Richard B. Miller
Brian B. Sanderson

After a technology upgrade, a hospital should take specific steps to preempt issues that could lead to decreased revenue.

At a Glance

  • Hospitals nationwide have seen revenue drop after implementing new financial and clinical IT platforms, typically because their adoption teams did not plan for the impact on downstream revenue.  
  • Technology is rarely a panacea. Although an upgrade can catch some problems, it can also add a new level of complexity that will make it harder to fix poor processes if they are not addressed up front.  
  • Finance departments should be involved in design and testing phases of all IT system changes-even nonfinancial systems-to protect revenues before, during, and after implementation.  

Hospitals are adopting new financial and clinical IT platforms at a fast and furious pace as they seek to position themselves to become more integrated clinical enterprises in an era of reform. Unfortunately, some organizations have seen patient service revenue drop unexpectedly after implementing new IT systems. With payment for clinical services already on the decline, hospitals should identify, plan for, and preempt issues that could lead such revenue decreases.

The University of Chicago Medical Center (UCMC), a general medical/surgical facility and teaching hospital with 568 licensed beds, learned this lesson firsthand. To staunch its losses after a technology upgrade, it took aggressive action to recapture revenue as well as establish revenue integrity processes for future technology upgrades. As a result, UCMC now receives the appropriate payment for the clinical services it provides.

Lessons for Effective Technology Implementations

In 2009, after several major systems upgrades-including in the organization's pharmacy department, infusion therapy clinics, and the emergency department-UCMC leaders noticed that the organization's gross charges were significantly below expectations given patient volumes. UCMC undertook an analysis examining the areas with the most significant declines. The investigation uncovered multiple charge-capture issues associated with recent systems upgrades:

  • Clinical systems were implemented completely, but "charging" technology wasn't.
  • Clinicians mistakenly believed that "everything was automated."
  • Connectivity among systems did not always map appropriately to charge codes, resulting in workarounds and increases in miscellaneous charges.

UCMC's experience points to five lessons hospitals and health systems should keep in mind when undertaking any technology upgrade. Organizations should develop tactics and strategies around these lessons to reduce or eliminate revenue declines after new IT systems have been implemented.

Lesson no. 1: To immediately identify revenue dips, formal revenue monitoring should begin before the technology implementation. It is critical to establish formal revenue tracking methods that enable the prompt flagging of revenue declines. Month-end or quarter-end reporting or anecdotal observations will not provide the timeliness or accuracy required to respond to a systemic revenue decline. Identifying the top codes that represent 80 percent of a department's revenue- and then trending the utilization and revenue on a weekly basis-might provide a more accurate snapshot of how the technology change could affect revenues.

In UCMC's case, the organization intensified its scrutiny of charges. Previously, UCMC monitored charges on a monthly and quarterly basis at an aggregate level. Given that the organization has about 38,000 active charge codes, UCMC leaders believed this level of monitoring was the best that could be accomplished with a reasonably sized staff. It turned out, however, that serious issues were escaping the organization's immediate attention. For example, unit-of-measurement issues related to pharmacy codes were going unnoticed, which meant the hospital was undercharging for medication.

UCMC now examines charges of individual departments on a weekly and monthly basis, seeking explanations for variances at the charge-code level. In addition, department managers understand the need for accountability on charging and monitoring.

The medical center also has formed a revenue cycle management group composed of several employees who had been conducting fairly low-level bill-hold clearing functions. Using more frequent and more detailed reports, the group follows charge-capture issues closely, allowing management to quickly identify areas with revenue issues. The group can also focus on a specific UCMC clinic or department undergoing a technology upgrade or other operational change to help maintain revenue integrity.



Lesson no. 2: The finance department has an important role to play in a technology implementation project. It's not enough for the finance department to have a representative on the project's steering committee; the department should be involved in technology upgrades from the very start, taking part in both the planning and the execution processes. Finance should be at the table when IT is mapping out the design and testing of a technology upgrade, because even ostensibly nonfinance-related systems like clinical platforms have profound implications for a hospital's finances. After all, the systems that produce clinical results also produce the charges that end up on bills.

In addition, finance should play a role in identifying the underlying processes associated with charging for clinical services and the people responsible for the processes. A proactive finance or revenue integrity group can facilitate how information is recorded, entered into the billing system, reconciled at the end of each day, and monitored against expected charge volumes.

