 18:30- of the laws of supply and demand. But
- 18:32- there are a lot of things where the
- 18:33- technology is capable of, but it's not really
- 18:35- cost effective as yet to have
- 18:38- the AI perform the functions maybe in lieu
- 18:40- of robotic process automation
- 18:43- or even a person. You know, token costs
- 18:45- are a real thing.
- 18:46- There's a lot of infrastructure
- 18:48- that needs yet to be developed to create
- 18:50- the bandwidth and throughput
- 18:53- and cost effectiveness
- 18:55- of, some of the technology
- 18:58- that we're excited about, but we know it's
- 18:59- going to take a little bit of time.
- 19:02- But we're very much about a
- 19:05- crawl, walk, run approach where we are sitting
- 19:09- with our operators, sitting with our clients.
- 19:12- We're identifying
- 19:13- those practical use cases that lend themselves
- 19:17- to automation
- 19:19- with the tools that exist today.
- 19:21- And we're very cognizant that it's not a
- 19:24- scenario in which you set it and forget
- 19:26- it. You know, you've gotta stay close to
- 19:28- this technology and ensure that when you deploy
- 19:31- it, that it's performing consistent with how you
- 19:34- developed, and intended it to. And there's gonna
- 19:37- be an iterative process of modifying and improving
- 19:40- the efficacy
- 19:42- of these products. And that's where, you know,
- 19:43- the people or the human in the loop,
- 19:45- if you will, come into play.
- 19:47- And I think it's, it's gonna be an
- 19:49- exciting time, and we're gonna see tremendous gains
- 19:51- in productivity and efficiency over the next twelve
- 19:54- to twenty four months.
- 19:56- And, beyond that, my crystal ball's a little
- 19:58- hazy, but,
- 19:59- I'm excited,
- 20:00- about what we have right in front of
- 20:02- us and some of the benefits that we're
- 20:04- seeing our clients deliver and that we're doing
- 20:06- in partnership with them.
- 20:08- I mean, things things are moving so fast
- 20:10- these days, Joe. I mean, total total to
- 20:12- twenty four months. I wouldn't I wouldn't push
- 20:14- you to to make any more predictions outside
- 20:16- of that one. I need to get Nostradamus
- 20:19- on the line.
- 20:20- For sure.
- 20:22- We are we are about out of time
- 20:23- here, Joe, but any quick final thoughts from
- 20:26- you for for the audience before I let
- 20:28- you go?
- 20:29- No. I just appreciate the time together with
- 20:32- you today, Brian. I enjoyed our conversation. It
- 20:34- was my pleasure to be with you. Yeah.
- 20:36- It was a it was a pleasure for
- 20:37- me as well. Thank you, Joe. I also
- 20:39- wanna thank our our podcast sponsor, MedMetrix.
- 20:42- You can tune into more podcasts from Becker's
- 20:44- Healthcare by visiting our podcast page at beckershospitalreview.com.