Medical lockbox innovations in revenue cycle management can drive profitability for healthcare providers. Implementing a full revenue cycle management solution can automate inefficient manual processes, improving productivity, cash flow, and payment recovery. By integrating lockbox services with RCM solutions, banks can help providers achieve straight-through processing, reducing days in accounts receivable by over 15% and increasing annual cash flow by millions of dollars through faster payment posting and collections.

1. Medical Lockbox Innovations in
Revenue Cycle Management
Drive Profitability for Healthcare Providers
Written by:
Joe J. Gregory, VP of Marketing
Michael Manna, Business Unit Manager, HRCM
June 22, 2012

2. Introduction
Imagine an industry where:
• You are paid nothing for 17 to 25 percent of your work 1
• Your customers receive certain services without paying for them
• Federal and state governments dictate your prices
• Insurance companies delay payments intentionally
• Customers commonly hold payment for months at their discretion
Healthcare providers (HCP) don’t have to imagine this; it is the world in which they live. For
them a focus on full payment recovery has never been more important as the industry
reimbursement climate continues to grow less favorable. Since 2000, hospitals of all types
have provided more than $326 billion in uncompensated care to their patients 2 , driving
operating profit margins under 3% per Thomson Reuters. For these reasons, collecting every
dollar of revenue is vital. Revenue Cycle Management (RCM) is a proven method to drive
efficiency improvements and help providers maximize reimbursements and collections
Financial institutions have a role to play in adding value to their healthcare clients by offering
advanced cash management services via technology innovations that integrate with their
medical lockbox offerings. These RCM-oriented solutions drive operational efficiencies and
improve collection for the HCP while strengthening the relationship between the financial
institution and the HCP.
This paper will explore the current state of RCM automation, the opportunities and benefits of
RCM innovations and the expanded role of the medical lockbox.
Inefficiencies in Accounts Receivables and Cash Management
Just a decade ago, HCPs used tedious manual processes combined with good accounting
practices to carefully manage their revenue cycles as a function of accounts receivable (A/R).
Manual tasks included filing paper claims, sending and creating bills and posting payments to
patient accounts. At the business office of the provider, the back office staff had little choice but
to continue to open mail, remove checks, take them to the bank for deposit and post manually.
Banks provided rudimentary cash management and lockbox services that left essentially all data
entry to the HCP of transaction and payment data via a paper-based system.
This labor intensive model was not desirable and destined for automation. The process also did
not scale well to accommodate additional physicians, more patient visits and new payers.
1
American Medical Association, “2011 National Health Insurer Report Card”
2
American Hospital Association Uncompensated Hospital Care Cost Fact Sheet, January 2012

3. Thinning margins due to lower reimbursements increased denials, and new government
regulations created new need for highly accurate and efficient accounting practices.
As the market evolved, banks finally offered medical lockbox services with scanning of all
checks, EOBs and related paper documents and provided these images online for the HCP.
Unfortunately, the data entry needed to reconcile payments back to individual services was left
to the HCP.
RCM Evolution
The revenue cycle is operationally quite complex, consisting of many sub-processes. Does the
revenue cycle begin with a patient encounter? Filing a claim? Receiving payment? What
about the ending point of the cycle: is it when payment is received or posted? What if there is a
denial or a secondary claim filing? As these questions illustrate, providers don’t share a uniform
view of the revenue cycle.
The Healthcare Information and Management Systems Society (HIMSS) 2009 Revenue Cycle
Management Task Force illustrates the expansiveness of the RCM process. Three major
categories within the RCM process were identified in the HIMSS paper, “Revenue Cycle
Management: A Lifecycle Approach”:
1. Front-end. This category includes scheduling, patient access, pre-authorization,
insurance verification and financial counseling.
2. Middle. This consists of charge capture and clinical documentation.
3. Back-end. The processing of claims, payment posting, follow up, customer service and
collections.
As the HIMSS Task Force report states, “changes in any one of these three variables may result
in less than desirable organizational performance.” Any provider who has lost a key
administrative staff member or waited too long to replace or update some of their RCM
technology can attest to the validity the previous statement.
This paper will focus on the Back-end processes.
The RCM landscape has shifted. Most providers now receive a majority of payments
electronically, but the shrinking percentage of payments by check often are the most
cumbersome to handle, particularly when they are accompanied by paper EOBs. For providers,
reimbursement is growing more complex, with emerging regulations, unfunded government
mandates and evolving encoding and reimbursement requirements. For this reason, the
adoption of next generation RCM automation by providers is almost a matter of survival.
Much of the industry change was driven by payers trying to achieve cost savings by remitting
payments and transmitting EOBs electronically. This drove progress, but it created a new set of
problems. Not all payers converted from paper to electronic at the same time and in the same
way. In 2011, the adoption of electronic funds transfer by major health insurance companies
ranged from 25 to 95 percent with reimbursements matching major CPT codes hovering near

