Moving to a single platform for all contract management and claims processing leads to quicker payment, accurate revenue collection, and decreased administrative costs.


Hospitals and health systems are finding it increasingly difficult to receive payments for the work they do and to maintain cash flow required to carry out their missions. Two key factors are contributing to this trend and the increasing costs that hospitals must incur to receive payments.

First, patients are responsible for paying almost one out of every four dollars of overall healthcare revenue (“ New AMA Study: Patients Responsible for Nearly One-quarter of the Medical Bill,” American Medical Association, June 2013). Second, 30 percent of patient collections go to bad debt (Pellathy, T., and Singhal, S., “ The Next Wave of Change for US Health Care Payments,”  McKinsey and Company, May 2010). Compounding the problem, payers make inaccurate payments on 7 percent of all healthcare claims ( New AMA Study: Patients Responsible for Nearly One-Quarter of the Medical Bill).

Denials can become an expensive problem for hospitals as well. The average cost to rework a claim is $25, and because of either lack of time or knowledge, as many as 65 percent of claim denials are never reworked (Graham, T., “Medical Group Management Association [MGMA]," You Might be Losing Thousands of Dollars Per Month in ‘Unclean' Claims,’" MGMA ConnectionFebruary 2014, Medical Group Management Association [MGMA]. Multiply that by several thousand and you have a recipe for a significant—and largely avoidable—expense.

While many hospitals are taking incremental steps to address these issues, the problems are accelerating, and patchwork solutions are not going to be sufficient. To survive and remain financially viable as value-based care becomes more prominent, provider groups need to consider a comprehensive approach such as a financially integrated network that addresses revenue cycle problems before they occur.

Identifying Payment Problems

Consider the typical patient experience and hospital visit workflows. Patients arrive at the hospital, the front office staff checks coverage eligibility, patients receive treatment, and the business office mails paper invoices long after patients leave. Three separate workflows begin when patients arrive, each using different systems and technologies. Medical records departments complete coding, managed care groups conduct contract modeling to determine discrepancies against payer agreements, and business offices focus on creating claims to meet payers’ business and technical requirements.

The three groups might meet once per month to conduct retrospective analyses, long after patients have left and their payments are due. It is, in effect, too late to do anything meaningful about collecting payments or preventing coding errors that lead to denials. In most hospitals, information from contract management applications, which track the actual contracted rates from payers, is not available to staff filing claims, making it nearly impossible to identify potential payment problems early in the process. Providers discover errors only at the time that payments are posted, which is often more than 30 days after filing.

Streamlining Operations and Efficiencies

In financially integrated networks, contract management and claims management systems operate as single technology platforms. This approach integrates admissions, eligibility, patient payments, and accounts receivables to flag any potential problems before they happen, increasing the velocity of payments, reducing cost to rework claim denials, and enabling near-time views across the entire revenue cycle.

Rather than placing payer edits into the claims submission process, these functions move upstream in the workflows. This provides visibility into contracts, claims data and eligibility, catching any potential problems or issues on the front end. Single, financially integrated platforms include rules-based automation and enable systems to “learn” from past trends to streamline operations and create significant efficiencies.

Now the hospital visit looks quite different. The front-office staff have complete visibility into billing, claims, and patient payment responsibility. Full automation also allows staff insight into up-to-date billing information, providing the ability to accurately enter all pertinent information to improve the revenue cycle. At the same time, automation decreases the need for administrative staff to contact patients well after delivering services to collect the additional information needed for rework.

In addition, other administrative staff can now identify, in close to real time, claims that may have the potential to be denied or underpaid. This gives them the ability to proactively make corrections based on the most current contracted payer rates. This single solution provides visibility into all pertinent data needed to ensure payment in the correct amount.

Increasing Payment Velocity

While the benefits are clear, scalable, and sustainable, achieving these levels of integration has its challenges. Multiple IT systems will require extensive integration work and custom modifications. Changes in workflows necessitate education and staff training. However, moving to a single platform for all contract management and claims processing leads to increased payment velocity and accurate revenue collection, which decreases administrative costs and ensures long-term financial viability. In the growing value-based care world, hospitals need to take steps now—with a financially integrated network—to protect the lifeblood of their operations and ensure survival.


Chris Wyatt is general manager consumer billing and payments, Change Healthcare, Nashville.

Publication Date: Tuesday, July 07, 2015