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RCM Payoffs Add Up

June 1, 2007
by Daphne Lawrence
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Many hospitals are finding that RCM management solutions are lucrative investments which allow for adding revenue and subtracting time

Tom Gavinski

In 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 Temple

Worklists 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 Mohnk