Revenue cycle upgrades: increase cash flow and lower expenses

Healthcare Financial Management, July, 2005

About HFMA Roundtables

With this article, HFMA continues a series of "virtual" discussions to offer thought leadership and practical perspectives on healthcare financial issues by leading industry professionals. This roundtable offers viewpoints and advice about ways to seize opportunities to improve the revenue cycle. This HFMA Roundtable is made possible through the support of Siemens.

Hospital financial executives have seen the statistics: About 13 percent of lost revenue can be blamed on underpayments, billing errors, denials, and self-pay debt. Rework accounts for up to 80 percent of billing office time. (a) Viewed optimistically, these numbers suggest the revenue cycle is rife with opportunities to improve cash flow and reduce costs. Hospitals that have in attacking revenue cycle inefficiencies tell of cash influxes of seven figures or more. But such achievements do not come easily.

Significant improvements require significant investments--in training, IT, restructuring, and staff time. But where to start? What changes need to be made first--or will provide the best ROI? Hospitals can learn a lot from seeing what other hospitals are doing. But the best answer often lies in a hospital's own metrics. Like any major redesign initiative, revenue cycle improvement efforts should be based on sound quality management: Look to your data to pinpoint what needs fixing. Then, measure again to see if the fix worked.

Presented here are the thoughts of a group of healthcare executives regarding methods for achieving better cash flow and lowering costs in hospitals and health systems.

* How did you determine opportunities to reduce expenses or increase cash flow?

* Hilton: I have a number of reports that I review daily, weekly, and monthly. All of my directors and managers have their own sets of metrics that help them keep a finger on the pulse of what's going on. Over time, you develop an instinct that tells you when something does not fit. I typically review weekly activity with our major payers, cash posting reports, aged trial balance reports, and noncontractual adjustments. I have a weekly report that shows me six-week trends, so I know if something is escalating from one week to the next. I look at discharged-not-final-billed weekly from an inpatient and outpatient perspective. I review reports on the accuracy of data collection by our patient access areas, as well as the amount of copays and deductibles collected by the registration staff. Each of these reports provides information that assists us in the management of the revenue cycle.

* Sykes: There are myriad reports that are utilized to effectively manage the revenue cycle. At a macro level, we monitor cash as a percentage of net revenue, A/R days, and the percentage of total receivables over 90 days. We also monitor liquidity ratios by payer class. These indicators, as well as other indicators such as write-offs attributable to denials, denials by payer, and bad debt, enable us to identify opportunities for improvement.

* Reino: UHS enjoys the advantage of being able to do a lot of bench marking within our own enterprise. We can identify problem areas by comparing one hospital's metrics against our other hospitals' metrics.

* What are you doing on the front end of the revenue cycle to increase cash flow?

* Hilton: One of our goals this year is to reduce our denials through better up-front capture of demographic and financial information. In particular, we're being more proactive with the preapproval process for our direct admit and emergency department admit patients. In the past, these preapprovals might have been handled by a registration person two or three days after admission. Today, we engage our ease managers early in the admission cycle to better monitor all patient admission issues. The ease managers get involved on the front end to review medical necessity and identify when a patient's insurer requires notification of an inpatient admission.

We've had to provide significant training to our case managers. The training sessions present ease scenarios relating to specific payers so the ease managers can learn about the subtle differences between, for example, the Blue Crosses and the Cignas of the world, as well as Medicare and Medicaid admission criteria.

So far, we're exceeding our target on this initiative. We've reduced our inpatient denials by 15 percent this fiscal year. Our target was 10 percent.

* Reino: One of the problems in our industry is making sure that we have accurately identified a patient and have not created a duplicate account. We all know the extra work that is created when you have two accounts out there from a guarantor management and collections standpoint, not to mention the patient care impact.

So we are looking at software programs that you can add to your front end to look up all the permutations of a name. For example, if you type in "Bill," the system will also find "William." Right now, we're trying to determine the potential impact of a software program like this and how much we should spend on it.