Management Tool Contributes to More Collected Revenue, Higher Sales Prices

Revenue Cycle Management (RCM) is hitting the radar screen at the nation’s best-managed clinical laboratories. That’s because shrinking reimbursement makes it imperative for clinical labs and pathology groups to collect every dollar legally due for the lab testing services they provide. RCM is a proven management tool for reducing unpaid claims and unlocking more productivity in the coding/billing/collections process.

“Revenue Cycle Management for laboratories encompasses all the administrative and management functions that contribute to the capture, and collection of revenue associated with lab testing services,” observed Lale White, CEO of Xifin, Inc. of San Diego, California. White has been an acknowledged national expert in laboratory coding, billing, and collections for more than two decades.

Revenue Cycle Management

Revenue Cycle Management

“What makes RCM a hot management area among laboratories today is recognition that increased attention to the Accounts Receivables of the laboratory quickly translates into more collected revenue,” continued White. “The return on investment for RCM projects is almost always substantial—even for well-run laboratories and pathology groups.

White was quick to add another overlooked benefit to Revenue Cycle Management. “For clinical laboratory companies and hospital lab outreach programs that want to increase their value, RCM is a the untapped source of revenues,” she declared. “In particular, when lab owners and pathologists are considering selling their laboratory, RCM is a simple, rapid way to increase the sales price of the lab, based on its increased top line revenue and value to the buyer.”

In recent years, three laboratory companies used RCM to boost their value and sales price prior to a sale to a prominent buyer. In 2004, US Labs (Google Finance) of Irvine, California, was acquired by Laboratory Corporation of America (NYSE:LH). During the two years prior to the sale, the executive team at US LABS used Revenue Cycle Management to increased collected revenue. In turn, this additional revenue played a role in increasing the value of the lab when it did sell.

Two years later, in 2006, Westcliff Medical Laboratories of Newport Beach, California, was purchased by an investment group that included Parthenon Capital of San Francisco, California. Westcliff’s owner stated that revenue cycle management projects in his laboratory not only contributed to increased revenue, but produced improved documentation and a detailed audit trail for the billing and collections process. All of these elements were recognized by the buyer and played a significant role in closing the sale.

In mid-2009, Piedmont Medical Laboratory of Winchester, Virginia, was acquired by Sonic Healthcare, Ltd. (SYD:SHL). RCM was used at Piedmont to increase cash recovery by 10% while reducing days sales outstanding (DSO) by a significant amount. As in the case of Westcliff Medical Labs, the buyer of Piedmont Medical Laboratory had confidence in the financial performance of the lab it was buying because of the improved documentation and audit trail that was part of the RCM program.

To help pathologists and clinical laboratory managers understand revenue cycle management and how to best apply these principles, Dark Daily is making available a free download of its definitive White Paper “A CEO’s Guide to Increasing Laboratory Valuation: Effective Revenue Cycle and Compliance Management are Critical Success Factors.”

This valuable White Paper explicitly details what RCM is and what it is not. Significantly, the White Paper provides a detailed perspective of how to increase valuation by managing the entire revenue cycle. It explains how to consistently analyze revenue processes, tools and workflows from the front-end to the back-end. The paper carefully lays out step by step instruction for lab executives looking to maximize the efficiency and adaptability all three of these factors in order to generate the greatest net return.

In an era of ever-dwindling reimbursement for laboratory testing services, effective use of revenue cycle management is a trump card that lab executives and pathologists can play to optimize the financial performance of their clinical laboratory or pathology group. RCM can unlock additional revenue while delivering productivity savings across all the money management functions in the laboratory.

Related Information:

Download the Dark Daily’s White Paper “A CEO’s Guide to Increasing Laboratory Valuation: Effective Revenue Cycle and Compliance Management are Critical Success Factors”

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