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Allscripts said it will launch a revenue cycle management (RCM) service for physician practices.

Allscripts' RCM Services will use third-party billing companies to provide billing, coding, and collection functions. But it will not target small practices, as some of its competitors do with their RCM services. Instead, Allscripts is going after the increasing number of large organizations that are outsourcing their RCM operations.

In the past, both small and large physician groups--but rarely, medium-sized practices with 25 to 75 physicians--have used billing services and EHR vendors for RCM, according to Ed Wrzesinski, director of RCM services for Allscripts. But today, big practices see more reason to outsource revenue generation, partly because of the increasing complexity of coding and the advent of accountable care organizations.

In addition, he noted that hospitals are acquiring physician practices with multiple practice management (PM) systems, creating a logistical nightmare. "You can spend a lot for software licenses and use a lot of resources to do conversions and move everybody onto a unified platform," he said. "Or you can outsource it with no capital expense for hardware or software and pay as you go. And we're seeing a lot of interest in this option."

Up to now, Allscripts has licensed its software to about 250 billing services that primarily serve small practices. The company is creating what it calls the "alliance network" to support and cull out those services. It's also changing its revenue model, charging the billing firms on a per-provider subscription basis for the RCM applications and its Payerpath clearinghouse. Without the upfront cost of software licenses, Allscripts hopes more billing firms will use its RCM technology.

When Allscripts sells a PM system or an integrated electronic health record (EHR)/PM system to a small practice, it can usually refer that practice to a billing firm if the doctors want to outsource their billing. The service hosts Allscripts' PM system and installs client software in the practice that allows its staff to view their accounts. If they have an EHR, it can generate charges directly to the PM system at the billing service.

But larger organizations such as hospital systems may not want to use these small billing services for their ambulatory practices, Wrzesinski said. So Allscripts is targeting these organizations with a billing network consisting of six "direct providers" that will use special technology to handle all aspects of RCM for them. Although Wrzesinski declined to name the firms, he said they're good-sized companies. Four of them, he said, are ready to take on contracts.

"They're doing implementation, user training, and support, and they're hosting the database and providing other services. We're supplying the technology and sharing the revenue with our direct partners," he said.

With billing services charging from 5% to 8% of collections, RCM revenues can be very sizable, and Allscripts clearly aims to get more of that pie by sharing it with the "direct" billing companies. Nor is it the only major vendor in this market: NextGen, which caters mostly to medium-sized and large practices, also has an RCM service.

"The vendors look at that billing service business, and they say, 'there's a lot of money there. If we take 5% of collections, we're going to get rich,'" said Bruce Kleaveland, a health IT consultant based in Seattle.

Until now, the EHR vendors providing these kinds of services--such as e-MDs, Greenway, and athenahealth--focused mostly on the small-practice market. In an interview a couple of years ago, Patrick Hall, chief operating officer of e-MDs, said that one reason his firm launched its own billing service is that so many support calls from customers had to do with billing.

Kleaveland said there may be another reason for e-MDs and other small-practice vendors to go into RCM. "They view it as a form of business diversification--a potential source of revenue that has an annuity-like aspect, because you collect fees as long as you remain a billing service. So in that sense, it's recurring revenue."

But he added that the main revenue source for most software vendors remains sales of software licenses and annual maintenance fees.

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