As healthcare reform-related reimbursement pressures continue to intensify, the pressure on patient care organizations has mounted, making it critical for them to execute a thorough and efficient revenue cycle management (RCM) system.
Today, hospitals, medical groups, and integrated health systems are facing the twin burdens of Medicare and Medicaid payment changes stipulated by the Affordable Care Act (ACA)—estimated to trigger more than $150 billion in reductions over the next 10 years—in addition to the specter of additional cuts from the Budget Control Act of 2011. Most hospitals have long deployed automated systems to address core processes around RCM, but these legacy IT applications often have out-of-date technology platforms that lack the advanced functionality needed to address new models of care delivery and reimbursement. In addition, the complexity of medical billing and collections has created fragmented workflows across the patient accounts pathway, resulting in gaps and inefficiencies that lead to lost revenue, according to new research from consulting firm Frost & Sullivan.
That research has estimated that the RCM industry is expected to grow significantly in upcoming years; RCM applications and services in U.S. hospitals are predicted to increase in value from $1.9 billion in 2012 to $3.07 billion in 2017, representing more than a 61 percent increase over five years.
Denied billing claims—mostly due to patients being ineligible—accentuate the need for a sound RCM system. Patients who receive care, but end up not qualifying for coverage and cannot pay out of pocket, can cause hospitals and physician practices to lose money, which when added up, and can result in financial burdens to the organizations.
What’s more, managing denied claims can also rack up expenses. Having an up-to-date medical billing service is essential for staying on top of various ACA provisions as well as other laws that deal with healthcare.
The trick about revenue cycle is that it really is a-rip-and-replace solution, says George Hickman, executive vice president and CIO at Albany Medical Center, northeastern New York’s only academic health sciences center, which incorporates the 651-bed Albany Medical Center Hospital. “On day one when you flip the switch, everything has to work if you’re going to get bills out and keep everything working the way it’s supposed to. Here, we had to pull back, clean it out, and then roll it out again. To prepare for that, the team has to be highly integrated in terms of how it behaves to pull this off, and there has to be a lot of accounts receivable and cash collection work,” says Hickman, who is chairman of the board of the College of Healthcare Information Management Executives (CHIME).
The key to a successful RCM system is that it starts the moment a new patient asks for a consultation or his or her first visit with a healthcare provider, and ends when that person’s balance equals zero. But healthcare reform and the push for deficit reduction are forcing hospitals to address long-standing inefficiencies and shortfalls around the RCM process, driving the market for a host of next-generation RCM solutions.
Ellis Medicine, a Schenectady, N.Y.-based 438-bed community and teaching healthcare system, for example, was able to connect three hospitals, including about 25 physician groups, on a single-enterprise revenue cycle solution from Malvern, Pa.-based Siemens Healthcare. “The idea behind the search for an enterprise-wide product was that we wanted a single-source product for all of our clinical information, financial information, as well as the implementation of a centralized business office,” says David Snyder, Ellis’ CIO. “As part of that implementation, it was key for us to have a single enterprise revenue management solution, so there is one call-in point for our customers. This allows them to get all of the data about any of the stays/services that were performed throughout the entity.” Ellis has been able to minimize disruption to its cash flow and has been able to keep the days that accounts stay in accounts receivable (AR) far lower than their pre-implementation baseline, says Snyder.
Emory Healthcare, a six-hospital system in Atlanta, uses Atlanta-based Ingenious Med’s RCM solutions in its hospitalist group. Karen England, CPC, revenue cycle administrator and assistant director of revenue cycle operations at Emory, says the biggest benefit on the new system is that the physician knows what he or she did. “They are the ones who are closest to the charge and to the patient. We also saw more of a collaboration relationship between my team and I, and with the physicians. It wasn’t bad before by any means, but it has become a real partnership. Then we started to get a huge focus on the amount of time it takes to get a charge posted. Because we were still paper-based with notes in the hospital, my coding team would follow the charts around and instruct everything to our physicians. That involved a huge amount of manpower and time. There were too many conversations about it taking too long to get charges in, and why charges were missed.” Now, England says, they aren’t chasing charges, but instead they are helping the physician understand the best and most appropriate way to capture their charges, and then the dollars can be captured after that.
A recent survey of 300 hospitals by the Healthcare Financial Management Association (HFMA) indicated declines in patient revenue and cash on hand. Healthcare organizations must implement strategies to increase cash, such as business office improvement, front-end collections, reduction in aged AR, denials management, and outsourcing to improve self-pay collections, say industry experts.
According to William Hasselbarth, executive vice president and CFO at Albany Medical Center, preparing strategically as well as operationally for health reform and the characteristics that they knew were part of health reform was a huge challenge and something that was crucial to their RCM success. “Strategically, we identified a number of corporate strategies that we would deploy around preparing for the new world (so to speak) of reform and what that entails; but also on the operational side, we knew there were going to be revenue pressures, expense profile pressures, demand for efficiency, and accountability to justify our cost, so we undertook an operational review, identifying areas where we looked at performance improvement,” he says.
One of those areas was revenue cycle, and stemming from that, Albany Medical Center was able to identify plenty of recommendations on how it could implement best practices. “It goes all the way from making sure our clinical documentation is robust to capturing every last clinical indicator and making sure we’re capturing all of that from coding standpoint and revenue standpoint,” he says. “But it was also around denial management, revenue capture, identification and charge capture, AR management, how quickly it takes a bill to go out, how clean those bills are when they go out the door, and the cost to collect. We have a whole list, and we’re making sure we track and optimize our performance around all of those revenue cycle areas.”
