RCM Payoffs Add Up

June 24, 2011
Tom Gavinski In the race for the best hospital IT solutions, clinical systems often take center stage. After all, hospital financial
Tom GavinskiIn the race for the best hospital IT solutions, clinical systems often take center stage. After all, hospital financial systems have been automated for so many years that most providers take them for granted. Innovations in revenue cycle management and new technologies are flipping that picture, though. Today, RCM is hot — and it's because the numbers are impossible to ignore. “Our AR (accounts receivable) days were up to 90 when we started our RCM initiatives,” says Tom Gavinski, former vice president of Minneapolis-based patient financial services at Allina Hospitals and Clinics, a 1,658-bed system in Minnesota and Wisconsin. “Phase One of our RCM project quickly brought us down to 60 days — and we kept going till we hit 40.”

According to the Healthcare Financial Management Association, median hospital AR days today hover around 50 — yet many hospitals are woefully over that. An enterprise-wide RCM initiative can turn that around fast. The biggest opportunity? Most hospitals have loads of manual processes. But which fixes will give the most bang for the buck — front end scheduling, registration and charge capture? Or back end denials and contract management? Bolt-on technology, or brand new enterprise systems? And whose show is it anyway, IT or finance? There's no cookie-cutter approach. But one thing is certain: Automation on any level is the fastest and best way to go.

Begin at the front

For most hospitals, the low hanging fruit is easily found in the front end, with the initial patient encounter — and the many errors it can generate. Automating the insurance coverage verification processes to get it right the first time is a fast fix. By accurately identifying Medicaid, self- or uninsured, bad debt or charity patients, and verifying address and identity up front, providers can come up with an action plan even before the patient presents for service. And with automated call back reminders, there's less wasting valuable resources on no-shows.

For Rich Temple, CIO at St. Clare's Health System, a 475-bed provider headquartered in northwestern New Jersey, the front end was his jumping point. “My first RCM initiative was a real time eligibility system with automatic query to major payers for eligibility at registration. We'd take demographics, fire off eligibility queries to a payer, get back eligibility information, and get the parameter around their co-pays,” he says. “I'd rather find out when the patient is sitting in front of me that they owe me 25 bucks rather than try and get it later. Our AR days went from the 70s to the 50s over the course of two years.”

Top loading the system gives providers information early enough to react to it. St. Clare's used scripting tools from Boston Software Systems of Sherborn, Mass. to minimize errors and save time. By automating, there's no need to ask the same question five times, duplicative order entry and risk of error are reduced, and regulatory compliance increases. “It just makes sense,” Temple says. “Once incomplete or incorrect information enters the system, it's passed downstream. And once you poison the well, it's very hard to recover.”

Rich TempleWorklists are another front end IT automation solution. “Our worklist automation just blew our managers out of the water,” says Rick Mohnk, CIO at 145-bed Central New England HealthAlliance, Worcester, Mass. “Our error logs were huge nightly printouts. It took two to three weeks before these got corrected, if ever.” Automating worklists sends those errors directly to the managers responsible for them. They cover everything that needs to be done to a claim, and correct errors before the bill is dropped. “We not only saw a bump in revenue, we saw a decrease in late charges.”

Hospitals can't reap the maximum benefit from front end IT solutions without changes in registration staffing. “We need to stop putting people after the parade,” says Ken Hufford of Minneapolis, Minn.-based Healthia Consulting. “Many organizations are getting wise to this now. They used to hire registration clerks with no industry knowledge, who didn't know a primary insurance from a secondary. The entire revenue cycle starts with that person. With seasoned, experienced people up front, quality goes way up. I think we're starting to see that paradigm shift in staffing.”

Or begin at the back

First opportunities don't have to come from the front end. At Allina, Gavinski (currently vice president at ICSystem in St. Paul) found the biggest bang for the buck by starting at the back end. “We essentially blew up the existing business office and reorganized it. Denial management was a huge opportunity. Organizationally, we set up a department, re-designed procedures and bought bolt-on technology to help us. Our patient accounting was an old Medefax system and we couldn't really tweak it, so we added a management system with a bolt-on and a predictive guidance system, also some billing scrubbers. When we did the back end, the (AR) days came down from 90 to about 60 in nine months.”

Rick MohnkDenial management is usually the focus of back end improvements because that's where hospitals are hemorrhaging cash. But there are other opportunities on the back end — like contract management. Payers are constantly changing their pay rules; and with the complex mix of payer and patient responsibility, it's often hard for providers to know how much they can be reimbursed, and from whom. Going in to negotiate with payers, hospitals need a very robust decision support infrastructure.

Contract modeling and payer review (CMPR) automation is one of the solutions here. These models analyze and compare actual to expected payment through critical decision support, and any variances in expected payments trigger follow-up processes to negotiate better contracts. “Ninety percent of hospitals have some form of contract management but only 15 percent are using best-of-breed solutions,” says Henry Ijams, a consultant from PayStream Healthcare, Charlotte, N.C.