4. 85% for most payers. Meanwhile, the percentage of providers still receiving checks from this
same group of payers ranged from four to 100 percent 3 .
Furthermore, Practice Management System (PMS) vendors were not all at the same level of
readiness to integrate the electronic data coming from a payer. In some cases, it integrated
smoothly, but not always. In either case, providers found themselves in the position of
managing a dynamic mix of payer data and payments – some paper, some electronic. In
practical terms, this meant that realizing one promise of all this change – automatic posting –
was still not a complete reality. But it was getting closer.
Today’s Revenue Cycle
Today’s state-of-the-art RCM automation solutions provide a full, end-to-end electronic clearing
for the efficient processing of payments between the healthcare provider and the payer. This
includes identifying, matching and reconciling several complex, paper-based or electronic forms
such as claims, explanation of benefits (EOB) and other data necessary to ensure accurate,
timely, and automated posting of receivables into a provider’s PMS.
According to the Clearing House Association, the healthcare payment cycle is ten times less
efficient and more complicated than any other industry’s payment process 4 . RCM automation
that eliminates manual or paper-based processes can deliver substantial improvements to the
revenue cycle.
HCPs now agree that RCM solutions that perform complete transaction validation and posting
preparation deliver an effective strategy for achieving full payment recovery.
Revenue Cycle Management Challenges
When it comes to managing the revenue cycle, there are many chefs stirring the pot.
• Service providers – Claims clearing houses, billing companies and other third parties
who provide services critical to the revenue cycle.
• Technology vendors – The set of hardware and software vendors whose solutions help
automate the revenue cycle.
• Banks – Provide the accounts in which payments are deposited. Many banks play a
more prominent role with cash management services, like lockbox, optimized for
healthcare providers. The opportunity exists for banks to integrate lockbox services with
RCM solutions, allowing banks to be more prominent players in managing the revenue
cycle.
Inefficiencies due to lack of integration of RCM sub-processes require manual intervention
which costs a provider in both time and money. For example:
3
American Medical Association, “2011 National Health Insurer Report Card”
4
Clearing House Association, Letter to the Office of Science and Data Policy, U.S. Department of Health
and Human Services, September 10, 2010. (http://www.theclearinghouse.org/index.html?f=071012)

5. • Provider may have achieved a high rate of auto-posting but still has to manually
reconcile “mystery” payments to claims.
• Payer often sends one large payment for multiple claims, requiring staff to manually
match partial payments to claim data.
• Provider may not have an archive which can consolidate EDI and EOB into a single
repository. Research EDI files and payment information without a readable remittance
advice is highly inefficient.
Overcoming the Status Quo
There are several reasons why providers cling to the manual processes such as the ones listed
in the previous section. They include:
• Focusing on meeting the federal mandates around ICD-10.
• Working to achieve Meaningful Use rules around clinical data.
• The chief administrator rarely has the luxury of time to think strategically. Urgent matters
related to keeping a practice, clinic or hospital running and profitable consume the vast
majority of an administrator’s time.
• “If it ain’t broke, don’t fix it.” A coping strategy for a provider that serves as a
rationalization for the inability – or unwillingness – to invest time, resources or money in
things that could make a provider more efficient and save money.
• Awareness. The rapid evolution of RCM solutions leaves some providers unaware of
the full spectrum of capabilities these solutions now represent.
• Technical complexity. The lack of expertise and systems integration capabilities.
• Past experience. Many providers have “scars” from previous systems implementation or
upgrade experiences.
While understandable, rationalizing the status quo based on any of these perspectives fails to
grasp the value that current RCM solution can deliver to the HCP.
Still, the status quo may seem like the path of least resistance for a provider relying on manual
systems or outdated solutions. When it comes to RCM automation, maintaining the status quo
with its inefficiencies essentially increases the cost of doing nothing. The continued reliance on
manual systems creates inefficiencies that affect the entire industry. Payers face problems with
the administrative costs of disbursing payments, as this paper-intensive process contributes to
inefficiencies and costs of over $300 billion each year 5 .
5
Instamed, “Trends in Healthcare Payments Annual Report: 2011”

