Revenue Cycle Management: Healthcare's Next Frontier?

Quality Systems Inc. (QSI), owner of ambulatory care EHR vendor NextGen, will continue its push into the inpatient and revenue-cycle-management (RCM) markets by acquiring ViaTrack Systems, a small claims clearinghouse that works with both physician practices and hospitals.

While ViaTrack has long been a NextGen preferred partner, QSI says it will continue referring clients to other clearinghouses as well. But based on remarks made by QSI CEO Steven Plochocki at a recent Oppenheimer & Co. analyst conference, it appears that ViaTrack has other attractions for NextGen.

"ViaTrack has the ability to process [claims] on the inpatient side and gives us an in-house clearinghouse capability," Plochocki pointed out. "ViaTrack is also developing new technology that will help us expand our product offering down the road."

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The ViaTrack acquisition, he made clear, is part of QSI's strategy to expand its RCM business, which now accounts for 13% of its revenue. That's second only to NextGen's physician EHRs, which generated 75% of volume. Dental products brought in 5% of revenue, and inpatient products, 7%, Plochocki said.

Plochocki told analysts that QSI expects the RCM business to grow rapidly in the near future. Already, he noted, outsourcing of billing and collection is growing because hospitals and physician groups are not very good at these non-core tasks. He expects this trend to accelerate because of healthcare reform, which will reduce reimbursement, and the advent of the ICD-10 diagnostic codeset in 2013. "Even if you do a good job of billing and collection, the process will become more complex."

Many RCM vendors offshore their services, and QSI is no exception. The company recently opened a software development facility in Bangalore, India and it plans to move some of its RCM operations to India and the Philippines, Plochocki said.

The inpatient aspect of ViaTrack's services also expands QSI's presence in the hospital market, where it already has relationships with 240 facilities. Earlier this year, QSI acquired another hospital IT vendor, CQI Solutions, which makes surgical scheduling and management software. In 2010, it bought Opus, which sells EHRs to small community hospitals. QSI combined Opus' EHR with the hospital financial systems of Sphere, which it had acquired earlier.

QSI's revenue from inpatient products in fiscal 2011, which ended March 31, was $26.7 million, a small fraction of its total volume of $353.4 million. Plochocki called this a "fast-growing" area for the company. But, while hospitals will undoubtedly continue to buy NextGen EHRs for their employed physicians, it is not easy to see how the company's inpatient systems pose a real challenge to the health information system (HIS) giants.

Vince Ciotti, a veteran health IT consultant, told InformationWeek Healthcare, "NextGen is just on a buying binge. If there's something for sale, they buy it."

In Ciotti's view, the ViaTrack acquisition won't "mean too much to a hospital." He's sure that Opus already has electronic data interchange (EDI) partners, as do other HIS vendors.

NextGen and Siemens, a major hospital system vendor, have a relationship that allows them to sell their outpatient and inpatient products together. Ciotti believes that QSI's acquisition of Opus--a Siemens competitor--might have shaken that relationship.

Meanwhile, Siemens is trying to develop a viable ambulatory-care EHR of its own, which could change the equation again. However last February, the two companies publicly renewed their alliance.

In his presentation, Plochocki emphasized that NextGen's large installed base of EHRs--3,500 medical and dental practices with 80,000 providers--will continue to be the company's biggest asset. As healthcare systems employ more doctors and acquire more outpatient facilities, he said, NextGen will grow with them.

NextGen is bullish on the market opportunities for EHRs because of the government's Meaningful Use incentive program. Its revenues have risen an average 22% annually since 2007, and its operating income has grown 17% per year over that period, Plochocki noted. And the best is yet to come, he said, because two-thirds of physicians still don't have fully functional EHRs.

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