With collections and patient payment topping the list of challenges facing hospital and health system revenue cycles, CFOs and revenue cycle leaders are seeking new ways to improve performance without making costly investments.
Picture the following scenario:
A community hospital in Colorado runs its revenue cycle management on no fewer than 22 software tools. Of those tools, only a third communicate with each other. Many operate in silos, not connecting with related solutions. Hospital staff are forced to toggle between systems to gather the information they need. The result is a cascade of data entry and workflow errors that introduce a whole new set of problems and repeatedly trigger the need for more training.
This is a real scenario, and it’s not unique. Many hospital CFOs and revenue cycle managers are in similar positions, and they are apprehensive about facing the coming years without improved revenue cycle tools.
Such tools may not be coming soon. Many hospitals have been spending their money on upgraded electronic health records (EHR) to obtain their meaningful-use incentive payments, pushing the replacement of revenue cycle management (RCM) systems down the priority list. According to McKinsey, “Most hospital CIOs have prioritized clinical/EHR software upgrades, thus delaying the replacement of RCM systems; less than 1 percent of hospital CIOs surveyed by HIMSS named RCM as a priority.” a
Revenue Cycle Headaches
In a brief survey conducted in 2015, CFOs and revenue cycle leaders were asked to identify their most pressing issues around RCM. The top two answers were collections and patient payments, with ICD-10 compliance, claims denials, and prior authorization also noted as critical. Full results are available in the exhibit below.
CFO and Revenue Cycle Leader Survey Results
The Limits of Tools
Respondents also were asked to explain why they were dissatisfied with their current RCM solutions. CFOs cited the following reasons:
- Overall system limitations (limited access to payers, system upgrades needed, time consuming for turnaround accounts, low interoperability, etc.; inaccurate in that data is not delivering complete responses, differing response or are not internally reliable)
- Failure of administrative staff to take full advantage of systems
- Lack of real-time eligibility verification
- Manual work required to address denials that should have been caught prior to treatment
- Costliness of systems
Revenue cycle leaders had different complaints, including:
- System performance issues and limitations (lack of integration, substandard, room for improvement, products don’t work, not user-friendly)
- Poor customer service
- Denials and delays in back-end discovery
- Inaccuracy, especially with prior authorizations
One area where respondents seemed to agree is “system limitations.” Many RCM solutions fall short of performance expectations, producing inaccurate results or no results at all and being slow to provide next-step recommendations. Perhaps more important, many don’t integrate with other systems such as EHRs and patient accounting platforms.
Addressing RCM Concerns
Improved RCM systems might not be within reach this year, but there are steps healthcare organizations can take to improve their revenue cycle performance. Following are recommended solutions healthcare providers can begin implementing today to address the top concerns identified by CFOs in the 2015 survey.
Collections. Thirty-five percent of CFO respondents said their top concern is collections. And it’s no wonder: Collections is costliest administrative function at most hospitals. From start to finish, collections cycles can take months or even years, leaving vast unpaid amounts in limbo. Collections also can account for up to 5 percent of a hospital’s net revenue, making it a high-priority issue to resolve.
An innovative tactic for addressing this concern that is gaining traction is stratifying accounts. Healthcare providers should consider claim age, insurance, and the payers, and then assign the claims categories based on this information. This activity should help organizations quickly identify the percentage of accounts for which payment is collected within 90 days; which accounts are delinquent; and the percentages that are paid by patients, insurance, or the government.
At one community acute care hospital stratifying accounts identified a number of opportunities in the revenue cycle. The hospital realized Medicare was paying in 28 days, on average, while a large commercial insurer was taking more than twice that time. When asked why there was a delay, the carrier said the hospital had been sending many large cardiology claims that required its claims processing staff to ask for clinical documentation. To speed up payments, the hospital started sending the documentation with the cardiology claims.
Hospitals also should consider using a comprehensive dashboard that gives them all the information they need in one easy-to-use interface, so they can see their stratified bad debt portfolio.
Patient pay. It’s important to understand that healthcare payments tend to be lower priorities for consumers than other bills such as car loans or credit card debt, because consumers are less concerned about the risk that providers will take strong action to collect healthcare debt. In fact they rank seventh, behind mortgages, car payments, cell phone payments, and credit card bills. b But even well-intentioned patients legitimately find themselves in a bind when it comes to paying medical bills. With that in mind, hospitals need game plans that begin before the patient is treated.
Investing in a third-party tool that assess a patient’s ability to pay is a good start. But there still will be patients who claim they are unable to pay their medical bills. In such instances, hospitals might want to consider issuing interest-based loans.