6. The Last Mile
McKinsey & Company estimated that in 2012, about 80% of the projected eight billion core US
health care transactions will be in electronic formats 6 . The remaining 20% of paper transactions
require a disproportionate amount of staff time to resolve.
Once a RCM system is in place, providers must remain diligent about eradicating remaining
inefficiencies on both paper and electronic payments. Once the initial RCM installation process
is completed, ongoing monitoring and quality of processes should continue looking for the
following examples:
• Paper EOBs which require extra conversion and processing.
• Review of reporting to verify accuracy levels of each sub-process.
• Additional overhead of denial research due to poorly presented EDI source information.
• Processes around identifying and appealing short pays.
• Handling bundled payments.
By monitoring these remaining items, approaching Straight-Through Processing (STP) levels of
efficiency throughout the Back-end revenue cycle becomes a reality. Conceptually, Straight-
Through Processing is the ability for a transaction to move from beginning to end of the revenue
cycle without manual posting; or in other words, it is frictionless.
So will STP ever be achieved in medical payments? Perhaps not, but implementing a full RCM
solution essentially delivers a “smarter” revenue cycle, where the target is more like 98%+
automation with expedited and automatic posting.
Quantifying Benefits of a Smarter Revenue Cycle
Productivity
With RCM automation, productivity means efficiency. More practically, it means that the
solution does more, and people do less. It’s not difficult to understand the value of displacing a
manual process that requires human intervention with an automated one. Some HCP’s exploit
this productivity benefit by reducing headcount. Others redeploy staff to support the collections
and receivables recovery. In other words, RCM automation doesn’t just help reduce expenses;
it contributes to driving value into the process and improving the velocity of payments
The following table estimates the productivity benefit for a provider whose staff spends a
combined total of 28 hours per day on manual RCM tasks:
6
McKinsey Quarterly, “The Next Wave of Change for US Health Care Payments”, Thomas Pellathy and
Shubham Singhal, May 2010.

7. Another aspect to the productivity benefit worth examining is the ability to scale the business
without adding administrative resources. Without a fully automated revenue cycle,
accommodating more patient visits or adding a physician usually required adding administrative
support staff. With RCM automation, this is no longer true. A barrier to growth is removed, and
that growth is more profitable. Providers find they can grow substantially without having to add
administrative staff when they have fully automated their revenue cycles.
Cash Management
Streamlining the research function is one way intelligent RCM solutions improve cash
availability. Research that involved retrieving paper, accessing multiple systems or searching
poorly indexed data was time consuming. Administrative staff has at its disposal a powerful set
of tools for finding and using all documents related to a patient encounter, claim and payment.
With this complete view of information, staff can respond to payer or patient queries more
quickly. They can also file secondary or appeal denied claims faster and more easily because
of the tools and intelligence built into RCM automation solutions to simplify these tasks.
To help illustrate the value of these advanced research capabilities, consider a case where a
payer has consistently under paid a provider for a specific procedure. The provider’s staff, after
discovering the problem, alerts the payer, who requests appropriate documentation as a
prerequisite to making full payment. Using the powerful search and analysis features of the
RCM system, all the required documents are located and prepared for submission to the payer,
even if some or all of them originally existed in paper form. The outcome is full payment
recovery for every instance of under payment.
Working secondary and denied claims is a task also simplified by RCM automation. The more
advanced solutions have denial management capability that detects errors that could trigger a
denial, as well as provides tools to help appeal and collect payment faster. In an environment
where it is not uncommon for a denied claim to require resubmission multiple times, the benefits
of denial management can singularly provide justification for investment in an RCM solution that
provides it.
The following table illustrates two important collection and cash flow considerations:
1. The impact of a system that reduces the number of claims that go unpaid:

8. 2. The impact on a provider with an average daily A/R balance of $250,000 when RCM
automation reduces the days in A/R by 15%:
Conclusion
The important thing for providers to understand is that this notion of a smarter revenue cycle is
not merely conceptual. There are still plenty of opportunities for providers to streamline their
revenue cycle and this is the perfect time to pursue it. Providers who have not yet implemented
an RCM solution as described in this paper will find the business case grows more compelling if
not imperative. Failing to implement RCM automation at the earliest opportunity defers the
benefits, literally resulting in leaving money on the table. To recap, the value to the provider
includes:
• Increasing revenue and collections without increasing employee workload
• Stopping the erosion of margins
• Visibility into remittances puts the provider, not the biller in control of the reibursement
process
• Proactively aligns a proactive business strategy with exceptional controls
• Provides practices growth opportunities with minimal downside
• Supports strategic growth initiatives such as move to ACOs
Financial institutions can now offer advanced RCM capabilities adjunct to their lockbox services
with streamlined system installation periods. Couple that with a stronger overall relationship,
RCM offered with a bank’s lockbox becomes a highly valuable commodity moving forward.