Most hospitals recognize that contract management is a best practice, but they're too busy fighting other wars — specifically, denials. “We see most hospitals losing 5 to 12 percent of annual net patient revenue to unmonitored payments and denials,” said Ijams. Payer review automation minimizes revenue loss due to underpaid or denied accounts and helps obtain contract terms with the greatest possible impact. “Contract engines that work in real time are a good solution — as soon as remittance comes in, alerts and worklists are generated that say, ‘Here's your underpayments.'”

CMPR systems track payer behavior — true underpayments are filtered out and assigned, minimizing wasted time. This can means real savings when dealing with payers whose contracts only allow a 30-day window to collect the underpayment.

But are legacy financial systems robust enough to perform these more complex back end tasks? And do they speak the same language as the newer clinical systems?

For some organizations, a core vendor approach means not having to bridge nearly as many interfaces. Mohnk agrees. “We'd been a Siemens customer for a long time. We took a hard look at what was out there and went with the full Siemens suite — they're our core vendor for clinical too.”

For others, hosted or bolt-on solutions can take advantage of the data and process already in place and allow a CIO to take advantage of the best of technology without a lot of up front costs. Home grown solutions are typically not a viable option due to the prohibitive cost of hospital IT staff and development.

“Whatever you can build in-house, there are five companies that have already built it —and cheaper than you can,” Ijams says. He added that for smaller providers, a combination of hosted imaging services and outsourcing the document image management and data capture application is a good solution. “You don't need $1 million to do this project; you can do it for a quarter of that. CIOs are interested in these skinny solutions and the ROIs are attractive.”

Patient revenue and pricing transparencies

With insurers and employers shifting a greater share of healthcare costs to consumers, revenues from patients are becoming a growing area of hospitals' bottom lines. And as consumer-directed healthcare increases, pricing transparency is a critical component of both patient satisfaction and revenue.

“Our self-pay at Allina is projected to double in the next five years,” Gavinski says. “Hospitals need the technology in place to deal with this huge influx of self-pay they're not accustomed to, and a logical foundation for justifying your pricing. People don't have to agree with it, but they do have to understand it.”

Hufford agrees: “Most patients are willing to pay, but nobody likes to be blindsided with a big bill. It's one thing to say this patient has insurance. But you need to take it to the next level. What's the deductible? Can I get some of it? Any of it? You need to figure out if the patient is going to owe $1,000 when he hits the door. Did he know that? Probably not.”

Collecting from patients is vastly different than from payers. An estimated bill should be generated and presented at the patient's first encounter, many suggest. Hospitals need to be more proactive in finding alternate payment sources when patients can't afford care and have applications for those alternates built into the workflow.

In the ER, hospitals need to be more creative. To that end, Allina added 20 fulltime patient advocates to qualify people for coverage. “In the ER, you often deal with transient populations that you can't find later,” Gavinski says. “We did applications for charity care at the same time as insurance, right there, in case the insurance was denied — we didn't have to look for them later.”

Changing the culture

A big challenge, many agree, is changing the culture to look at RCM systemically. “With the integration of clinical and financial systems and the ability to charge upon documentation, these two groups can interact more,” says Healthia's Hufford. “We need to change the mindset of ‘I'm here for patient care' or ‘I'm here to collect bills.' We're here to do both.”

Tom Gavinski agrees. “You can't look at RCM as a compartmentalized process, going after this piece or that piece. It must be enterprise-wide to include all the processes across the revenue cycle. We used a strong finance dashboard so people could see our performance and goal. Once accountability, oversight and reporting processes are in place, you can maintain your performance,” he says.

Allina was able to sustain its AR days in the low 40s two years after the project. “You can't look at the revenue cycle as a cost center. You always have to look at the cost/benefit you can derive from investing in technology. If you just look at the cost side, you're missing a lot of revenue opportunities. That's the key,” says Gavinski, “to get yourself to think like that.”


Best Practice: HIPAA and Third Party Translators

New HIPAA regulations represent a real opportunity to use RCM because they mandate more standardized transactions which can be used to improve claims recovery. HIPAA compliance 835, EDI Electronic Data Interchange, standardizes how claims are to be paid by payers. Difficulties may arise, however, because the HIPAA formats are not 100 percent postable by the provider, meaning that even though the payer gives the provider the HIPAA 835, the provider doesn't have the claim code they need to match it back.

The best practice here, many say, may involve third-party translators, aggregators or clearinghouses that can take provider claim data and marry it with the data from the payer to get a file that matches electronically. Once that gets fixed, hospitals are able to get to an electronic settlement and take out the excess cost of paper. Some regional players are doing this already. There are only minor system changes required on both the part of the payer and provider to make it work. PayStream is calling this “aggregation and translation” and believes the emergence of this new breed of players — the aggregators and clearinghouse players — will be very important in the next three or four years in the migration from paper to electronic files. — D.L.

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