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An Estimated $262B in Medical Claims Initially Denied in 2016, Analysis Shows

June 26, 2017
by Rajiv Leventhal
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A new analysis from Change Healthcare has revealed that out of an estimated $3 trillion in medical claims submitted by hospitals in the U.S. last year, an estimated 9 percent of charges—representing $262 billion—were initially denied.

As the analysis showed, for the typical health system, as much as 3.3 percent of net patient revenue, an average of $4.9 million per hospital, was put at risk due to denials. While an estimated 63 percent of these claims were recoverable on average, reworking each denial costs providers roughly $118 per claim, or as much as $8.6 billion in appeals-related administrative costs, according to the research from Change Healthcare, a Nashville-based vendor.

These takeaways were included in the Change Healthcare Healthy Hospital Revenue Cycle Index, published June 26th at the HFMA ANI 2017 conference. “The insights reinforce the tremendous opportunity hospitals have to accelerate cash flow and reduce administrative costs by using advanced analytics to better manage the revenue cycle,” according to Change Healthcare officials.

The revenue cycle index data was culled from a sample of more than 3.3 billion hospital transactions valued at $1.8 trillion, and is based on primary institutional inpatient and outpatient claims processed by Change Healthcare in 2016, and the average charged amount and first denied amount for 724 hospitals in the claims sample. The total claimed charges and denied amounts for the nation’s 5,683 hospitals was then extrapolated from this sample data. An appeal success rate of 63 percent for hospital customers and average reimbursement rate of 29 percent were used to calculate the amount denied.

“Eye-opening insights like these are only possible with advanced analytics and revenue cycle tools that let you identify the root causes of denials, and implement and automate practices that prevent them,” Marcy Tatsch, senior vice president and general manager, reimbursement and analytics solutions, Change Healthcare, said in a statement. “You can’t fix what you can’t see. But by reinventing the revenue cycle with analytics, a hospital can improve its success rate in appealing denied claims and increase how much revenue is recovered—not to mention reducing the number of denials in the first place.”

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Four Ways RCM Must Transform for the Shift to Value-Based RCM

January 10, 2019
by Parag Shah, Industry Voice, President, Practice Solutions, Integra Connect
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Value-based care is driving transformation of many established operations within medical groups—and the revenue cycle is no different

It is likely that 2018 will be remembered as the year that value-based care became a financial reality for most U.S. medical practices. Those participating in MIPS (the Merit-based Incentive Payment System) received their first round of results and a view of the impact on future reimbursement rates.

Specialists taking part in advanced alternative payment models (APMs) such as the Oncology Care Model (OCM) program were also provided performance reports from CMS, in some cases accompanied by unexpected claw back demands. Finally, commercial payers such as UnitedHealthcare and Aetna promoted research and forecasts attesting to the increasing influence of value-based contracts in the reimbursement mix.

A recurring theme of value-based care is the need for practices to undergo transformation and adjust their practices, clinically and operationally. But how should they transform financially?

Revenue cycle management (RCM) has been the primary process by which practices ensure they are fairly and fully reimbursed for the care they provide to patients. In a fee-for-service system, the process is straightforward at a high level—ensure encounters are properly documented in the electronic health record (EHR), submit corresponding claims and follow through to payment. Now, with revenue streams dependent on new quality and cost performance measures, benchmarks compiled from peer groups, episode costs beyond practice walls and more, forecasting payment has become much more challenging. While fee-for-service reimbursement is not going to vanish, the shift to value-based care requires practices to revisit their existing RCM approaches and evolve them in four primary areas:

  1. Optimize based on value, not just volume. Practice financial performance once depended primarily on the “top line” of patient encounters, both the number of them and the type of services delivered. This, in turn, led to a focus on the up-front accuracy of claims, not to mention the efficiency of provider and office workflows.

By contrast, value-based programs including MIPS and APMs identify specific quality, cost, and other output measures upon which reimbursement levels depend. Therefore, optimization now also involves: 1) facilitating the accurate capture of the inputs from which measures are calculated and ensuring complete and timely submissions; 2) noting payer or peer group benchmarks, when also considered as part of performance; 3) partnering with clinical peers to identify those measures for which the practice is likely to over- or under-perform and creating financial scenarios based on likely outcomes; and 4) for areas of under-performance, working with clinical peers to address the root cause of negative outliers and drive continuous quality improvement.

  1. Minimize risk, not just denials. Financial downside in fee-for-service RCM often presented in the form of unwarranted payer denials. As a result, practice teams took pains to ensure clean claims up front and continued engagement through the approval process.

