Leveraging business intelligence for revenue improvement

Healthcare Financial Management, August, 2008

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The workflow processes that influence the financial performance of a hospital are diverse, ranging from scheduling and registration to coding, billing, and collections. And so are the many stakeholders' roles and responsibilities. Effective performance management requires a keen understanding of revenue's relation to the activities of payers, clinicians, and pre-care and post-care employees.

With such sophisticated operations, many hospitals today recognize that revenue management must become a seamless activity that is supported by comprehensive business intelligence. As providers move toward a holistic approach to revenue management processes, they must address key questions about how to bring together wide-ranging performance data to enhance efficiency, improve revenue capture, and achieve sufficient margins to carry out their missions.

Just some of the questions that today's hospital chief revenue officers need to ask:

* What key information should providers and payers share with one another for effective revenue management?

* What is needed to help patients understand the clinical and the financial aspects of their care so they can have a positive experience with the organization?

* What is needed to track and manage efficiency, including patient throughput and workflow?

* What kinds of information help physicians partner with hospitals on clinical and business issues?

* How can these information elements be consolidated into a tool senior managers can use for tracking, corrective action, and strategy?

This HFMA educational report, sponsored by McKesson Corporation, discusses various factors leading to the need for improved use of business intelligence and offers advice from hospital leaders on ways they are using performance data to optimize revenue management at their own organizations.

* Today's Challenges

it can easily be argued that traditional revenue cycle management just isn't working for many hospitals. Generally, challenges are seen in several areas.

High cost, inefficiency. Significant amounts of time and resources are devoted to improving processes associated with registration, insurance eligibility verification, authorization for medical procedures and specialty care, clinical coding, and filing claims for payment. Yet all too often these efforts are incredibly inefficient and ineffective:

* More than $1 billion is lost to hospitals every year because of the need to reprocess accounts receivable. (1)

* About $20 billion is lost every year because of inaccurate and incomplete codes and charges. (2)

* Billing offices take more than 10 days, on average, to send out hospital bills. (3)

* Hospitals fail to collect as much as 80 percent of self-pay net revenue. (4)

Difficulty meeting consumer needs for pricing information and payment capabilities. Revenue cycle management increasingly must accommodate patients who are covered by consumer-directed health plans, such as high-deductible health plans and their associated health savings accounts (HSAs).

The number of patients covered by HSAs and high-deductible plans is growing. One million out of a total of 2.5 million health reimbursement accounts in 2005 were HSAs. (5)

Six percent of employees in private industry had an HSA in 2006, (6) and 32 percent were projected to add an HSA to their benefit programs in the next 12 months, according to the Foundation for Agency Management Excellence. (7) Nearly 3.2 million patients were covered by high-deductible health plans in 2006, an increase of more than 600 percent in less than two years. (8)

As a result of the rising popularity of HSAs, patients are becoming more engaged in their healthcare decisions: shopping among healthcare providers for the best value for services and making careful cost- and quality-based decisions. Also, patients are often directly responsible for making payments to hospitals for their care.

"You have to develop a process to be able to handle the overall needs that are somewhat standard, and then you have to be able to adjust to handle the unique situation," says Michelle A. Carrothers, director of debt management and revenue cycle, OSF Healthcare System, Peoria, III. "This is not like manufacturing, where you're building a widget and the widget is built the same way every time. In health care, we offer a service. Our patients have unique clinical and financial situations to which we must respond."

Unfortunately, most revenue cycle management systems are not set up so patients can go online to check for prices, services, and quality measures or to handle preregistration, let alone bill paying.

"Traditionally, hospitals have not been as transparent about pricing and payment options for a patient's clinical needs as they could be," notes Lynn L. Musselwhite, FHFMA, assistant vice president for patient financial services, Mountain States Health Alliance, Johnson City, Tenn. "Providers these days are realizing it's as important to educate patients about the economic side of health care as it is on the clinical side. We have to marry the two."