One of the big things related to system change was the cultural shift in terms of how revenue cycle operations were conducted, adds Veronica Ziac, director of information technology at Ellis. “The system drove some of those changes—previously we had a lot of fixes going on at back end. For instance, the business office would adjust charges and would change things on a visit to produce clean bills, but a lot of those problems were caused by front end staff (registration error or charge error), and it all ended up back in the business office. It was a poor model, it was hard to manage, and it did not put the right work to the right person at the right time.” The way the system works now, Ziac continues, is that it pushes much of the responsibility to the right place, so you can fix your own errors. “That’s been a huge shift for us, in thinking and in culture; and we have added staff up front to handle those workloads.”
Ziac admits that RCM becomes more challenging every single day. “More recently, one example is the increase in high deductible plans. That is something we have now started to understand the implications of, as we are seeing a downturn in some of our volumes for voluntary admissions and procedures. People are putting off care because they have to pay out of pocket. How do you mitigate that? Your volumes are down but these are people who need service. How do you work that in your business plan?”
Kara Marx R.N., CIO at Methodist Hospital, a 460-bed facility in Arcadia, Calif. feels that the workflow to more tightly align clinical and financial processes is going to be the difference maker, but that’s something that can be challenging right now. “How do we continue to optimize the clinical side and the pieces that help drive that reimbursement?” she asks. “Is it from physician documenting, coding, or dropping off the bill and getting the AR? It just needs to be much more progressive in identifying the points in revenue cycle that create the delays and bottlenecks. Is it registration? Is it identifying a patient’s eligibility when he or she first comes and communicating what his or her responsibility is? To me, integrating and communicating and understanding the role that each of those stops along the revenue cycle path plays can be the difference maker. It’s not all about technology. In fact, technology can get in the way sometimes. It’s about workflow. You have to find partners who align with your goals and identify the whole picture.”
By Oct. 1, 2014, all U.S. healthcare organizations will have to transition to the 10th revision of the International Classification of Diseases (ICD-10). The standard diagnostic tool will not only improve the medical billing process as a whole, but help patients get appropriate coverage and doctors get paid. Revenue cycle teams will have to invest resources and time to master the new coding system, which will affect reimbursement trends and electronic health record (EHR) implementation.
“ICD-10 is huge part of this,” says Emory Healthcare’s England. “We’re working with a team within our information systems group that is working on ICD-10 preparation. I would say that we’re halfway there now. And part of that involves going to our vendors and asking if they will be ready for ICD-10. England spoke highly of Ingenious Med’s readiness, saying a big part of that are the vendor’s enhancements with diagnosis searches. “Our physicians have been saying that it’s a huge improvement as previously, they weren’t able to find anything. I can pull diagnoses all day, but they’re the main ones using the tool. If they can’t find what they need, they won’t use it.”
“What would be nice is if there were vendors who said, ‘How can I help you position to code better?’” adds Marx. “Instead of training physicians for ICD-10 (what it is and understanding it), why don’t we just incorporate it into their workflow today? I want to see vendors say that they are going to sell a physician documentation system that has already taken into consideration ICD-10 and will prompt the physician to document better so when the coders get it, it won’t take as much time.”
To this end, there is still is an industry-wide feeling that people aren’t ready for ICD-10, and from the healthcare system side, that is an accurate sentiment, says Hamilton Shawn, executive director at The Advisory Board Company, a Washington, D.C.-based healthcare consulting firm. “Missing one thing can screw you up and make you fall behind if you and the vendor aren’t aligned. In reality, we’re probably six months behind from where we should be. The Office of the National Coordinator for Health Information Technology (ONC) has told us no more delays before, and now they’re doing it again. So there is a feeling that people have—‘Are we ever going to go through with this?’”
Shawn says that engaging patients and finding a better way to have a financial conversation is crucial for long-term RCM success as well, despite admitting that many patients might not yet be ready. “It hasn’t been a smooth approach so far. I know HFMA is working on that [with its new patient financial interaction guidelines], but it’s time to sit down with them and explaining what’s going on. This is something that is confusing to them, and it will become even more important as we see the road ahead in terms of healthcare reform.”
Looking down the line to what’s coming with us at reform, revenue cycle won’t be the same as we know it, agrees Albany’s Hickman. “We’re going to see a different type of tool suite emerge around how is it that we manage in the world of bundled payments, how is it that we recant our data into other forms so we can do business analytics that we need to better understand bundled payments and population health. “
The Centers for Medicare & Medicaid Services (CMS) recently announced 106 new accountable care organization (ACO) program participant organizations, nearly doubling the national total. But numerous existing patient accounting systems are not currently built to process bundled payments, and most revenue cycle personnel are not trained for this method.
Nevertheless, that is where the industry is heading, says Ellis’ Snyder. “What we’re seeing on the horizon are ACOs directing many of our customers towards plans that they will carry, which will mostly be under a bundled payment model. At the federal and state level, that’s where the guidance is towards. It’s only logical when you look at the percent of the federal and state budget. Economically, when you look at the consumption curve, it’s unsustainable going into the future. We have started a couple pilot tests asking the question, ‘If we are to bundle your customers into some type of collaborative, can we effectively manage care and reduce cost for both the customer and the insurer?’ We need to determine what we need to be proactive rather than reactive, and that’s where healthcare is going.”