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to improve your healthcare organiztion’s revenue cycle mamangement

S E E YO U R R E V C YC L E D I F F E R E N T LY

B Y E L I Z A B E T H W O O D C O C K , M B A , FA C M P E , C P C

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Healthcare organizations operate in an environment fraught with challenges—some familiar, such as the complex, ever-changing regulations and downward pressures on reimbursement from government and commercial payers and others still emerging, such as consolidation of payers and resulting monopolistic hold on providers’ fees. Consider how these and related developments are likely to affect your organization’s bottom line in coming months and years:

The migration of financial account-ability from payers to patients

The Affordable Care Act’s healthcare insurance marketplace, as well as employers of all sizes, are introducing more high deductible plans. The surest response to this trend is to take a new approach to revenue cycle manage-ment. If it hasn’t already, your organization must quickly adapt its revenue cycle processes to a place where it’s imperative to understand—and collect—each patient’s financial responsibility for using your providers’ services.

The continued spread of automation

As automation takes hold at all levels of the revenue cycle, it becomes vital to interface traditional billing protocols with new, streamlined approaches.

The pressure is on organizations to keep their workforces trained to use the tools, resources and processes needed to ensure successful financial outcomes.

The central role of data collection and reporting for payment

The scrutiny of stakeholders is at an all-time high; government and commercial payers are measuring scores of data about healthcare organizations—or expecting you to report it. Leaders must learn to navigate new complexities in the revenue cycle as systems and processes are harnessed to ensure timely and accurate data extraction—whether for external programs or internal business intelligence.

I N T R O D U C T I O N

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Seven steps

1 review your payer contracts

2 implement a financial clearance process

3 collect time-of-service payments

4 deploy technology

5 prevent and manage denials

6 reengineer your collections cycle

7 develop a dashboard

A B O U T T H E A U T H O R

Atlanta-based Elizabeth Woodcock is the founder and principal of Woodcock & Associates. Co-author of the best-selling book, The Physician Billing Process: Potholes in the Road to Getting Paid, she has focused on revenue cycle management for more than 20 years. Author of more than 500 published articles, she recently completed her 17th book for the Medical Group Management Association. Elizabeth is a Fellow in the American College of Medical Practice Executives and a Certified Professional Coder. In addition to a Bachelor of Arts from Duke University, she completed a Master of Business Administration in healthcare management from The Wharton School of Business of the University of Pennsylvania.

For more information, please visit www.elizabethwoodcock.com.

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1 Review your payer contracts

Your revenue cycle begins long before a patient ever walks in the door. It actually commences when you place your signature on a payer contract—or fail to do so, thus enabling the contract to kick into ‘evergreen’ mode. Many organizations complain about their relationships with payers, but do little to change them. Start with the basics by understanding the payer’s prices (in industry parlance, the allowables) and the terms of the contract. Learning that the payer reimburses you a certain percentage of Medicare isn’t good enough. The rate may be a percentage of the current year’s Medicare rates, or it could be the schedule from 2012; therefore, you need to obtain specific prices, including the impact of modifiers and multiple procedures. Many states have laws to support your efforts to obtain pricing information, so seek counsel from your state medical society if you have trouble getting this information.

Balance the percentage of business you receive from each payer against what life would be like if you dropped the payer altogether. If you decide to continue contracting with the payer, schedule a meeting with one of its representatives to discuss your future relationship. Don’t plan to just go in and ask for more money; you’ll need evidence to support your side in the negotiations. Prepare a presentation about the quality of the care you provide to the payer’s beneficiaries. With clinical data, the possibilities are endless. You can gather smoking cessation counseling rates for the payer’s covered beneficiaries, for example. If you just have billing data, don’t despair. There is plenty that bill-ing data can indicate about your patient care. For example, to demonstrate that you provide

superior patient access, pull data out of your system to show your volume of after-hours codes (CPT® codes 99050 and 99051). Supplement this data by estimating the cost of the emergency department visits you saved the payer. If you don’t have time to put this together, consider hiring an intern from a local college or university to help you.

During the meeting with the payer representative, focus on the value your organization provides—and explore the willingness of the payer to reimburse you for it. A favorable outcome may not always be a hike in your fee schedule, but gaining more satisfactory terms in the contract—an extension of the filing deadline, for example—certainly make it worth your time.

