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From the June 2003 Issue |
Revenue Recovery Rhode Island healthcare system uses contract management technology and services to recover unpaid millions. By Nadeen LaFleur with Debra Koziol
That’s a tough job made tougher when these dedicated employees don’t have the necessary tool set to do their jobs. When it comes to collecting and making money for an organization, manual systems are financial employees’ worst nightmare. That’s a situation that our organization experienced firsthand—and corrected with enviable results. Lifespan health system, located in Providence, R.I., is a not-for-profit system overseen by a board of directors and volunteer community leaders. Formed by the consolidation of Rhode Island Hospital and The Miriam Hospital in 1994 and Newport Hospital in 1997, Lifespan is Rhode Island’s first integrated, multifacility health system, servicing almost 500,000 inpatient visits annually. With the creation of Lifespan, system administrators faced the task of integrating three hospitals, and one of the first departments to be integrated was patient financial services. Our goal was to ensure that all of the financial systems and contracting were the same throughout the enterprise. Our administration saw the consolidation as an opportunity to install a system that would not only help in the recovery of lost revenues, but would also bring consistency to the revenue recovery process for all hospitals in the system. Identifying Our Needs Using a largely manual process, Lifespan had difficulty recovering funds and managing contracts with payers. Essentially, we worked on faith that third-party payers were paying us correctly. We knew we needed a contract management system, but we also knew that installing one would present its own internal challenges to what was still a new enterprise. Each member hospital in the system had different contract terms. The number of payers and payer contracts per hospital ranged from 10 or 12 to several hundred, covering an array of health plan variations such as indemnity, semi-indemnity, Medicare, PPO, HMO and POS plans. The patient financial services department was not adequately equipped to handle follow-through with third-party payers to recover lost funds. The research and manual effort necessary was labor-intensive and time-consuming. For each case, the healthcare system’s financial staff had to prove to the payer that discrepancies existed, which meant gathering actual financial and payment documents and building a case for reconsideration. Our staff had neither the contracts knowledge to handle this type of laborious revenue recovery nor the IT systems needed to streamline it. In a few instances where we had received payments for services, we would later uncover evidence that the amounts paid were incorrect; then we would have to backtrack and manually initiate building a case for securing re-payments. Because all reimbursements were based on contract estimates only, we lacked the ability to track for actual reimbursements. Information on case volumes, length of stay, medical/surgical days, ICU/CCU days, and outliers/carve-outs came from a variety of different systems—and these systems didn’t talk to each other. Finally, our staff had minimal understanding of contract verbiage and terms. They needed more contract management training and better technology tools. Taking the Plunge Overall, we wanted to more accurately identify payment discrepancies and more easily locate the needed documentation to resolve payment disagreements, so we began investigating an automated system to assist in payment variances. Rhode Island Hospital, the Miriam Hospital and Newport Hospital had been Siemens customers before the consolidation—and we recognized the advantage in having a vendor that knew the hospitals intimately. Because dollars were already invested in Siemens’ registration and patient financial services software, we anticipated less of a learning curve if we stayed with a familiar vendor. We needed an application we could use from a desktop. Ultimately, we decided in May 1999 to implement Siemens’ contract management application and to engage with Siemens Global Services organization for related contract management administration and recovery consulting services. The contract management solution was a Unix-based client/server platform that supports Microsoft Windows 2000 workstations. We also chose to have Siemens serve as our application service provider and host the solution. Siemens initially trained Debra Koziol, Lifespan’s operations manager for patient financial services and the leader of the contract management solution process, on the application and maintenance. The vendor gave Koziol focused, hands-on training on the contract management software. For the first year after implementation, Koziol was the only member of the patient financial services staff who worked on the software. After implementation, she became head of quality control of the system and was essentially responsible for contracts being loaded and accurate. This was a period of trial and error for us. With the contract management software in place, we quickly learned that contracts that seemed the same in all three hospitals really were not. As we began to recover revenue, we used some of these monies to fund new positions. Over a two-year period, we added six new contract management positions to Lifespan, paid for with recovered revenues. Internal Re-engineering Lifespan recognized the installation of automated contract management as an opportunity to re-engineer and fine-tune its internal processes to make better use of its software investments. We set up a data center fairly quickly. The Siemens consultants performed the initial setup of the contracts, agreeing to maintain and load them and add any new contracts into the system throughout the term of Lifespan’s vendor agreement. Once the software was loaded and maintained, we began to produce customized reports to analyze underpayments and discrepancies, risks and opportunities. Then, when all of our current contract data was loaded into the system, we ran reports that allowed us to compare instances of underpayment. Having isolated those instances, we could move forth with revenue recovery action. Over time, the patient financial services department took ownership of developing, implementing and managing a system capable of handling the volume and terms of contracts and the existing database of patient accounts. We created an in-house team of revenue analysts who became knowledgeable about all payers doing business with our hospital affiliates. These revenue analysts reviewed contract terms with the contracting department to determine where the biggest opportunities were for revenue recovery. We also began a series of managed care contract education overviews for the patient financial services staff. With online access to payer systems as well as claims status and adjustments, we were better equipped to develop contracts with the payers, to adjudicate claims and to address process issues. Today, registration issues, coding optimization and charging issues practically jump off the screen at us. Our patient financial services department now has an online central database for contract terms and conditions that is accessible via every analyst’s PC. Rewarding Results Since the contract management system was installed in early 2000, Lifespan’s recovered revenues have increased more than sixfold from FY/2000 to FY/2002.
In addition, we have shaved 15 days to 25 days off our accounts receivable (A/R) days total. According to statistics compiled by Lifespan CFO David Lantto, the system has also contributed to our achieving a 35 percent reduction in A/R days over three years (Figure 1).
Retroactive Processing. The department can now control retroactive processing. Contract negotiations are sometimes concluded after the beginning of the contract period. Once the final rates are determined, the system automatically recalculates and prepares a reconciliation report. The start date is entered, and within minutes, a list is produced of all the accounts affected and the expected reimbursement. Because we now gather more accurate information, we feel we can contribute to stronger contract negotiations in the future. Stop Loss/Outliers. The contract management application has allowed us to track and recover complex calculations such as stop loss/outliers. Outlier provisions are made when eligible charges rendered during a single admission reach a negotiated threshold. An example is an inpatient account that is reimbursed at a per diem rate until the total allowed charges reach $100,000. At this threshold, reimbursement for the entire account changes to a percentage of charge in lieu of the per diem rate. With an automated system, we can track reimbursement and recover monies due us. Bundled/Tiered Reimbursements. Even bundled reimbursements—a single payment for a group of related services—are now easier to calculate. The contract management system easily calculates reimbursement for any number of fee schedules. For example, one payer may have multiple fee schedules based on the product. Medicare, Medicaid and commercial products may each have their own fee schedule.
Nadeen LaFleur is the corporate director of patient financial services for Lifespan, Providence, R.I. Contact her at nlafleur@lifespan.org. For more information about Siemens’ contract management products and services, www.rsleads.com/306ht-200 © 2003 Nelson Publishing, Inc |
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In the recessed financial corners of every healthcare
organization are experts—CFOs, claims processors, accounting specialists and patient financial services managers—who are dedicated to making sure that their organization bills for and collects every dollar’s worth of service it has provided.
At Lifespan, we expect to continue to uncover more hidden dollars. As new issues emerge, we will integrate them into contract management just as we are doing now with Medicare and ambulatory payment classifications. An integrated, automated system used by our now-knowledgeable and well-trained staff has allowed the three hospitals to handle revenue recovery uniformly and efficiently.