June 11, 2007

Bottom Line Bonanza — Five Ways to Improve Receivables
By Selena Chavis
For The Record
Vol. 19 No. 12 P. 16

Tired of rejection? Industry experts explain how healthcare organizations can keep denials to a minimum.

Effective management of accounts receivables has been a major focal point of the healthcare industry since the turn of the century as hospitals seek ways to improve the bottom line in an era of leaner budgets and tighter profit margins. In fact, in the 2007 Healthcare Finance Outlook, sponsored by the Healthcare Financial Management Association, research revealed that revenue cycle improvement was currently a top concern among chief financial officers in healthcare environments.

More specifically, the top two concerns named by CFOs were simplifying charge systems and understanding and improving performance related to key indicators in the revenue cycle. Another high-ranking revenue cycle concern was capturing full and accurate charges to avoid claims denials.

Given the complexity of today’s payer provisions, industry professionals are quick to say it’s no surprise revenue cycle management ranks high, especially since industry statistics reveal that many hospitals lose millions of dollars each year to claims denials and delays. And it only takes one small registration, coding, or billing error to send a claim right back down the pipeline to the provider, making the task of overcoming denials a monumental undertaking for many organizations.

In this article, a number of technology vendors and industry professionals have been asked to weigh in on the primary causes of payment delays and offer potential solutions. On issues ranging from staffing shortages and inadequate technology to lack of training and confusing billing practices, these experts offer advice on how to reduce hospital receivables and improve the revenue cycle.

1. Equip the Front End
According to Vincent Farina, senior manager with BESLER Consulting, a large share of the mistakes associated with claims denials happen at the first point of contact.

“Those mistakes will eventually cause a billing delay … that will lead to a denial,” he says. “It’s all about having the systems and tools in place that front-end staff can use.”

Farina notes that many healthcare providers are realizing the key to an effective revenue cycle strategy that will increase cash flow and reduce administrative denials begins at the patient access area. They also realize that the traditional patient access model needs to be updated to incorporate contemporary patient access, quality assurance, and training programs. “These programs greatly improve the accuracy and completeness of registration information through a meaningful educational approach and the means to track, address, and resolve impediments to eliminating claims denials,” he adds.

In an effort to reduce overhead costs, Nanda Krish, president and CEO of Boston-based technology vendor Mirrus Systems, says that many hospitals may be tempted to reduce staffing or consolidate functions on the front end. “Institutions investing in the right training for people and the right amount of people in the front office will be more successful,” he notes, adding that efforts by many healthcare providers to consolidate patient access functions have resulted in an increase in denials because error rates increase.

Farina says effective training programs and the provision of up-to-date electronic tools can immediately improve the front-end registration process and reduce denials. “A lot can be done via the Internet now,” he emphasizes, adding that online portals now exist to expedite activities such as verifying insurance benefits, obtaining authorizations, and identifying the patient’s payment responsibility. The availability of online reference manuals can also keep staff from having to thumb through cumbersome hard copy books. All too often, the patient access department lacks the technology it needs to perform successfully, he says, adding that registration staff should have Internet access. “It’s like this barrier that we run across with some facilities. It’s trying to change the mind set of the individual,” he says.

Acknowledging that most facilities have implemented some type of training program for front-end staff, Farina suggests that healthcare organizations should not assume employees are fully equipped to impact the denial rate. Training and staff development can also have an added value of contributing to higher job satisfaction and lower staff turnover. “Having someone go into a training class every six months is crucial to success,” he says. “It produces a more content individual doing the job.”

2. Take Advantage of Technological Advancements
It may require some extra dollars up front, but consultants and experts agree that investing in the most up-to-date technology can bring significant improvements in the reduction of claims denials. According to Farina, all hospitals should be implementing solutions that allow revenue cycle processes—such as coding, billing, and reimbursement—to be managed electronically.

Research reveals that hospitals are able to efficiently reduce costs, increase revenue capture, optimize labor, and improve process management by aligning themselves with the electronic age. The method of claim delivery makes a difference, as well as in accuracy level and processing time. A survey completed by the Health Insurance Association of America found that an average of 94% of claims received electronically from hospitals was “clean” as opposed to 87% of paper claims.

According to Cheryl D’Amato, director of HIM with Minnesota-based technology vendor Ingenix, common sources of denials include improper documentation, lack of medical necessity, and improper coding. Electronic solutions can minimize some of these common errors, she notes.

By offering official language for documentation or prompting for the “billability” of certain codes, the technology can address issues associated with documentation that improve coding practices. When it comes to medical necessity checks, electronic coding solutions currently available on the market provide online access to updated and active local medical review policies, local coverage determinations, and national coverage determinations.

According to David Hammer, vice president of revenue cycle solutions with McKesson Provider Technologies, managing the revenue cycle through electronic processes means that HIM professionals are no longer waiting for paper. “The solution provides instant access,” he says. “Right there, that takes out one of the hidden delays.”

3. Build Logic Into the Workflow
Most new technology geared toward improving the revenue cycle will offer some kind of analytics that can help build logic into the workflow. For example, with the electronic submission of claims, facilities will receive denials electronically, accompanied by a reason code. Because the information is already integrated into the electronic system, the technology can then be used to expedite the process of addressing the issue. “Build in logic [through the technology] so that the denial is routed to a person [who] can most efficiently address the issue,” Farina suggests, adding that subcategories could include clinical, coding, or billing. “Instead of creating one major area, you are subsetting denials into specific categories.”

