Navigating regulatory challenges in hospital revenue cycle: the impact on RCM teams and the path forward

The term “regulatory compliance” is often associated with its cost. However, the foundational purpose of regulations is to protect patients and ensure quality care.

Most would agree a healthcare system without regulations would be catastrophic. But provider organizations are now burdened with managing compliance under increasingly complex requirements. If they fall short, they can expect a significant impact on operations and revenue.

According to research conducted by the American Hospital Association, health systems, hospitals and post-acute care providers must comply with 629 discrete regulatory requirements across nine domains. The study also found that these providers spent close to $39 billion a year on administrative tasks to support compliance with those regulations. This equates to $1,200 in regulatory burden for every patient admission. Considering that the AMA’s review included just four federal agencies, the total regulatory burden is even greater when factoring in state and payer requirements.

Of the nine domains in an AHA review of healthcare regulations, providers dedicated two-thirds of full-time equivalents associated with regulatory compliance to supporting CMS’ Conditions of Participation (CoP) adherence and billing/coverage verification processes. That represents 63% of the total average cost of regulatory burden.

Regulatory impact on revenue cycle management (RCM) teams

Regulatory compliance associated with revenue cycle processes often focuses on payer requirements regarding medical necessity, prior authorizations, documentation, timely filing and similar tasks. RCM teams are also increasingly impacted by federal regulations affecting other aspects of their operations. The following are three areas that represent significant effort.

1. Price transparency. Since the rise of consumerism and high-deductible health plans (HDHPs), patients have taken a firmer stance on knowing the cost of services before they receive them. CMS’s original rule implementing price transparency requirements went into effect on Jan. 1, 2021, requiring hospitals to publicly post machine-readable files of rates for more than 300 “shoppable services.” Commercial payers had until July 2022 to do the same with negotiated in-network and out-of-network rates.

In January of 2024, the AHA reported that “at least 91% of hospitals” had posted files as of the end of 2023. They share research data that indicates data quality has improved and that more than half of hospitals’ posted files are “deemed complete.” However, according to research conducted by McKinsey & Co., “U.S. healthcare prices vary widely; on average, prices for the same healthcare services differ by 40% to 50% within a given U.S. metropolitan statistical area.” 

In short, price transparency is much more complicated than just posting prices. It includes nuances that can have a significant economic impact on providers, payers, patients and the healthcare system as a whole. While providers try to navigate the rule, they must find additional ways to help patients better understand their financial responsibility and make it easier for them to pay. The true cost transparency challenge resides with payer coverage determinations and out-of-pocket cost formulas.

2. Coding and documentation. Compliance with complex coding requirements presents significant risks to a provider’s revenue cycle, accounting for $36 billion in annual lost revenue, denials and fines. To be compliant, providers must ensure that “coding of diagnosis, procedures and data complies with all coding rules, laws and guidelines.” Because noncompliance falls under the “fraud and abuse” category of the American Medical Association’s Principles of CPT Coding, it is an area that receives significant scrutiny from payers and is subject to increasingly stringent government regulations.

One of the most impactful steps revenue cycle managers can take to improve coding compliance is implementing a comprehensive education program for the billing team. This can include a dedicated support team who can provide expertise and support on complex coding and billing questions. Consider that between March 2020 and March 2022 there were more than 100,000 payer requirement changes. Staying on top of these changes can be challenging, even for the most seasoned coders. Ongoing, rigorous education and industry certification are imperative.

Internal audits can also help providers maintain coding compliance. Audits can identify coding issues and problematic trends so they can be addressed proactively and process improvements can be put in place. The Medical Group Management Association says, “to design an audit, identify strategic initiatives, such as performance measures, validation of coded claims, prevalence of diseases and treatments and adherence to policies and procedures to ensure compliance.”

In addition to training and audits, automation technologies such as AI and robotic process automation (RPA) are invaluable tools for improving coding accuracy. They can perform regular analysis on charts and clinical documentation with limited human intervention. Automated triggers can be applied to processes to initiate specific actions. Once a human becomes involved, much of the work to investigate and identify a coding issue will have already been completed.

3. No Surprises Act. The No Surprises Act, which went into effect on Jan. 1, 2022, is an initiative that protects patients from being balance-billed at higher rates for emergency care or other services received from out-of-network providers in an in-network facility. For non-emergency services, it stipulates that uninsured and self-pay patients are entitled to good faith estimates of their potential final bill.

To maintain compliance, revenue cycle teams must be able to identify which patient encounters fall under the No Surprises Act so they can be processed and billed appropriately. It is vital that revenue cycle teams make extra effort to stay current on how they are expected to handle out-of-network claims.

RCM operational impact

Constantly evolving regulations add significant work to already overburdened revenue cycle teams. Many organizations still struggle with RCM personnel shortages. Maintaining adequate resources with an optimal level of expertise is a growing challenge that requires significant investment in recruiting, hiring and training.

New technologies can automate and streamline many revenue cycle processes and requirements in addition to coding. However, not all organizations can afford to implement these technologies.

The path forward

While providers cannot outsource their regulatory compliance obligations, outsourcing can be an attractive option in supporting their efforts.

Outsourcers typically have more resources to hire and retain revenue cycle experts who are familiar with how these developments can impact revenue cycle processes. Their vast resources allow them to scale as necessary. Outsourcing partners also typically have the latest technologies deeply embedded into their revenue cycle processes, benefiting both them and their clients. In this way, providers receive a faster return for their outsourcing investment.

In these challenging times, providers cannot afford the operational headaches and financial ramifications of noncompliance. We know the path forward; now it’s time to act.