Once you obtain the numbers, confirm the reimbursement by carefully evaluating your remittance data. This data should be available in your clearinghouse solution if it enables elec-tronic remittance advice on all claims. Compare pricing data by payer, and then marry your information with your own cost analysis.

Next, pull data specific to the payer’s administrative burden. Good indicators of this burden are the percentage of services the payer requires to be pre-authorized and the percent-age of charge line items that the payer denies on first submission. Any information you can gather about these and other ‘hassle factors’ is helpful in determining your future relationship, if any, with that payer. Finally, understand current terms outlined in the contract, such as termination, filing deadlines and recoupments.

Balance the percentage of business you receive from each payer against what life would be like if you

dropped the payer altogether.

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2 Implement a financial clearing practice

Patient financial responsibility has increased significantly in the past few years, and is projected to grow even more in coming years with the increased percentage of those with high deductible health plans. With a staggering amount of bad debt from patient balances a realistic possibility, healthcare organizations have found that consistent execution of a financial clearance process can be a win/win for the organization and the patient.

Financial clearance is the process of verifying insurance coverage, benefits eligibility and finan-cial responsibility, including unmet deductibles. It also includes the critical task of communicating all of this information to the patient. Keeping a patient in the dark for weeks or months about their charges leads to patient dissatisfaction—and nonpayment. Yet this is exactly what happens when you fail to transmit the statement in a timely manner. Imparting knowledge about financial responsibility before the service is rendered, at the time of service, or at the soonest opportunity after-wards, empowers the patient. If the patient cannot assume this responsibility, the financial clearance process is a pathway to transition the patient intoa financial assistance program; for example, you could offer discounts to those experiencing financial hardship. The value of patient-physician communication has been long recognized in clinical matters. The same goes for finances: telling thepatient about problems, such as difficulty confirming their insurance coverage, reduces denials and improves cash flow.

Financial clearance doesn’t end with communicating charges to patients. Estimate and communicate the patient’s financial responsibility,

including any unmet deductibles, before the service. Doing so can transform the clearance process from an expense to a process that produces positive returns. Healthcare organiza-tions that have successful financial clearance processes are migrating their patient collections efforts from expensive, largely ineffective units based in the business office to pre-service collections teams. These teams may require the same amount of staff resources as the business office, but they exact a much higher amount of collections.

If moving all of your patient collections efforts to a pre-service basis is beyond your reach today, consider combining the forces of your business office and scheduling teams. Traditionally, the former places outbound calls all day to patients who owe money—but with little success in actually reaching patients, the latter accepts calls from patients all day long. Eliminate this strict di-vision of duties. If your schedulers could be trained to identify balances—asking for payment via a credit card—your investment in that process will quickly result in a positive return. Even if money doesn’t exchange hands in these contacts, you accomplish setting patients’ expectations that you are serious about collecting the money they owe.

Summary• Compute your cost per procedure code• Compare cost to payer’s allowables• Determine each payer’s ‘hassle factors’• Calculate percentage of business from payer

• Use administrative and clinical data to seek better contracts (fewer hassles, better terms, etc.)

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3 Collect time-of service payments

The financial clearance process establishes expectations and may help with pre-service payments. Don’t let your efforts stop there, however. There are three tiers of time-of-service collection efforts for which to strive. (See Figure 1.)

Co-payment collections are a necessity—in fact, they really are an obligation, as most commercial payers require participating providers to collect co-payments from patients. Cost-sharing, of course, is a means of controlling utilization, and you play a role in that effort by requesting co-payments.

Success in collections starts with the basics of knowing how to ask for money. The question, “Would you like to pay?” needs to be written out of your vocabulary. Replace it with the more ef-fective, “How would you like to take care of your co-payment today?” A companion tactic is to wait until the patient hands over his or her credit card before discussing any additional balance due. Then, politely mention the patient’s balance and request payment; for example, “You have a balance of $100. Can we put the balance on your card as well?”

For patients who are not insured, collect a pre-determined minimum deposit. Many physician practices find the most effective deposit rate is the

average level of the co-payment that would be due by their commercially insured patients. For others, a rate close to their total visit charge is generally appropriate. Some practices charge different deposits for new versus established patients. The key is consistency unless, of course, the patient meets the financial hardship levels you’ve outlined for granting a discount.

