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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."

Having a third party managing the software brings other advantages. Any changes issued by payers such as Aetna (Hartford, Conn.), Medicare, UnitedHealthcare (Minneapolis), and Blue Cross Blue Shield of Virginia (Richmond) regarding billing codes, for instance, are automatically incorporated into the software to remind staff to make modifications to their submissions.

Additionally, since using the software Louise Obici files more than 90 percent of claims electronically, with the remainder being sent via mail by Payerpath, she says. Removing the burden of mailing bills has freed up staff for other projects.

The return on investment has been impressive, with total monthly cash collections increasing from an average of roughly $6.4 million in 2004 to $8.4 million in 2005, she says. The gross accounts' receivable days dropped from 57 in November 2004 to 45.3 in November 2005, says Cason, and a staff reallocation allowed for two of her four billers to be reassigned to the task of following up on problem accounts.

At Winchester Physician Associates, Winchester, Mass., a 15 clinic practice with 34 physicians, the implementation of hosted software from athenahealth, Inc. (Watertown, Mass.) seems to have substantially improved revenue cycle management. Ted Sullivan, director of physician services, likes the ability to drill down through the software to find data and run reports on collections, denial claims, productivity and scheduling loads — which revenue cycle performance measures at every clinic.

"Only one person knew how to run reports on the old system, and it was torture," he says. "Now the practice managers in each clinic can run reports easily."

The software has also changed the clinics' workflow. Physicians and staff try to collect co-pays from clients upfront and now routinely hand them an envelope if they cannot pay at the time of their visit. A "hold bucket" stops the processing of claims with omissions and errors, alerting staff and physicians they need to take some extra steps to get the paperwork right, says Sullivan.

After one year, athenahealth's Web-based solution provided an interesting variety of results. The physicians and staff have much greater accountability for claims, in part because they receive merit bonuses based on the accuracy of their billing, says Sullivan. Meanwhile, the billing department went from 22 employees to seven and the accounts receivable cycle and collections jumped by 6 to 8 percent over the old system.

Patients seem more satisfied, as do staff. "We have a culture of collecting the money for services, and we're seeing benefits," says Sullivan. "We are starting to expand our marketing to prepare for practice growth, and our physicians are happy with the new system because they're making more money."

Web-based software products recently introduced by DaVincian Technology, Inc., Austin, Texas, are being used by Perot, Certus Corporation (Greenwood Village, Colo.) and other clients to help healthcare institutions prevent and manage rejections and denials.

Meridian accepts challenge

Meridian Health (Neptune, N.J.), a multi-hospital and clinic system with revenues of $725 million annually, began using DaVincian's "Challenger" (denial management) and "Guardian" (denial prevention) in June 2004 to make improvements in registration and coding in its system, says Judy Hebble, director of access management.

Under HIPAA regulations, which not all insurers have embraced, denials should be electronically transmitted to providers using a form known as "835s" in the lexicon of HIPAA. Meridian first submits claims to insurers through its Siemens' "Invision" health information system. Any claims denied electronically are downloaded into the DaVincian software, she says, where it helps detect trends in denials and suggests rule changes the health care system may want to deploy in registration or other areas to avoid future problems.

"You might see a rule that says for this MRI (magnetic resonance imaging) you need this pre-authorization, and that's why you had a denial," explains Hebble. "The software asks if you have that rule or points out that there is a new rule from an insurer."

Typical of academic health centers, the UIHC is a very large operation composed of 284 subspecialty clinics, 700 physicians and a relationship with the Carver College of Medicine. All physician and hospital services get billed through one central business office. In 2003, Klitgaard and his staff decided IDX's Flowcast would have a starring role in bringing in new revenue.

"You can set up the system to do what you want it to do, and we agreed that one of the main things we wanted it to do is to be able to bring in new money," says Klitgaard. "We also saw that one of the most important aspects of the project would be Flowcast's online work tools, which the old system did not have."

The IDX system incorporated 62,000 scheduled appointments, 1.5 million patient records and three years of associated visit history, 15,000 outstanding referrals and 800 unbilled in-bed visits.

But it did not catch fire immediately with users — far from it. "The first six to nine months were no fun, we were well behind where we wanted to be," he concedes. "The first three to four months were really rough as we learned the software, and I will say there was some doubt there. But we kept saying it would get better — and it did."

Part of the problem was the sheer size of the user base. Working with IDX personnel, the hospital trained more than 2,700 end users before the software went live. "That's the equivalent of training half the population of the town I grew up in," Klitgaard says.

Improvements in the hospital's redesigned workflow have resulted in days in accounts receivables dropping from 70 to 58 at the hospital, and from 71 to 54 in the faculty practice plan. The hospital submits around 75 percent of its bills electronically, a move clearly intended to increase compliance with HIPAA's electronic submission mandate. The hospital digitally copied older patient records and removed paper records. Accuracy improved in billing, with an increasing number of charges captured.

With more money flowing in, the hospital has begun entertaining new capital projects. Though Flowcast has been a success, Klitgaard recalls that during the implementation stage "it was tough to keep people behind it." Today, in contrast, "We're continuing to go after what is owed us by documenting all services," he says. "The cash on hand is always getting better."


Author Information:


Frank Jossi is a freelance writer based in St. Paul, Minn.


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