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I don’t understand our industry. I have to admit. Maybe, I’m just bizarre. Maybe, I’m abnormal. I haven’t spent my entire life in this industry, although I have been in it for 15 years. Maybe, I’m not normal. Maybe, I’m abnormal. Also, I’m not too fond of McDonald’s, and they’ve sold billions. I didn’t know that I was doing the Dougie.
Maybe, I’m just not normal. Perhaps, it’s me. Undoubtedly, when you’re breaking up with somebody, this is the situation where you say, “It isn’t you. It’s me.” It could be that situation. However, I don’t understand why there is so much focus on things that don’t seem to be the most important to me. I can’t understand it.
Let’s discuss the metrics
An example is the number one measure in our industry, in revenue cycle management, medical billing, whatever you want to title it, the number one always revolves around accounts receivable. I understand that, in some ways, this is an account receivable business. Yet, if you think about something else, you’re selling widgets, whatever it is. Yes, of course, there are some metrics around your AR.
Typically, it’s around sort of like what your loss rate is, but that’s a pretty small percentage for most industries. I understand that there’s more emphasis on this. Moreover, there’s a whole industry just around getting that money. Yet, it still doesn’t seem to make sense to me for all kinds of different reasons.
Compare and contrast revenue cycle management
Let’s take a metaphor for another business. Suppose we’re in the business of handling and managing claims and the accounts receivable form and collecting on it. In that case, there is a metaphor of something like FedEx, a logistics business. They are essentially trying to get something from point A to point B in a certain amount of time.
If we think about somebody like FedEx, I’m pretty confident they’re not going to say that they are in the package storage business. I mean, we’re talking about AR, which is sort of like the purgatory of claims. Also, it hasn’t gotten paid. It isn’t written off yet, either. Thus, it isn’t lost. If it isn’t paid, it’s sitting there in a dead zone.
FedEx or whoever else is picking up packages. Moreover, they’re trying to get them to a destination in a certain amount of time without being damaged, without being lost, and so on. I am sure that they don’t consider themselves in the package storage business. Also, it is not anywhere in their ethos. That’s not their thing.
Why are we in the claim storage business? That’s essentially what AR is. Plus, we’re sitting on it until something good happens to our ultimate goal, and we declare that it’s lost, and we give up on it.
I’m sure that FedEx looks at rates, like how many packages are lost, how many are not delivered on time, and all kinds of other metrics. I’m sure they’re not looking at their inventory aging as the number one metric because that’s kind of what AR aging is. It’s like, “How long is the package sitting in their control before it gets to the destination?” Invariably, that their number one KPI is not inventory aging or package or letter aging. In addition, they’re looking at delivery time, not how long it’s sitting in inventory. They probably don’t go and say, “What’s the average length of time something that we have in our possession has currently been in our possession?” That wouldn’t make any sense.
Look at the right things
Understanding the time lag is longer in AR, you might say, “Well, okay! I get that.” We’re still looking at the wrong thing. We shouldn’t be focusing on something like, “How long is it sitting in a room?” We should be like, “Is it getting paid? Is it getting to the destination?” and “How many of them are getting to their destination?” or “How many of them are lost? Additionally, “How many do we have to write off?” That seems like the more appropriate kind of focus.
Even if you don’t take the metaphor of package and delivery, if you ask somebody, “Do you care more about getting paid or getting money quickly?” I’m pretty sure they’re going to say “paid” rather than “quickly.” Now, if you want to have a cake and eat it, sure, I want it fast. If you said to somebody, “Okay, let’s pick something.”
A real example
I’m going to make up an example. If you said, “Okay, I’m going to pay you $2 a year from now, or I’m going to pay you $1 at six months, or even I’ll pay you $2 a week from now or $1 today.” So, how many people are going to take the dollar today rather than $2 a week from now? Again, some people are in extreme financial crunches, and they don’t have access to cash flow, and they’re about to go down the drain. That’s a tiny percentage of people. Also, that’s what factors exist for. In addition, they kind of take advantage of those situations. Absent that kind of extreme situation. Further, virtually everybody will take the $2 a week from now rather than $1 today.
Suppose you take that even to a greater extent. If you said, “Okay, do you want $1 a week every single week from now until infinity, or would you rather have $2 a week every week, but it doesn’t start for three months?” Still, I’m pretty sure almost everyone would take the $2 a week starting in three months because that cash will quickly eclipse the $1 week.
This focuses on how we measure how fast. They’re not even counting how fast their money comes in because that would be a payment cycle, looking at how long the money has been sitting in inventory, the unpaid inventory. That makes no sense to me. Also, all of our focus is on AR instead of payments. That shouldn’t be where we’re at. We should be looking at payment. Moreover, we should be looking at “How am I getting paid? How well is it getting paid? Also, ask, “How fast is it getting paid?” not “How long is it sitting in inventory?”
Does it make sense?
Again, maybe I’m just the odd one out. Maybe, I’m an idiot. That happens. There’ve been other times where I thought I was the idiot, and then I became the idiot. I drank the punch eventually.
Back in the 90’s, I remember the dot.com bubble. Every year, stocks were going up and up and up. They were doubling every year at just special rates. I could think, “This is stupid. This bubble is going to burst,” because I was in tech pretty early. In ’95, ’96, ’97, every year, it was doubling. I was saying, “Well, this is stupid. This is stupid. This is stupid.” In ’98, it doubled again. In ’99, it doubled again. Well, somewhere in 1999, I felt like, “Okay, I must be an idiot.” I bought a bunch of tech stocks. Guess what? Within 12 months, it just collapsed. Further, I think one of them I purchased was off somewhere around 97% within a year.
I don’t think I should be drinking the Kool-Aid at this point. Also, I believe that I’m not an idiot, but who knows? Let us know. Maybe, I’m an idiot. Maybe, there’s something we’re missing.
Even the name “revenue cycle management” doesn’t seem to make much sense to me. Where’s the cycle? Are we giving the money back to people after we collect it? Additionally, this is not a cycle. Please tell me what I’m missing, but even the nomenclature around this revenue cycle management. If we want to keep the RCM acronym, we’ll call it revenue collection management because we want to collect money, not cycle it.
The goal is a collection. The name of the industry doesn’t even say what we want to do. Management? What is that? Are we just hovering over it rather than doing something? In addition, we want to collect. Revenue collection management seems like a better title if you’re going to stick with RCM.
That’s my rant for today!