With the nation in a deep recession, health care providers are looking for new ways to improve their cash flow. Many are taking a very close look at their revenue cycle management practices, identifying logjams in the multi-step process of preparing a claim and getting paid.
MaryAnn Hastings, director of the central billing office at Methodist Medical Group in Peoria, Ill., offers advice based on her involvement in revenue cycle turn-around projects at several providers: "You have to start by analyzing and identifying the root cause of cash flow problems," she says. "Is it the processes, the technology, the people or all three? Address your processes first. That will tell you what you need to do with technology. And that will tell you what you need to do with people."
A key component of the financial turnaround at the 144-physician practice was much more aggressive editing of claims on the front end, before sending them to payers.
For many providers, thorough checking of claims upfront is a missing link in the payment chain, says Pat Kennedy, president of PJ Consulting, Rockville, Md. "All providers need to have software to make sure they are coding claims according to their contracts with payers, according to industry standards and according to payer rules and regulations," he says. "The more they can do on the front end to create a clean claim, the more it will speed up their cash flow."
In addition to paying closer attention to the coding and editing of claims, more providers are automating the process of confirming insurance eligibility before patients arrive for care. And some are moving toward filing claims directly to certain payers using Web portals, rather than relying on a clearinghouse-a trend many payers support.
"We hope to see clearinghouses used less over time," says Bart Strickland, director of commercial EDI services for Blue Cross and Blue Shield of South Carolina, Columbia. He likens the use of a clearinghouse to the old game of whispering a message to a group of friends gathered around the campfire, each one passing what becomes an ever-changing message to the next person. "The more steps there are, the greater the chances for error or for the message not getting delivered," he says.
A growing number of payers also are using new technologies to speed up claims adjudication. And to close the loop, providers and payers are working together to adopt electronic remittance advice as well as electronic funds transfers - eliminating mountains of paperwork in the process. Plus providers are taking steps to make their back-end collections efforts more efficient (see story June 2008 issue, page 30).
What's the Problem?
Why is submitting a bill and getting paid so difficult in health care? For starters, these bills are far more complex than those in other industries. But too often, "providers and payers don't talk," which leads to problems and delays, says Steve Schaefer, vice president of finance at 336-bed Virginia Mason Medical Center in Seattle. The hospital found that when it held face-to-face meetings with one of its major payers, it was able to eliminate wasteful steps in claims processing (see sidebar, page 32).
But beyond a lack of communication between providers and payers, a key reason for claims processing difficulties is "a lack of awareness at the granular level of how information flows within your own organization," Schaefer stresses.
Virginia Mason, along with a growing number of other hospitals, is re-engineering revenue cycle management, applying lean manufacturing principles developed by automaker Toyota. The idea is to "mistake-proof" all the processes involved.
"One of the problems in health care is that we lack engineers," Schaefer says. "A lot of folks are either clinical or clerical in nature. When you get into claims processing, the leaders may have engineering minds, but they may lack a systematic method for process improvement. Often, the CFO gets the job because of their personality. We have become a personality-driven industry rather than one having a systematic methodology."
The Beginning
An important first step in improving cash flow is gathering all necessary demographic and insurance information before care is delivered.
In re-engineering revenue cycle management, Christus Health, a 40-hospital system based in Dallas, is now focusing on front-end processes, with a goal of pre-registering as many patients as possible, says Amy Tsui, director of revenue cycle consulting.
The hospital chain electronically verifies insurance eligibility using software from Passport Health Communications Inc., Franklin, Tenn. It also uses an application from Transunion, Chicago, to help determine if a patient is eligible for financial aid from various sources or qualifies for the organization's charity program. The application creates a score of a patient's ability to pay their bills.
Christus Health also recently implemented Accureg software from Mobile, Ala.-based Database Solutions that produces daily reports on information missing from registration records. Similar to editing software that scrubs claims for accuracy, this application pinpoints missing demographic information early in the game, an important first step in the preparation of an accurate claim, Tsui says.
Some smaller group practices, which have far fewer resources than a single hospital, much less a 40-hospital chain, nevertheless are taking steps to gather more information upfront.
For example, Desert Ridge Family Physicians uses payers' Web sites to verify insurance eligibility for every patient before they arrive, says Tiffany Nelson, M.D., founder of the Phoenix, Ariz.-based practice. The four-physician group offers same-day or next-day scheduling. So it's important to gather as much information as possible immediately after a visit is scheduled, she says.
Similarly, the pediatric practice of Peter Masucci, M.D., in Everett, Mass., conducts real-time eligibility checks using a service from athenahealth Inc., Watertown, Mass. If the online check fails to confirm eligibility, staff members then call the payer or patient to resolve the issue before the visit, says Donna Masucci, office manager.
Coding Challenges
The doctors at Desert Ridge also take the extraordinary step of selecting the codes used in claims through an electronic health records system.
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