As more payers shift financial responsibilities to their covered beneficiaries, the job of collecting co-insurance and unmet deductibles becomes a skill your organization must develop—and quickly. It starts with knowing the allowable for the service being rendered. Although the allowable may be understood prior to the patient’s encounter, it’s uncommon to know all the details in advance— the level of the evaluation and management code that will be charged for an established patient office visit, for example. You will also need to know the specific allowable for the patient’s payer— often one of the dozens, if not hundreds, of health plans with which your organization contracts. An automated price estimator is invaluable in this process. This tool may be available through a payer portal, a contract monitoring system or as a standalone software product. In a pinch, a simple Excel spreadsheet could serve as a substitute. To use the spreadsheet, gather and record infor-mation about allowables for all of the procedure codes you commonly perform. List the codes and add columns (or rows) for each payer. Train your check-out staff to interpret the spreadsheet, and collect the co-insurance and unmet deduct-ible before the patient exits. Depending on how

Co-payments

T I E R O N E

F I G U R E 1Tiers of time-of-service collections

T I E R T W O

T I E R T H R E E

Co-payments

Balances

Deposits

Co-payments

Balances

Deposits

Co-insurances

Unmet deductibles

Summary• Move patient collections efforts to

pre-service period• Inform patients of financial responsibility

before the time of service

• Combine business office and front office efforts

• Train schedulers to collect balances

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4 Deploy technology

Today’s focus is on optimizing the use of the electronic health records (EHR) system for clinical technology, but revenue cycle technology also offers significant advantages; namely, it helps to improve cash flow, reduce costs and enable staff to work smarter. There are a multitude of revenue cycle technologies on the market today. (See Figure 2, page 6.) Consider your practice management system and its capabilities carefully before making a purchase. With a functional practice management system in place as your core system, look for opportunities to automate the following processes:

Insurance coverage and benefits eligibility

Insurance verification—the process of confirm-ing the patient’s insurance information with the payer directly—can be laborious and fraught with error. Checking every payer’s website to verify coverage is time-consuming; automating the process via your practice management system or clearinghouse allows redirection of those staff efforts to other tasks, while still meeting the goal of verifying every scheduled patient’s insurance coverage and benefits. Ideally, this process is per-formed during the scheduling process, as well as one to three days prior to the visit so that patients for whom insurance cannot be confirmed can be contacted in advance. You’ll at least be alerted in

advance that a counseling intervention may be necessary by a financial advocate (a represen-tative of your business office who is trained to handle patients’ questions about their financial responsibility).

Charge capture Automate the collection of codes through an interface between the EHR and the practice management system. The key is to eliminate the data entry of codes from paper charge tickets to the practice management system— a manual process that consumes hundreds of hours each year for physicians and their staff, and introduces the prospect of errors through mistypes or omissions.

your workflow is arranged and the technology you have at hand, this may mean collecting at the patient’s arrival and at departure; or it may mean moving all collections to the conclusion of the patient’s visit.

Successful organizations accept all forms of payment, and have made the modest investment in technology that can charge the amount to patients’ credit/debit cards at the time of service—or, at the very least, capture those data to securely hold “on file” for future transactions. Capturing and securely storing a patient’s card information gives you the flexibility to collect deposits and residual charges more rapidly or initiate effective payment plans that draw amounts from the patient’s credit card account.

Summary · Estimate patient responsibility

at check-in

· Train staff in effective time-of-service collections

· Collect deposits from uninsured patients

· Collect all co-payments, balances, depos-its,co-insurances and unmet deductibles at the time of service

Today’s business office enjoys a multitude of opportunities to automate. Additional areas for automation include: provider enrollment and credentialing, credit card on file, remote deposit, lockbox, electronic remittance and funds transfers.

Although technology can bring opportunities, you are wise to spend some time to consider its application within your organization in detail. Is the new technology streamlining work, or will its introduction add staff time and effort but not value? Are staff adequately trained in the new process? Does the vendor truly view its customers as partners by providing responsive customer support, training opportunities and up-grades? Take a step back from the excitement of automating a work process and ask: Does this technolo-gy replace your paper process, or must you resort to use paper or make manual entries somewhere along the way? Implementing technology for the sake of automation won’t bring the results you need; using technology to change the way you work—for the better—ushers in new possibilities.

