I.T. Putting Together the Revenue Pieces

Joseph Goedert, News Editor
Health Data Management Magazine, March 2007

Hoping to get better results in collecting bills from self-pay patients, Orlando Regional Healthcare last July went live with software that uses data analytics to separate patient accounts into those at low, medium or high risk of defaulting.

Based on credit scores, household income, patient history of paying the delivery system in a timely manner and other factors, Orlando Regional decided to focus on its medium-risk population.

The organization continued to generate and mail bills to those in the high-risk category but not spend any more staff time on them because most of those accounts eventually would go to a collections agency. And it wasn't worth the labor costs to go after low-risk accounts that likely would be paid anyway.

But about one-third of patient accounts are medium-risk and worth more effort to collect, Orlando Regional has found. "We're bringing in the same cash flow from self-pay accounts but have 50% less staff in the self-pay collections area," says Keith Eggert, vice president of revenue management.

Revenue cycle management software has been around for years, but for much of that time has focused on core claims management-getting claims out the door and posting payments when they arrived.

In recent years, software vendors have introduced tools that dig deeper into revenue cycle issues, not only helping organizations understand areas where they are not getting the revenue they deserve, but also providing the data to actually do something about it.

Contract management software, for instance, analyzes actual payments from insurers against what they are contractually obligated to pay. Recovering money from underpaid claims literally is "found money" and the average hospital can recover $3 million in the first year of using the software, says Ryan Hampton, director of operations and health care services at PayStream Advisors Inc., a Charlotte, N.C.-based research and consulting firm.

"As things get tighter, every dollar counts a lot more," he adds. "The software isn't used to generate new revenue, but protect the revenue that hospitals should already be getting."

More than 70% of hospitals have at least one advanced revenue cycle management tool, Hampton estimates. "There's good ROI on all of these systems," he adds. "It's almost silly not to have one or more of these tools."

Some provider organizations have found that capacity management software not only improves patient flow and satisfaction, and boosts staff productivity, but also generates substantial amounts of new revenue (see story, this page).

Other organizations in recent years have installed software that enables clinicians to capture appropriate charge data for professional services by having the tools to enter the correct diagnosis and procedure codes at the point of care.

Some of these providers now are starting to expand on that concept by adding software that also captures "technical charges"-the charges for use of the facility, drugs and other supplies-at the time of use.

The Self-Pay Analytics software used at Orlando Regional, from Emeryville, Calif.-based MedeFinance Inc., also is helping the organization enroll patients in Medicaid and properly grant charity care to eligible patients.

Household income is part of the data set received from credit agencies and other sources via the software, making it easy to determine if a patient is eligible for Medicaid or charity care.

Previously, these accounts would roll out the door to the collections agency, says Eggert, the vice president of revenue management.

The software flags patients "who fell through the cracks" of the delivery system's program of enrolling eligible patients for Medicaid, a problem that most frequently happens in the emergency department. The hospital now is getting more revenue from Medicaid, although a formal analysis has not yet been done, Eggert says. Further, identifying more patients eligible for charity care enables the delivery system to write off the costs of that care, instead of having to categorize it as bad debt.

Checking the payments

Provider organizations implementing contract management software often find huge savings during the first year of use. That's because they can retrospectively analyze claims already paid in the past year or so, find those that were underpaid and seek the proper payment.

But significant savings can continue year after year, says Mike Caudle, assistant vice president of patient accounts at 16-hospital Carolinas HealthCare System in Charlotte, N.C. "We recovered $6 million in underpayments last year, just from managed care, non-governmental payers," he notes.

The delivery system since 1998 has used the Pathways Contract Management module from McKesson Corp. as part of its implementation of the San Francisco-based vendor's hospital information system.

When the time comes to renegotiate an insurer's contract with Carolinas HealthCare, modeling features of the software enable Caudle to enter the insurer's proposed contract terms and see the financial changes that would occur.

Further, if a payer's new proposal includes a term that wasn't consistently followed in the current contract, Caudle has the data to prove it. "If an insurer can't pay according to a contract term, you have leverage and can have it pulled."

The use of electronic data interchange technology to conduct insurance eligibility verification transactions is an "excellent" complement to contract management software, Caudle says.

Verifying eligibility helps the delivery system police its own data entry before a claim ever goes out the door, he explains. For example, a patient may be registered as being in an HMO and the provider will bill the claim as such. But the eligibility verification may show that the patient actually is in a PPO, enabling billing at a higher reimbursement rate.

Less waiting

Eligibility verification also reduces the amount of time spent checking, for example, why a PPO payment was below contractual terms, and finding out later the patient actually is in an HMO and the lower payment was appropriate.

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