Recovering consultant Andrew Tsang is back with another top tier analysis exploring why healthcare’s revenue cycle management bundle is currently mispriced.
Great bundles lead to great unbundling. The term “unbundling” was first coined in a 2010 Tumblr post that applied the concept to Craigslist, a patchwork homepage of loosely related categories waiting to be peeled off as specialized startups.
- AirBnB eventually took housing, Indeed took jobs, and dating apps took personals. Investors were standing by with checkbooks in hand every time.
RCM is healthcare’s Craigslist. It’s a $300B monster of about a dozen different steps that exist to process the disagreement when payors and providers can’t agree on what care is worth.
- Tsang maps these steps out in what might be our favorite visual of the year.
- RCM is practically begging to be broken into its component parts (prior auth, clinical documentation, denials), but the same investors funding the unbundling thesis are also the ones writing huge checks to fuse the wedges back together.
That’s because Craigslist isn’t linked like RCM. You don’t need a new love interest to get a new couch, and you don’t need a new couch to get a new love interest. Although it couldn’t hurt.
- With RCM, optimize coding and the patient’s bill goes up. Optimize collections and patients defer future care. Every optimization at one step ripples through the others.
Hospital execs know this. They’re not buying best-of-breed point solutions, they’re consolidating onto platforms that cover the full lifecycle, and vendors are behaving accordingly.
- Tsang argues that RCM vendors are rational actors that are being pushed to acquire nearby wedges rather than build them, and you don’t have to look much further than Waystar or Smarter Technologies to find evidence to support that.
- “The payor-provider fight is structurally dysfunctional, and that dysfunction rewards positioning over performance.”
RCM isn’t getting unbundled, it’s getting rolled up. When IT budgets get cut, CFOs pick the partner who covers enough of the arc to be worth keeping.
- The worse the market gets, the more valuable broad coverage becomes, and the RCM platform moat continues compounding. That’s the state of the RCM market.
The Takeaway
Tsang makes a compelling case that the RCM vendors that survive the next decade won’t be the ones that reduce the claims disagreement. They’ll be the ones that own the channel for it.