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Releasing Revenue Cycle Potential

March 1, 2004
by Ken Saitow
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IT managers have a critical role in organizational efficiency.

Despite years of emphasis on financial performance, many otherwise well-run healthcare organizations still don't achieve optimal revenue cycle potential, often because they're not being paid for services rendered. Process breakdowns, the likely cause, can cost organizations as much as 4 percent of annual net revenue. But administrators might not realize they're using traditional IT systems ineffectively.

One way to increase revenue is to redesign the cycle into a holistic process--beginning when service is scheduled and concluding when correct payment is received. This requires capitalizing on technology investments already made and, possibly, deploying point solutions or enterprisewide technologies. Technology isn't necessarily the complete answer, but it can help maximize processes and workforce effectiveness. Its proper use can add $8 million or more annually to the bottom line of an organization operating at $400 million net revenue.

Evaluating existing systems
By examining internal and external revenue processes (e.g., payer follow-up, insurance verification) and prevalent problems involved, IT managers can help restructure systems to work together across the revenue cycle rather than as discrete steps within departments. As system deficiencies are revealed, managers can address them in a step-by-step approach.

A prudent first step is to assess information systems. Do they promote the flow of accurate information, or do aging or substandard systems contribute to process problems? If system replacements are necessary, the IT manager should plan to implement the change to optimize fundamental revenue cycle processes. Often, however, all that is needed is to fully leverage the systems already in place.

Workflow requires close examination, because handoffs between key steps in the revenue cycle frequently lead to critical process breakdowns. For example, information is often captured by multiple methods--fax, email and voicemail--resulting in labor inefficiencies, inaccuracies and lost accounts or bills. With full utilization of the existing system, data flow can be facilitated via strong bridges between departments or point solutions that go beyond processing transactions by aggregating data to provide consistent drivers that expedite workflow.

Another area requiring scrutiny is reporting--the system's effectiveness in aggregating data to provide accurate information and allow a real-time, comprehensive view of revenue cycle functioning. In a fully leveraged system, reports clearly depict what's going on at departmental levels across the organization. Reports also should identify accounts with the highest potential for significant return.

Another critical question is where process breakdowns occur. How well does the system provide an accurate and timely picture of overall revenue cycle health? And does it extract the information decision-makers need to improve processes? Knowledge of where existing technology is efficient and where capabilities can be further maximized allows application of solutions that precisely align with a well-functioning revenue cycle across the enterprise.

A wealth of benefits
Standardized information exchange enhances communication in hospitals and reduces unnecessary steps in daily work. Evaluation of existing systems with the revenue cycle in mind can reduce costs by decreasing staff and resource requirements. It can improve charge capture and entry-to-billing times. And it generates productivity gains through having the right information available, tracking performance and managing to a standard.

The need for healthcare IT to achieve consistent, predictable outcomes is growing. IT managers contribute to health systems' efficiency by helping reduce errors and streamlining electronic infrastructures. Realizing the revenue cycle's full potential holds great promise for an organization's financial stability.

Ken Saitow is director, information systems and new service development, Stockamp & Associates, Portland, Ore.

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