As value-based contracts grow, financial leaders must also anticipate and model the new risk factors that could negatively influence future practice revenue. Actions include projecting reimbursement levels as a result of various performance scenarios under MIPS; potentially putting aside bundled payment income until payer reconciliation is complete; or invoking stop-loss insurance as protection in two-sided risk models.

  1. Shift focus from in-office encounters to care delivered across all settings and conditions. For the most part, fee-for-service revenue cycles focused on the encounters between providers and patients that occurred between a practice’s four walls. Many value-based care models instead involve accountability for total episode costs, which can be driven by patient visits to other settings (e.g., EDs and urgent care), other providers (in the case of co-morbidities) and other treatments, including those received in the home. Revenue cycle teams will be important drivers in ensuring that proper integrations and interfaces are established to other systems in which such data resides, as well as partnering with clinicians in establishing the financial need for new practice capabilities that increase performance in the areas of expanded scope – for example, care management efforts that will focus on treating patients based on risk and with a holistic view of their “whole person” care. 
  1. Move from retrospective to real-time reporting and action. The primary KPIs by which practices measured revenue cycle performance were largely retrospective in nature: net collections, days in A/R, denial rates, and cost to collect, to name a few. Dashboards, therefore, also looked back and compared historic performance across defined periods of time—with an eye on future improvements. Practices could remediate issues with the next group of claims.

Value-based care models often involve sizeable performance periods with high revenue impact—for example, six months in an APM such as the Oncology Care Model—and payers share results long after practices have any ability to address issues. The revenue cycle therefore needs to implement the ability to monitor performance at a detailed level in real-time. This speaks to the need for a new foundation of data management that pulls from all the relevant clinical and financial sources that impact quality measure performance, harmonizes it and enables a layer of advanced analytics. These analytics should include both timely dashboards and the ability to run custom reports, all with the ability to drill down to the level of individual patients, providers, and practice locations to permit the identification and targeting of interventions when needed.

Value-based care is driving transformation of many established operations within medical groups—and the revenue cycle is no different. Taken together, the four steps outlined in this article point to an expanded role for the financial leaders in medical practices. The tendency for some to treat RCM as a back-office function will give way to a new collaboration with clinical peers at the forefront of the practice, modeling, tracking, and designing responses to the scenarios upon which overall financial health will depend.

Parag Shah is president, practice solutions at Integra Connect. The practice solutions division manages client engagement and delivery across all provider-facing solutions.

 


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Survey: Healthcare Organizations Skeptical of athenahealth, Virence Merger

December 3, 2018
by Heather Landi, Associate Editor
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Healthcare organization leaders are expressing some initial skepticism about the merger of athenahealth with Virence Health Technologies, as a result of Veritas Capital and Elliott Management’s recent acquisition of athenahealth.

Current customers of the two vendors say they are in “wait and see” mode following the merger of the two companies, however, the majority of non-customers say they do not plan to purchase health IT technology from the combined company, according to a new survey from Reaction Data, a market research firm focused on the healthcare and life sciences industries.

The Reaction Data survey gauges how patient care organization leaders are reacting to the acquisition of athenahealth by Veritas Capital and Elliott Management, and the subsequent merger with Virence/GE Healthcare. While mergers and acquisitions in healthcare are becoming the new normal, the merger of Virence/GE Healthcare and athenahealth is unique, the report states.

In July, Veritas Capital acquired GE Healthcare’s revenue cycle, ambulatory care, and workforce management product lines, and then several months later rebranded it as Virence Health Technologies. On November 12, private equity firm Veritas Capital and hedge fund Elliott Management announced the acquisition of athenahealth, the Watertown, Massachusetts-based electronic health record (EHR) and practice management vendor, for $5.7 billion,

Following the deal’s closing, Veritas and Evergreen Coast Capital, a subsidiary of Elliott Management, expect to combine athenahealth with Virence Health. The combined business is expected to be a leading, privately-held healthcare information technology company with an extensive national provider network of customers and world-class products and solutions to help them thrive in an increasingly complex environment, the companies said in a press release.

The deal concludes a six-month acquisition process and a tumultuous period for athenahealth and its leadership. Elliott Management, the sometimes-activist fund run by billionaire Paul Singer, has put pressure on athenahealth leadership to take the company private or explore a sale since the hedge fund acquired a 9-percent stake in the company in 2017.

For the survey, Reaction Data collected feedback from patient care organization leaders about how aware the market is about the M&A event and an analysis on how likely the newly combined company will attract, or repel, new business.