Offering a real-life example, Farina says that a large ambulatory care center with multiple specialties employed this logic and reduced outstanding denials from 120 days to approximately 45 days within four months. “They saw some immediate return,” he says.
Payment delays related to HIM departments typically occur in what Hammer refers to as the “midstream” segment of the receivables cycle. Often, it becomes an issue of managing the discharged-not-final-billed (DNFB) area. “Payment delays related to HIM can come when that whole DNFB segment gets to be too big,” he emphasizes, noting that the application of analytics technology can help HIM departments control this area and accelerate the release of claims to the billing department.

Typically, technology can analyze accounts in a DNFB status to surmise the root cause for delay, determine areas in which improvement will have the greatest impact, and recommend action items and initiatives to reduce the DNFB level.

Workflow and analytics components can also help HIM departments work claims in descending balance order. “All too often, these departments are stuck on the old ‘first-in, first-out’ rule,” Hammer notes. “An advanced HIM application can let management define the way that claims ought to be worked. I’ve been surprised in my experience at how few departments have fully embraced the concept of workflow management.”

Workflow management solutions can also capture errors as they move through the system and edit them along the way. According to Krish, a patient may enter the system coded one way, but the diagnosis can often change as the patient undergoes tests. Analytical systems can be implemented to assess what is happening with the patient and make edits while HIM is doing the coding. “Healthcare seems to be more paper intensive with silos between different organizations,” he notes. “People are not talking across walls.”

According to D’Amato, organizations can also build logic into back-end processes that help determine when certain claims are no longer necessary due to coding changes.

4. Implement Solid Coding and Documentation Programs
Inappropriate documentation remains a hindrance to timely submission of claims from the HIM department, according to D’Amato. “It slows down the process because HIM then needs to query the physician,” she says, noting that many institutions are implementing documentation improvement programs to address the issue. Add high turnover rates and difficulties in finding qualified coders, and the need for solid training initiatives around coding and documentation is apparent.

“The shortage of coders has really taxed the industry,” she says.

The greatest challenge for coders is keeping up with the most current release of information from various entities, including the Centers for Medicare & Medicaid Services, fiscal intermediaries, and the American Medical Association.

Farina suggests specifically assigning someone to keep up with industry changes and train other employees as needed. “It’s maintaining feelers out there for real-time issues,” he emphasizes. “Some might shift a biller into a training role to address issues over industry changes.”

Management and upkeep of a charge master is also key to an effective coding program and compliant billing practices, says D’Amato. A master list of services, supplies, and drugs used for patient care, a charge master contains the associated HCPCS or CPT-4 codes and revenue codes listed with each service, supply, or drug. This information is used to automatically generate detailed coded information in the required file format for billing. “If charge tickets are not accurate, it’s going to cause a decrease in revenue,” D’Amato says, adding that staff should be trained to do regular audits of changes and apply revisions as needed.

Another challenge to coding productivity comes in the form of identifying and managing severity diagnosis-related groups (DRGs), subclasses of diagnoses that increase revenue opportunities, as well as coding complexity.

“In every hospital, we recognize that it’s going to take a little longer than ‘same day’ to get these charges posted to accounts,” Hammer says, adding that best practice timeframe runs between two and four days. “You would want an HIM department to spend the extra time for effective documentation.”

He notes that some workflow technology has the ability to provide workflow data packets. “This ties back to the idea of [severity DRGs]—you can use the technology to teach the system what kinds of [data] are necessary to accurately define the [severity DRG],” he suggests. “Workflow data packets can be defined to help ensure that all necessary info is present for coders when they receive charts. Data packets define required elements for coding to begin and be completed.”

5. Implement Uniform Billing Practices
Because there is so much opportunity for quicker turnaround of receivables, Farina says that facilities should require every payer to accept electronic billing. “It’s hard to believe that you still have facilities billing hard copy,” he says, noting that in most cases, speed of payment can be doubled by electronic processes. “There’s a huge payment delay when you go hard copy.”

He says that when healthcare organizations initiate contracts, they should place the burden of meeting the facility’s payment-method requirements on the payer. “They are allowing the payer to dictate the language of the contract,” he says. “Facilities will agree to bill one way with one company and a different way with another.” Farina notes that hospital systems often may not be designed for a particular kind of billing, causing delays and confusion.

For those facilities that already have contracts in place requiring varied billing practices, Farina suggests implementing contract management software to ease the complexity of the process.

— Selena Chavis is a Florida-based freelance journalist whose writing appears regularly in various trade and consumer publications covering everything from corporate and managerial topics to healthcare and travel.

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Key Performance Indicators

David Hammer, vice president of revenue cycle solutions with McKesson Provider Technologies, offers the following as a target for performance indicators related to the revenue cycle and denials:

• Overall denials rate as a percent of gross revenue: < 4%

• Clinical denials rate as a percent of gross revenue: < 5%

• Technical denials rate as a percent of gross revenue: < 3%

• Rate of additional collection for underpayments: > 75%

• Rate of appeals overturned: 40% to 60%

• Electronic eligibility rate: > 75%

• Physician precertification double-check rate: 100%

• Case managers’ time spent securing authorizations rate: <
20%
• Percent of high-revenue managed care contracts modeled (80/20 rule): 100%

• Total denials reason codes: < 25