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Getting Paid

March 1, 2006
by Frank Jossi
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Providers are investing in revenue cycle management software to keep cash flowing into their coffers.

Two years ago, the University of Iowa Hospitals and Clinics (UIHC) in Iowa City decided to dump its antiquated revenue cycle management software and begin using a new system called Flowcast from Burlington, Vt.-based IDX, now part of U.K.-based GE Healthcare. The new software has apparently more than paid for itself, having brought an additional $171 million into the hospital's coffers from March 2003 to July 2005 and improved billing operations throughout the 762-bed institution.

"It's had a large impact," says Christopher Klitgaard, director of the Joint Offices of Patient Financial Services at UIHC. "We have 30 percent more cash than we would have captured using the old system."

Revenue cycle management (RCM) software has grown in popularity over the past few years as healthcare providers scrambled to increase collection of accounts receivable and reduce the time required to receive reimbursements from private and government insurers. Moreover, the software helps providers abide by the Health Insurance Portability and Accountability Act (HIPAA) which encourages them to submit billings electronically.

With healthcare costs escalating, providers have begun to look for software and strategies which "will bring down their costs and make collection much more effective and efficient," says Jim DeFrancisco, vice president of Revenue Cycle Solutions for CareTech Solutions, Inc., Troy, Mich.

The industry has responded with a host of products intended to stop inaccurate claims before they get submitted to payers, decrease the number of days a bill remains in accounts receivable and increase the capture of charges for treatment rendered by providers. The RCM software can also lead to greater productivity by changing the workflow of patient financial services' departments and can assist in reducing claim denials.

Access denied

The Advisory Board — a healthcare consultancy in Washington, D.C., which offers clients software tools and a best practices approach to RCM — has studied more than 100 of its hospital customers and found they routinely suffer a 9 to 11 percent loss of revenue due to denials. Losses can be mainly attributed to denials by insurers, underpayment of claims, "data anomalies" caused by contract errors between hospitals and payers and other assorted issues, says Hamilton Shawn, practice manager in research and best practices.

More money, of course, means providers can plan better for the future, says Jeff Kao, senior vice president of IDX. Emboldened by more predictable and higher cash collections, many institutions that have implemented RCM software and services are looking at funding new capital projects to increase their ability to compete in the marketplace, he says.

Typically, RCM providers offer their services in three ways. The first sees healthcare institutions retaining control of their revenue cycle using internal employees and sophisticated software packages from a variety of vendors serving various market niches. In a slight derivation of this scenario, some providers contract with outside consultants that specialize in revenue cycle management to improve their institution's performance.

A modern RCM platform in hospitals is not all that common. "Most hospitals have a revenue cycle system that's home-grown and jerry-rigged and doesn't allow them to drill down much on data," says Scott Fassbach, chief research officer for the Advisory Board. "Only a minority of them have purchased the new whiz bang (revenue cycle) systems."

A second method is to outsource the entire accounts receivable department to vendors such as Dallas-based Perot Systems, Inc. or EDS, Plano, Texas, among others. Employees who want to stay in their jobs can become part of the outsourcer's staff. Outsourcing proponents believe companies that have an expertise in revenue cycle management will outperform an internal staff.

Finally, the third approach to RCM involves having revenue cycle applications hosted remotely. Several companies provide the service, among them Payerpath, Richmond, Va. (recently acquired by Misys Healthcare Systems, Raleigh, N.C.) and NDCHealth Corporation, Atlanta, Ga.

A closer study of institutions using software devoted to improving their revenue cycle reveals a long list of strong results, from smoother workflow to greater cash in hand.

Obici's chosen path

The 138-bed Louise Obici Hospital in Suffolk, Va., had been using Web-based accounts receivable software when Brevonda Cason joined the staff as its patient accounts director in 2004. She decided to shift the department to Payerpath's revenue cycle product based on her experience with the product at a prior job.

"I like using Web-based software because it offers easy access anytime, anywhere, and you can send out bills from wherever you are," says Cason, who routinely checks the billing operations when she's on the road. "You don't need to be here at the hospital to get the work done."