Of the respondents, 22 percent are practice administrators, 18 percent are CIOs, 12 percent are chief financial officers (CFOs) and the remaining respondents are chief medical officers, CEOs, physicians, chief nursing officers, medical directors and chiefs of staff. Thirty-two percent of respondents are athenahealth customers, 19 percent are Virence customers and 49 percent aren’t customers of either company.

While Veritas acquired several important product lines from GE Healthcare six months ago, less than half of respondents (44 percent) were aware of that M&A event. Conversely, the majority of respondents (60 percent) are aware that Veritas and Elliott Management are acquiring athenahealth and plan to merge it with Virence (GE Healthcare).

Looking at overall impact, 45 percent of respondents are neutral on the impact of the merger, while 26 percent expressed a positive opinion and 29 percent have a negative opinion on the merger. Half of respondents who are current customers (51 percent) say they are in “wait and see” mode when it comes to sticking around for the long haul, with the remaining respondents are equally split between leaving (25 percent) and staying (24 percent).

“Reassuring the customer base that integration pains will be minimized and that investment and support will continue will be key priorities for the new ownership team,” the report says.

The rest of the market (non-customers) is another story. As of right now, the majority (57 percent) state they are unlikely to consider Virence or athenahealth for future purchases. Thirty percent of non-customers are in “wait and see” mode.

“While, at present, this certainly isn't an optimistic result, if the new owners execute the integration at a high level, word will quickly get out that the new combined entity truly is greater than its individual parts and the pendulum will swing back in its favor,” the report says.

The report authors also note that skepticism among healthcare organizations is expected among healthcare M&A deals. “Enough of these events in healthcare have gone south that it's perfectly reasonable for customers, and the market alike, to be professionally skeptical about its future. However, it should be noted, that these are two sizable companies brought together by two world-class private equity firms so it is entirely possible that this new company will emerge as a truly formidable competitor to industry titans Cerner and Epic,” the report authors wrote.

Related Insights For: Revenue Cycle Management

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Survey: Providers Remain Challenged with Optimizing Revenue Cycle-Related EHR Functions

November 29, 2018
by Rajiv Leventhal, Managing Editor
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Healthcare providers continue to focus on technology to spearhead revenue cycle improvements, but remain challenged with optimizing electronic health record (EHR) functionality, according to new research from consulting firm Navigant and the Healthcare Financial Management Association (HFMA).

The survey of 107 hospital and health system chief financial officers and revenue cycle executives, released this week, found that 68 percent of respondents said their revenue cycle technology budgets will increase over the next year, down from 74 percent last year.

Results also showed that, compared to last year: 39 percent fewer executives project a budget increase of 5 percent or more; and 53 percent more executives predict no change to their budgets.

However, this slowing of IT spending does not mean providers are satisfied with their current EHR functionality, researchers noted. Fifty-six percent of executives said their organizations can’t keep up with EHR upgrades or underuse available EHR functions, up from 51 percent last year.

Further, 56 percent of executives suggested EHR adoption challenges have been equal to or outweighed benefits specific to their organization’s revenue cycle performance. Both hospital-based executives and those from smaller hospitals cited more challenges than benefits, compared to health system and larger hospital executives. This is likely due to greater capacity and scale in health system and larger hospital IT departments, researchers concluded.

“Hospitals and health systems have invested a significant amount of time and money into their EHRs, but the technology’s complexity is preventing them from realizing an immediate return on their investments,” Timothy Kinney, managing director at Navigant, said in a statement accompanying the survey. “When optimized correctly, a good portion of the ROI can come from EHR-related revenue cycle process improvements.”

When asked which revenue cycle capability their organization is most focused on for improvement over the next year, most executives (76 percent) once again selected technology-related capabilities. Revenue integrity continues to be the top area of focus among them, cited by 24 percent of executives who noted such revenue integrity program benefits as reduced compliance risks, and increased revenue capture and net collection.

The survey results also showed that, compared to last year, EHR optimization as an improvement priority rose from 15 percent to 21 percent, while physician documentation fell from 18 percent to 12 percent.

What’s more, even though providers do appear to be better prepared to address consumer self-pay, the area continues to be an issue, the research revealed. Eighty-one percent of executives said they believe the increase in consumer responsibility for costs will continue to affect their organizations, down from 92 percent last year. Among them, 22 percent think that impact will be significant, compared to 40 percent last year. Executives from health systems and larger hospitals believe their organizations will be more heavily impacted by consumer self-pay.

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