Other trends that hospital revenue cycle management programs are juggling include increases in audits, bad debt, and patient financial responsibilities.


Dec. 7—Hospital revenue cycle management (RCM) teams face some worsening payment headwinds, recent trend analyses and hospital financial executive surveys predict.

In a November analysis of 850 client hospitals’ payment transactions, accounting and consulting firm Crowe Horwath found “an alarming disparity of performance across five major national commercial managed care payers in key performance indicators (KPIs) for the revenue cycle such as accounts receivable (AR) and denials.”

The Crowe report, revealed big differences between five major national payers in areas of average time to payment, and initial and final denial rates. Crowe said some health insurers are making it more difficult for hospitals and health systems to collect revenue.

Crowe software calculates true accounts receivable (AR) days, which measures gross receivables with contractuals taken at the time of billing added back in. The analysis found a gap of 15.5 days between the payer with the lowest true AR days (52.2 days) and the payer with the highest (67.7 days).

Initial denial rates among those five national payers also varied, from 7.5 percent to 11.1 percent of net patient service revenue (NPSR), meaning one of every 10 dollars of revenue is at risk for nonpayment. The payer with the highest denial rate used the request for additional medical information description more than three times as often as the payer with the lowest rate. Final denial rates---uncollectible claims---ranged from 0.8 percent to 2.4 percent of NPSR.

 “Since commercial payers are key to a provider’s success, the provider should actively look for payer-by-payer trends,” said Brian Sanderson, managing principal for Crowe. “Ongoing, detailed managed care payer performance reporting, integrated with managed care contracting, will become even more important as hospital reimbursement tightens.” 

Denials Disparity

Sanderson said the disparity in denials activity--- with similar claims denied dissimilarly--- creates a challenge to hospitals.

“If there is not continuity in what is denied, it puts hospitals at a disadvantage,” Sanderson said in an interview. “There is sometimes a disconnect between hospital managed care contracting and revenue and billing cycle departments over what is actually collectible. If the contracts are created efficiently, they are easier to administer and that’s a good place to start.”

Sanderson said the ultimate goal should be to stop denials from occurring at all, but to do that, hospitals should understand the root causes for those denials.

A June survey found that hospital technology budgets continued to grow even as providers struggled to realize the full benefits of existing revenue technology. The Navigant/HFMA survey of 125 hospital and health system CFOs found that 90 percent are concerned about consumer self-pay and less than half have established revenue integrity programs. 

Three-quarters of surveyed executives said their RCM technology budgets were increasing, and more than half said they struggled to keep up with electronic health record (EHR) upgrades, said Jake Morris, managing director at Navigant. The survey found that 41 percent lacked the means to track the effectiveness of their technology. Only 44 percent had established revenue integrity programs.

“Revenue integrity should be the glue that binds clinical operations with coding and business office functions,” Morris said. “It’s clear that providers with established revenue integrity programs are benefiting from them; expanding their scope will help yield long-term financial reporting reliability and operational efficiencies.”

Hospitals need to exploit the full functions of their EHRs as they consider new technology spending, Morris said.

“Are they getting the most out of their existing technology? Have they fully optimized everything they have now? They need to focus on account structures and processes,” Morris said in an interview.

Further revenue cycle pressure came in a separate 2018 “Healthcare Outlook,” in which Navigant predicted an uptick in uncompensated care after years of decline.

Navigant predicted potential cuts to the Affordable Care Act (ACA), growing reliance on high deductible insurance plans, and a rise in uninsured populations.

Morris advised hospitals to tighten revenue cycle functions; implement strategies for rating credit quality to target collection efforts where they’re likely to yield results, and to develop manageable payment plans for households with less income.

Other Trends

Jacqueline Poliseno, director, consulting and appeals for Craneware, said hospitals are seeing significant increases in the number and types of audits, especially audits relating to short stays, DRG validations and, most recently, emergency department (ED) leveling.

Both the Centers for Medicare & Medicaid Services (CMS) and Aetna recently identified ED leveling as a new area of interest, Poliseno said in an interview. Poliseno said denials continue to plague hospitals, especially in areas of eligibility, medical necessity (particularly for outpatients), level of care assignment, and notifications.

“It’s about process and documentation,” Poliseno said. “Providers should pay attention to what’s being audited. And lately payers have been increasingly public about looking into ED leveling. Too many organizations lack good policies and procedures around ED leveling and that leaves them wide open for bad denial outcomes.”

Community hospitals struggle with volatile patient volumes and a shallow resource pool, Ryan Wise, RCM Lead for athenahealth, said in emailed comments. 

 “There’s a strong focus on upfront processes to turn revenue faster -- low DNFB [discharged, not final billed], clean first-pass claims, and a lot of energy dedicated to creating stronger networks for best practice/process sharing and benchmarking, all of which we partner with our clients on,” Wise said.

A November Moody’s Investors Service report found that bad debt increased in 2017 after a decline from 2014-16.  Moody’s Investors Service predicted bad debt will grow 6 to 7 percent in 2018, partly attributable to rising copayments and increased patient reliance on high deductible health plans.

Hospitals and health systems must continue to focus on point-of-service collections, said Rick Gundling, senior vice president for HFMA.

“The amount the patient pays out of pocket is becoming more material,” Gundling said in an interview. “Many patients are too late in understanding the consequences of those high-deductible plans. Hospitals must focus on clearly communicating those out-of-pocket costs because health insurance literacy is not great.”

He said hospitals should work closely with payers to reduce denial rates.

 “Denials not only affect healthcare providers” Gundling said. “But patients get caught in the middle and end up getting unexpectedly billed, while health plans are left with unhappy members.”

Heather Prideaux, CFO of the 10-bed, Atwood, Kan.-based Rawlins County Health Center, said the standalone critical access hospital is treating increasing numbers of uninsured.

Prideaux said in an interview that adding EHRs accessible for both inpatient and outpatient services has saved Rawlins’ staff time and work.

“We’re also more able to collect copays and deductions from patients and it allows us to push our internal staff to collect upfront,” she said.

Rawlins recently combined its business office and medical records departments to create an RCM team.

Destiny Schroeder, information systems director for Rawlins, said instead of passing on unpaid debts to collection agencies, Rawlins incentivizes its staff for each upfront payment collected.

“We’re also doing a better job of educating patients about the charges for services and what they’re expected to pay,” Schroeder said. “With our software, that information is available immediately and staff can see what the eligibility and co-payments are, which means less manual processing for our staff.”


Mark Taylor is a freelance writer based in Chicago.  

Publication Date: Thursday, December 07, 2017