Discussing payment prior to treatment is a good first step. c Regardless of whether patients are insured, healthcare providers should determine in advance each patient’s propensity to pay based on credit scores, mortgage balances, and other financial information. Hospitals should estimate the cost of treatment ahead of time and consider asking patients to pay all or a portion of high-balance estimates in advance of treatment. If a patient is eligible for a payment plan or charity care, those options should be discussed at that time.
Establishing funding mechanisms in advance of care allows the patient and the facility to focus on the care, not the payment.
ICD-10. Hospitals and healthcare providers covered under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) should be familiar with ICD-10 codes by now, and their staff should be aware that procedures must be well documented if the organization is to receive complete payments.
Staff should be as specific as possible in their documentation and carefully report every step of a patient’s treatment, which often means multiple codes need to be submitted. Modeling the organization’s case mix index, ensuring clinical documentation is in place or optimized, and using charge to reimbursement modeling are crucial to ensure providers are getting paid correctly for the care provided. Consistent and complete documentation to the level and intensity of the services provided ensures maximal reimbursement. The old adage is “if it was not documented, it did not happen.”
Denials. Much like patient payment, denials management should begin before treatment. A patient may have insurance, but a certain procedure may excluded from the patient’s plan. Once a patient learns that his or her policy won’t cover a certain procedure, other financing options should be presented such as participation in a payment plan or needs-based discounting. If these options are not available, the next step is to explore other treatment options until funding has been established. No patient with insurance wants to be surprised by a bill asking them to pay 100 percent for a procedure that was not covered. Patients would much rather know about their coverage gaps in advance. Such knowledge allows the provider to assess options—allow the procedure for free/charity, perform it under appeal, delay it until an authorization is place, explore alternative treatments, etc. Doing so allows the patient time to work with their provider or physician to assess timing of treatment options, speak with their insurance, or seek funding or financial assistance in order to make a clinical decision jointly with a financial one. Cataloging procedures that are often denied by health plans helps staff easily identify ahead of time procedures that are likely to be denied so they are ready when patients are considering their options.
Prior authorization. With good prior authorization systems in place, it’s fairly simple for hospitals and health systems to find out which procedures require prior authorization from a patient’s health plan. In particular, it is important to keep prior authorization tools and processes current with insurance policy changes.
One hospital adopted the following five-step process for prior authorization to ensure the process ran smoothly:
- Continuously update the inventory of procedures that require prior authorization.
- Catalogue prior authorization requests that are regularly denied and contact payers to see why.
- Identify which payers deny the most prior authorization requests and contact them to work on a solution.
- Ensure staff are familiar with the prior authorization process and the escalation process if failures occur.
- Educate physicians on the prior authorization process and requirements.
The Best Tool: An Ample and Well-Trained Staff
Even the best tools won’t work to their potential without staff members trained to use them. Hospitals should be innovative in their approach when evaluating resources for staffing levels and solutions, looking at the process from scheduling to collections as a holistic revenue-sustaining investment rather than a cost center.
Employees are the most valuable resources hospitals have. Employees gain wisdom as they learn systems, and they know what works and what doesn’t. If asked, they can disclose which processes should be reevaluated. And if they’re treated as the valuable resources they are, they will ensure revenue is rolling in as it should. Recruitment and retention efforts are challenging in this market, so providers must be creative in incenting staff, recognizing them for their efforts, and developing sophisticated career ladders to keep their teams engaged. Employees in these areas typically know their jobs and the operations better than anyone else, and their opinion and ideas should be solicited often.
Hospital CFOs and other revenue cycle leaders face a difficult situation as market disruptions continue to present from reform to the ACA to value-based care – the numbers show it. Margins are thin with most hospitals, and new projects and tools are critically evaluated against competing priorities. Tenacity and visionary leadership will be tenets for success, and even if new tools are not yet in the budget, healthcare organizations should begin implementing processes that get them ahead of the curve in meeting today’s revenue cycle challenges.
Jonathan Wiik, MSHA, MBA is principal, revenue cycle management, TransUnion Healthcare, Parker, Colo. and a member of HFMA’s Colorado chapter.
a. Bayley, M., Calkins, S., Levine, E., and Machado-Pereira, M., “Hospital Revenue Cycle Operations: Opportunities Created by the ACA,” McKinsey, May 2013.
b. “Revisiting Healthcare Payments: An Industry Still in Need of Overhaul,” McKinsey, March 2010.
c. Eyestone, J., and Rozen, M., “Patient Payment Optimization: Use These Practical Considerations to Help Your Organization Optimize Patient Payment Processes and Performance,” J.P. Morgan Chase and Co., May 3, 2016.