In a Special Report published in Healthcare Informatics’ September/October issue, healthcare finance thought leaders shared their perspectives on the shifting landscape around revenue cycle management and the importance of developing a robust RCM strategy. These finance experts pointed out that U.S. physicians and hospitals are facing considerable impacts on their healthcare reimbursement. At the CFO level, healthcare organizations face increasingly thin operating margins, declining reimbursement rates and changing reimbursement models.
For that Special Report, Associate Editor Heather Landi interviewed Sandra Wolfskill, director of healthcare finance policy at the Healthcare Financial Management Association. HFMA is a Chicago-based trade organization for healthcare finance professionals. At HFMA, Wolfskill oversees the association’s Revenue Cycle MAP, or measure applied performer initiative. Prior to her position at HFMA, Wolfskill was president of a healthcare finance consulting firm, and she spent 15 years in healthcare financial management and consulting, including serving as CFO of a small community hospital.
Wolfskill spoke with Landi about the current and evolving payment landscape facing healthcare finance leaders, what CFOs should be focusing on right now, how organizations can leverage IT to optimize revenue cycle performance and the role of the CIO in all of this. Below are excerpts from that interview.
What are some of the challenges that healthcare finance leaders are facing right now?
At the high level, CFOs are being challenged by a lot of stress on operating margins, which is another way of saying profitability. Reimbursement rates are declining, in most cases, and so it’s the struggle with ‘How do I bend the cost curve to continue to be viable in this environment where I am seeing payer mix shifts going from the commercial world over to the government world?’ And that is being influenced by the Baby Boom generation coming off employer-based health plans and moving into the Medicare world, be it through traditional Medicare or Medicare Advantage. There’s also the impact of the changing reimbursement models, whereas we’ve lived in a fee-for-service world, for a very long time, and so the emphasis was on volume, such as how many chest x-rays, how many MRIs, could I do? In the value-based world, we now are confronted with the issue of risk, and if we assume risk in our contracts with our payers, how do we control for that risk and how do we manage that risk?
An example of a risk contract that’s been around for a long time is capitation, where I get paid PMPM (per member per month) fees for providing services to the individuals covered under those plans. If I don’t calculate my risk correctly and negotiate my risk component correctly, I could end up losing a lot of money on contracts like that.
In the revenue cycle management world, what I’m hearing from colleagues is that there is a huge need to not lose sight of revenue integrity within the revenue cycle. And that’s probably the number-one or number-two concern that most revenue cycle leaders have. And what we mean by revenue integrity is making sure that we have classified and are charging for services correctly; that the services we do provide are actually documented in the patient’s electronic health record (EHR), that we have charged for them appropriately, that we have coded them correctly and that we have been paid correctly by the payer. Revenue integrity is an issue that touches across multiple areas within the organization.
The second big challenge is denials. I send claims out to my payers, and do they pay me or do they issue a denial? And how do I mitigate and reduce the amount of denials that I have to deal with on a regular basis? We’re seeing some organizations doing some very interesting things. They are having conversations with the payers, and saying ‘If you’re always denying this device, can we come up with way that you can see the patient’s record, in a secure and encrypted environment, and decide right then and there if you’re going to find the medical necessity that you are looking for and you’ll pay it?’ As opposed to, the payers denying it automatically, then the provider organization sends the records, the payer then agrees that it should be paid, and pays it, which takes more time and resources to accomplish. So how can we streamline? How can we cut the cost of transactions and cut the cost of billing and collecting, but also allow the payer to protect their interest and allow us, the hospitals, to be paid appropriately for the things that we do?
The key for RCM is the same as it’s always been and that is to correctly identify the patient and the insurances that are involved with that patient. A perfect example is population health, whereby a patient might be enrolled in a population management plan that looks, on the surface, like a regular Blue Cross plan, but it may have a population management component. If don’t get the patient into the right Blue Cross plan when we register the patient, then the physicians downstream may not immediately recognize that the patient is part of a different treatment modality, which means they need to do different things, need to document different things in the record. Then, the payment system isn’t going to work correctly and they are not going to be paid appropriately for what they are doing. The impact is that we just must get better and better at linking the patient and their plans together appropriately.
When you look at the federal payer side of this issue for hospitals and physicians, what do you see?
More and more of the patient population is moving into Medicare coverage; that’s a by-product of the age demographic in this country and that’s going to continue for a while. That’s putting a fair amount of strain on the trust funds. That’s why there is a continued discussion around how do we sustain the Medicare programs and how do we sustain the Medicaid programs.
On the Medicaid side, what we’re seeing in the expansion states is more patients coming into the hospitals, because they have insurance, and, in a lot of cases, what we’re hearing is that providers are able to engage those patients earlier before something becomes a chronic, ongoing medical issue. And, so, overall, the patient’s health is impacted positively and you can avoid moving into more severe situations. And, the hospitals are getting paid for providing services which they probably wouldn’t have provided because the patient would ultimately have come into the emergency room (ER), when a chronic condition becomes acute. It relieves some pressure on ERs, and actually allows patients to get better service and allows patients to have coverage; it gets them into the system and into places other than the ER.
In terms of private health insurers, what is the landscape for revenue cycle management right now?
I think the thrust that I’ve seen from the commercial payers is that they are wanting to work smarter; they understand that they need efficiencies, just like we do on the provider side. The commercial payers want more automation; the more things we can do electronically, in terms of information exchange, the better. I think the biggest movement we’ve seen in the past 12 months is a willingness to move ahead with electronic processing for pre-authorizations for service. That was one big area that was very much a manual, or a fax-based, process for a long time. And, more recently, we’re seeing a lot of movement on the payer side as well as the hospital side to automate that, use the transaction standards, move the information back and forth electronically.
Many organizations are leveraging IT to optimize revenue cycle management. What is the role of the hospital or health system CIO in all of this?
I think they need to be engaged with the CFOs and understand the automation and technical resources that are out there to eliminate manual work within several areas of finance, but especially within RCM. Where can things be automated beyond where they are today? If the product or technology is not available within the core processing system that the hospital or system is using, is there a bolt-on out there that will solve this issue and will let me automate and be much more effective and efficient in how I process activities within the revenue cycle? It’s playing a very proactive support role of trying to look at revenue cycle, because a lot of revenue cycle is transactions, pure and simple. So, how do I automate them? How do I pull out and only use people when I need to on an exception basis to fix the things that the machines can’t fix?
With the evolving payment landscape in healthcare, what should healthcare finance leaders focus on right now?
They should be looking for ways to work smarter, not harder. They should be trying to stay ahead of the pressures that the industry is facing to bend the cost curve. So, they should be looking very closely at cost accounting systems and understanding where they can reduce cost and not compromise quality or safety.