Lesson no. 3: A "best-of-breed" approach for selecting new systems can impede charge-capture. Under this approach, each department chooses the best technology available for its area, based solely on its own clinical needs and frequently without considering that the technology will generate charges that must transfer to the revenue system. If the systems are not compatible, charges can be lost. This practice is especially prevalent in organizations in which the departments operate with a high degree of autonomy.

To preclude potential compatibility issues, UCMC established IT governance committees that oversee all technology-related decisions. If a system will not integrate well with the existing revenue system, UCMC will not buy it, despite the wishes of any particular clinical department.

Lesson no. 4: The IT and finance departments should agree on ways to test new systems to ensure they are functioning appropriately from both an IT and a finance perspective. From the IT department's perspective, the testing phase for technology upgrades is designed primarily to determine whether a new system is programmed appropriately and functioning as desired. Most IT departments do not test the revenue processes (which might not seem directly related to the system) to confirm that all of the services are flowing through the revenue system and onto patient bills. These operations should be tested, and the finance department should be involved.

For example, as a research hospital, UCMC grapples with the complexities of distinguishing standard-of-care orders from research orders for billing purposes. For some time, it had a system where one employee would enter an order and another would determine whether the order was a standard-of-care or research order. After UCMC upgraded its technology, the new system assumed that one employee was performing both functions and cut the second employee out of the information flow. Information material to determining whether an order should be classified as standard of care or research was not getting into the system because no one who knew how to enter such data had access to the system. From the IT department's perspective, the system was working; for the finance department's purposes, it was not.

The most effective approach to avoiding such conflicts is for IT and finance to define a successful implementation. In addition, finance should provide IT with realistic budgets, so that IT need not focus solely on completing the implementation on time and on budget at the expense of broader operational considerations.

Lesson no. 5: A technology upgrade cannot make up for poor processes with issues growing more significant after implementation. This lesson might be best expressed by the following equation:

Broken Processes + New Technology = Negative Revenue Impact

If a process has not captured all of the charges in the past, it is likely to have the same level of leakages-or worse-after an upgrade.

New technology can take care of some headaches and possibly catch some problems, but more often it introduces a new level of complexity as well. Think of it this way: If you can't drive a car very well, you shouldn't get into the cockpit of a 747. The amount of damage you could do with the more complicated machinery is exponentially greater. When it comes to technology upgrades, hospitals usually find it much more difficult to solve problems after the technology has gone live than to address them up front.

Hospital managers often are unaware of how broken or compromised a process is because the charging tasks "just get done." Here's a hint: If the work area of the employee in charge of a process or related tasks is littered with sticky notes with workarounds scribbled on them, the process probably is not working. Workarounds are a red flag indicating a process that needs to be fixed.

An Ounce of Prevention

In today's healthcare environment, hospitals face more and more hurdles related to collecting revenue. Although some of the difficulties with revenue collection are driven by forces beyond a hospital's control, others are due to poor, existing charge-capture processes that can be exacerbated by technology upgrades. The good news, though, is that hospitals can avoid these problems.

The first step is to recognize the revenue implications of changes to systems generally thought of as clinical rather than financial. Implementation projects should consider the effects on charge-capture activities and involve the finance department in the design and testing phases, because even nonfinancial systems can have a dramatic effect on a hospital's bottom line.

The second step is to identify the charging processes of each of the clinical departments affected by the new technology. Everyone should understand how their roles, tasks, and accountability will change after implementation. Each department should identify the three to five key tasks necessary for charging and script how the new tasks will be performed.

The final step is to analyze revenues before, during, and after implementation. As long as there is no change in clinical practice or an aberrant change in the volume of services, there should not be material changes in the units of care (how many), gross revenue (how much), and net revenue (whether the hospital gets paid). Profound changes in any of these tracking elements indicate a technology issue that must be addressed.

Richard B. Miller is vice president of finance, University of Chicago Medical Center, Chicago, and a member of HFMA's First Illinois Chapter (

Brian B. Sanderson is a managing partner, Crowe Horwath LLP, Oak Brook, Ill., and a member of HFMA's First Illinois Chapter (


Publication Date: Wednesday, February 01, 2012

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