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Financial, operational assessment key to improving RCM

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   By Nancy Ruff, May 2012

H05_RCM_CTG_Nancy RuffBy establishing a committed partnership of third-party resources and internal staff, provider organizations can be proactive rather than reactionary.

Meaningful use of electronic health records (EHRs), HIPAA 5010, ICD-10 and federal programs that shift reimbursement models from fee for service to outcomes-based payment are shaking up the healthcare industry. Collectively, these programs will have a massive impact on the revenue and financial viability of hospitals and medical groups. Throw in the Centers for Medicare and Medicaid Services expanding the number of audits to uncover overpayments and fraud, and the potential for financial damage is significant.

To stay ahead of the continual clinical, financial and regulatory challenges they face, healthcare organizations must rethink their approach toward revenue cycle management (RCM) processes and software. With payers increasingly holding providers accountable for the quality of care they provide, the financial health of hospitals and medical groups will hinge on how efficiently they bill and collect the money they are owed while reducing expenses associated with those tasks.


To stay ahead of the continual clinical, financial and regulatory challenges they face, healthcare organizations must rethink their approach toward revenue cycle management (RCM) processes and software.


By establishing a committed partnership of third-party resources and internal staff, provider organizations can be proactive rather than reactionary because reactive moves and Band-Aid technological fixes will put them at a huge competitive disadvantage. The latter approach will create problems that organizations can ill afford to have, particularly in light of the continual and rising stream of legislative and market changes they will face in the foreseeable future.

Analyzing performance
The first step providers must take to ensure fiscal health is to conduct a financial and operational assessment involving an in-depth review of three core areas of RCM: financial performance, technology and workflow.

The financial performance analysis includes gathering and reviewing accounts receivable (AR) reports that will enable providers to quantify a host of metrics tied to billing and collections. These include days in AR, collection rates, aged AR by payer and the percentages of clean and denied claims by payer. Providers also should review denied claims from their top 10 payers to determine why those claims were rejected and identify possible patterns.

Once this step is completed, an organization can use this data to compare itself against industry standards from the Medical Group Management Association (MGMA) or other third-party data source to see how its performance compares against peers and national norms. Through benchmarking, hospitals and medical groups can identify areas they need to address to improve profitability.

Assessing technological capabilities and needs
When it comes to billing software, it is common for providers to make penny-wise, pound-foolish decisions. They invest in systems that allow them to capture demographics and perform basic  processes, but decline to pay for separate modules – such as batch and real-time insurance eligibility, contract management and robust reporting ? that can dramatically accelerate payments and more effectively manage their financial operations.

While some organizations select tools that lack critical features or functions, others opt for full-service solutions but fail to fully utilize and manage the functionality of the system. For example, billing systems that have features such as date and time-stamp tracking are a necessity because they allow providers to manage and monitor workflow and revenue in real time. Without enabling this function, providers cannot accurately document when patients schedule an appointment, when they check in, when insurance is verified, when co-payments are collected, when charges are entered, when payers and patients are billed and when payments are received and posted.

One way for organizations to determine if they are using systems correctly or need to replace or upgrade them is to closely assess and document the capabilities of every application and the functions they actually are using within each system. As providers implement or upgrade their EHR systems, they should consider what implications these systems will have on the revenue cycle and look for the most robust and fully integrated solution. For instance, ICD-10 will have a huge impact on coders and physician documentation, meaning organizations will have to educate and train both coders and physicians to ensure accurate and timely billing.

Additionally, providers need to evaluate if it’s in the best interest of their organization to implement other technology solutions to help them streamline front-office and RCM operations. For example, tools – such as patient portals and patient kiosks – enable patients to self-register for appointments, update their insurance and demographic information and pay co-payments/co-insurance online, either prior to the visit or at the point of care.

Studying personnel and workflow
In addition to a review of financial metrics and technology, a comprehensive assessment requires organizations to interview and observe staff to map out the workflow impacting the entire revenue cycle. It is essential that the assessment includes all constituencies touching the revenue cycle – from front office and billing staff, through clinicians, third-party vendors, financial analysts and managers. These interviews, layered with critical on-site observations, will give organizations invaluable insight by identifying and recommending opportunities for improvement. Two areas that are likely in need of addressing are effort duplication and the transition from manual to more automated workflows.

An example of duplication of effort is when both a scheduler and a central business office employee separately verify insurance for the same patient. By assigning the task to a single person and closely managing the results, providers will increase employee productivity and streamline workflow.

As hospitals and medical groups transition away from manual processes and implement more automated workflows, they are looking to identify and reduce the prevalence of repetitive tasks. A prime target for automation is work assignment, which historically has been accomplished verbally or via printed AR reports, and can now be routed electronically to employees through detailed work lists available at the start of their shifts. Organizations can also implement computer-assisted coding (CAC) software to help coders and health information management (HIM) employees meet increased workload demands from ICD-10, which will boost the number of procedure and diagnosis codes from 16,000 to approximately 155,000 codes. CAC software automatically generates codes from electronic physician documentation for coder review and validation, therefore significantly decreasing the time and effort required by the staff when manual processes are in place.

Road map to success
The final stage of the financial and operational assessment involves the development of a road map for action and remediation based on findings. This strategic plan will specify processes, technology systems and job responsibilities of personnel across the revenue cycle. While the road map will vary from hospital to hospital and practice to practice, it should include an educational, communication and outreach plan for employees and physicians.

It is crucial that physicians and registration, billing, coding and HIM employees understand how their roles affect the revenue cycle and, ultimately, contribute to their organization’s financial health.

Hospital and medical group leadership will also need to clearly demonstrate their commitment to the road map. They can do this by having senior executive management and revenue cycle department directors join project managers to help drive meetings, provide regular updates and quickly address concerns from employees.

The process of overhauling the revenue cycle can be challenging because it often involves dramatic changes in culture and workflow. But organizations that work proactively and methodically to improve revenue cycle operations from top to bottom will be in the position to accelerate cash flow, reallocate FTEs, decrease costs, boost productivity, leverage cutting-edge technology and gain a competitive advantage that will sustain them through the ever-changing dynamics of today’s healthcare industry.

About the author

Nancy Ruff is the director of health advisory services at CTG Health Solutions. For more on CTG Health Solutions, click here.


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