Revving Up Revenue

April 1, 2009

Investment in process redesign and claims management technology leads to financial success for a growing physician practice.

Olive Branch Family Medical Center was a paperless practice almost as soon as it opened in August 2003. A spin-off from a larger medical group, its practice management (PM) system was in place from day one, followed by an integrated electronic medical record (EMR) several months later.

Investment in process redesign and claims management technology leads to financial success for a growing physician practice.

Olive Branch Family Medical Center was a paperless practice almost as soon as it opened in August 2003. A spin-off from a larger medical group, its practice management (PM) system was in place from day one, followed by an integrated electronic medical record (EMR) several months later.

Within six months, Olive Branch identified an additional opportunity to streamline its operations, control overhead and shore up its revenue stream. After attending a professional conference in November 2003, Olive Branch began reviewing its accounts receivable (A/R) management functions. Analysis suggested that a technology upgrade would enable the practice to redesign and enhance billing office workflow in much the same way EMR implementation had improved clinical workflow.

Revisiting Billing Operations

Olive Branch Family Medical Center, based in Olive Branch, Miss., has two physicians and seven nurse practitioners. Because we were a new practice trying to find our footing, we were especially focused on claims submission, processing, and when necessary, re-submission. So it wasn’t long — maybe three or four months — before we realized that our existing clearinghouse was under performing. Claims processing took too long and claims often were delayed due to problems that could have been corrected on the front end. Our analysis also revealed that an unacceptable number of denials simply never reached us, leaving us with no opportunity to re-submit the claim and capture the earned revenue.

The lack of functionality and service likewise meant that our staff could not work as efficiently and effectively as possible. There was a lag of three to seven days, for instance, between the times claims were rejected, and when we could re-work and re-submit them. In a similar vein, the labor cost of manually preparing secondary claims compelled our staff to dedicate significant hours for a relatively small revenue gain.

Following this review, we began to focus our resources on developing a new claims management process, using technology more effectively through a new partner and making internal operational adaptations. Our fundamental goal was to reduce A/R days.

Assembling a Solution

Our project team, which was comprised of our A/R manager and chief financial officer, began looking into ways to process claims in a timelier manner and with greater organizational productivity. In addition to assessing the potential to reduce days in A/R, we learned about the various options available in the marketplace and identified several key criteria to guide our evaluation and selection process.

We determined that our medical claims clearinghouse partner would need to leverage Web-based applications extensively to allow us to monitor claims status and respond to any problems early in the revenue cycle. When we learned that some of the newer systems available would enable staff to “follow” claims through an online “dashboard” and quickly re-work problematic claims in real time, we knew we were on the brink of discovering technology with great potential to reduce the amount of time required to make edits and handle claim errors.

With our previous claims management infrastructure, we had limited information about the performance of certain payers, individual biller productivity and other revenue cycle variables. So, we also looked carefully at how a broader set of reporting capabilities could improve our management and decision-making.

Given how intertwined the two processes are, we felt that clearinghouse compatibility with our existing PM system would serve us well. This would likely engender a level of collegiality among service providers, which could benefit our staff during problem resolution should any issues arise. Based on our research, criteria evaluation and a series of reference checks, we selected Atlanta-based Navicure for clearinghouse services and claims management solutions.

Transition To a New Business Process

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One of the major challenges related to switching clearinghouses is avoiding a gap in cash flow during the transition period as one system closes out and another begins. To prevent this, our team was prepared to manage claims using two different processes and parallel software systems for a short time. In our case, this transition was completed in six months.

Another initial obstacle — a potentially significant one — stems from the need to re-submit large volumes of new paperwork to all payers. We avoided a significant expense in terms of staff hours by having the vendor update electronic data interchange information with our payers. Our role under this arrangement was limited to filling out the proper forms, which had been provided by the vendor and subsequently collated, managed and filed on our behalf.

For staff training, we found Web conferencing to be more efficient than a physical meeting — and just as effective. With a trainer on the telephone and the Web application in front of us, we walked through how to submit claims, correct claims, re-submit claims, create reports and perform other tasks. Our staff members found the technology highly intuitive and were ready to apply their knowledge as soon as the system went live.

We have made a range of positive operational and workflow changes to our receivables management process. In general, these adjustments have helped us work faster, meet deadlines, organize work more efficiently and become more proactive.

For instance, we take full advantage of front-end claim editing functionality, routinely reviewing claims and making National Patient Identifier, diagnosis code or Patient Quality Reporting Initiative-related changes before submitting. We have likewise streamlined the process we use to re-work rejections. Within the user interface of the Web application, our billers see rejections and make corrections. We typically re-submit them on the same day they are identified.

In the past, we often spent all day posting payments without catching up on any backlog. Now, with electronic remittance advice (ERA), our billing staff focuses solely on reconciling payments with our bank statements and not on data entry. We consistently post all payments the day they come in. Submitting secondary claims also had consumed a great deal of time and postage costs — not to mention posing a HIPPA-compliance risk by transmitting protected health information on paper. Our billing office now submits most secondaries electronically. When that’s not possible, we can generate the claim in a special, ready-to-send format that omits all extraneous patient information.

Finally, because every step in our A/R process is now automated, we have access to previously unattainable business intelligence about the practice. We can see which procedure and diagnosis code combinations are causing the most problems, which edits need to be adjusted, and which rejections are most common. Similarly, we use the system to identify how rejected claims are trending by insurance company. We can also monitor staff productivity, such as claim volumes by employee.

As a result of these changes, even our patients have shared positive feedback. From their perspective, claims are handled faster with fewer complaints. We benefit, as well, because our staff rarely has to answer the question: “Why wouldn’t my insurance company pay for this?”

Expected and Unexpected Results

Based on our experience, we believe that our peers tend to misunderstand the value proposition of re-engineering the claims-management and receivables-management function. When considering the cost-benefit equation, our colleagues tend to overemphasize the expense side. In addition to revenue recovery and enhanced cash flow, we suggest that medical groups translate salary, benefits and other sources of overhead into hard cost savings.

Smaller practices will be able to reduce head count outright by one or two employees. Larger practices should be able to offset costs through productivity gains on a much larger scale. These gains come from more efficient claims filing; an absolute decrease in claim errors (and, therefore, less time spent correcting them); reduced rejections; and fewer denials. Rejection rates, for example, fell by 4 percent at Olive Branch. Our staff now focuses its time exclusively on “legitimate” rejections, such as those due to terminated coverage or an incorrect policy number.

Overall, we were able to decrease billing staff by 1.5 full-time equivalents. We did not anticipate such an expanded capability — just two employees handle all of the tasks within our billing department — but the arrangement has worked. And because our billing department is a manageable size, adapting to the new technology proved not to be a disruptive process.

We also did not expect such significant reduction in our average days in A/R, which initially stood at 45 days. Because our claims go out so promptly and rejections are re-submitted so quickly, our days in A/R now consistently remain between 28 and 32.

Although we didn’t establish statistical benchmarks prior to this initiative, we do know that electronic secondary claims submission and ERA together save several hours on a daily basis. This productivity benefit complements the impact on gross revenues captured by expanded secondary claims submission.

Clinical and administrative functions, such as medical records and practice management, tend to be more well-known areas of interest for process redesign. However, practices can apply the same logic to claims management. With a reasonable investment in reorganizing workflow, re-assigning responsibilities and introducing technology appropriately, medical groups can elevate their management capabilities while enjoying a significant return on that investment.

Randall T. Huling, M.D., FAAFP, CCRI, is president of Olive Branch Family Medical Center in Olive Branch, Miss. Contact him at [email protected] .

April 2009

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