medSR Develops and Implements Future State Roadmaps to Improve P.E. Firms’ Portfolio Performance

Over the last several years, we have witnessed an increase in consolidation in the healthcare industry. The consolidation has occurred across the multiple spectrums of providers, from acute facilities to ASCs to specialty care physician groups. Several factors influencing the consolidation include the desire to increase market share, improve operational efficiency, and drive down the cost of service. Private Equity (PE) funding and purchasing has been a driver in the consolidation movement.

The increase in market share under a single brand banner provides actual and perceived benefits in patient acquisition and improved patient experience. The consolidation allows for increased spending on marketing and branding of services. The patient’s experience has improved with the new entity’s standardization of office design and operational protocols. As patients are referred across multidisciplinary providers, they benefit from securing care within related entities. Expansion of the brand helps diminish revenue leakage, keeping revenue within the organization. From the PE perspective, the consolidation and increase in market share improve negotiating leverage when developing new reimbursement rates with insurance carriers.

Improving operational performance and ultimately reducing the cost of service are financial imperatives within a PE environment. The ability to measure and project the performance improvement opportunity should begin as part of the due diligence process. A detailed operational assessment must be performed, covering all service delivery components and Revenue Cycle Management. The Revenue Cycle Assessment helps the PE purchaser better understand the “day in the life of” a patient encounter. Based on the type of entity under review, the assessment should include such functions as scheduling, arrival, data validation, charge capture, coding, billing, and denial mitigation. A detailed review helps identify revenue generation opportunities, which can lead to cash flow gains. Are there barriers to scheduling patients, and is capacity not being optimized? Are all services performed being charged and coded appropriately, impacting reimbursement from insurance carriers? Does the entity perform root cause analysis on payer denials? Are there backlogs in claim follow-up or providing payers’ requested documentation, all of which can lead to denials and revenue reduction due to timely filing limitations? medSR, through its Revenue Cycle Management Practice, performs the critical steps of an operational assessment which include; interviews, observations, and analytical test work. The assessment helps define operational improvement and revenue generation opportunities. medSR has helped develop and implement future state roadmaps to help achieve performance improvement.

Reducing the cost of service and improving margins can often be realized through the consolidation of functions between like kinds of entities within the PE portfolio. medSR provides project/change management expertise to help organizations plan and implement consolidations in operations. Operational performance improvement and cost reduction are often realized through consolidation, especially in back-office support functions like Business Office Management. Developing a Central Business Organization (CBO) allows for retaining top talent and support staff. medSR also provides partial or full outsourcing functionality either on-shore or off-shore through our employed staffing operations. Standardized processes and using performance metrics help improve cash flow and reduce lost revenue. From the PE perspective, the single CBO model provides a single point of accountability in managing and providing results for the organization. The size of a CBO would support the purchase and use of new-age technology that would be cost-prohibitive to a single entity. The centralization of multiple entities and the increase in volumes could help in vendor negotiations. Significant cost savings have been realized from early-out vendors and collection services with increases in potential volumes. Alternatively, PE firms have realized that back-end operations are not a core competency of the service providers and have increasingly looked at outsourcing arrangements to support the entities in the portfolio. The use of an outsourcing vendor has many merits, including; minimal capital expenditure, flexibility to scale services and staffing based on volume, resident subject matter experts who know how to run effective support services, and costs structured based on performance.