F I G U R E 2Revenue Cycle Management Technology Items in color present in multiple locations.

Credit card on file

Credit Card Processor

Contract Monitoring

Eligibility

Kiosk/Tablet

Patient Price Estimator

Practice Management System

Remote Deposit

Charge Capture

Charge Scrubbing

Practice Management System

Clearinghouse

Credit Card Processor

Electronic Remittance

Lockbox

Online Bill Payment

Patient Statements

Practice Management System

Provider Enrollment & Credentialing

Remote Deposit

Secondary Claims

Workqueue Management

Patient Portal

Reception area Exam room Business office Patients home

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Clearinghouse

Don’t think that pushing a button to submit your claims to insurance payers means that the process is necessarily headed to a smooth conclusion. Contract with a reputable claims clearinghouse that stands behind its services (you don’t want to be the organization that tells the all-too-common tale of woe about batches of ‘lost’ claims that you know you transmitted but the payer never received). Look also for a clearinghouse that offers value-added functionality to the billing process. Clearinghouses are not what they used to be. They do much more than simply channel claims to the patient’s payer. Today’s generation of clearing-houses automates the revenue cycle to include scrubbing charges to identify misapplied mod-

ifiers, missing linkages between procedure and diagnosis codes, and many of the other problems that cause payers to deny claims. A superior clear-inghouse can also process electronic remittances, perform reporting and analysis and automate the submission of secondary claims. Look for a partner that turns data into information, ensuring you can manage your organization more effectively.

Payment monitoring

The end goal—to verify accurate payments received, and do so at the granular level—is provided by a host of vendors’ solutions. Some practice management systems offer integrated payment monitoring, as do contract monitoring solutions.

5 Prevent and manage denials

The complexity of the revenue cycle can be overwhelming at times, particularly when claims are returned without payment. These denials are made for any number of reasons, but many stem from errors or omissions at one of the following points in the revenue cycle:

• Registration – incorrect insurance coverage or specific data• Medical necessity – the diagnosis doesn’t support the rendering of the procedure code• Timely filing – the claim wasn’t submitted to the payer within the timeframe it requires• Pre-authorization – the payer didn’t grant authorization to perform the service• Duplication – the claim has been submitted more than once• Additional information – in order to process the claim, the payer requires additional information

from the provider rendering the service, or from the patient• Coding – the service was not coded in accordance with the payer’s rules, or a combination of

codes was used such that one or more in the sequence were not payable according to the payer

There’s another type of ‘denials’—and it’s one you are going to see a lot more of. It’s when a portion of the claim is not paid but rather applied to the patient’s deductible or co-insurance, or the service is considered non-covered. In any case, the payer is simply shifting the financial responsibility to the patient. Contacting the payer won’t do any good in these cases; you must transmit a statement to the patient to collect those amounts.

F I G U R E 3Cost of denial

“Staff time” Includes 20 minutes of billing staff time at $22/hour, plus 10 minutes of another staff member’s time (for example, front office) valued at $20/hour. “Interest” calcu-lated on $200,at 10%, compounded monthly, for 30 days. “Overhead” includes management, equipment, space and other fixed costs.

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© Walker, Woodcock, Larch, 2015, as published in The Physician Billing Process, Third Edition by MGMA.

Summary• Use an EHR system

• Use a practice management system that automates:

· Insurance coverage and benefits eligibility verification)

· Code collection for charge capture

· Code scrubbing

· Payments

• Use a full-service claims clearinghouse

Because payer rules seem to be ever-changing, denials will never be completely eliminated, yet your efforts to prevent them, including a good claims scrubbing engine in your practice management system and clearinghouse, are certainly worthwhile. Knowing the payer’s payment policies, for example, deters denials related to medical necessity. The cost of a denied claim is $14.92—a small figure which can add up quickly if you continue to sink expen-sive resources into the collections process (See Figure 3, page 8). The best route is to address the reasons for denials, where applicable, in your payer contracts. For example, you might seek in your next contract to exempt your organization from the filing deadline for claims submission if the delay was caused by the patient providing inaccurate information at registration.

Manage denials by following a systematic, timely and comprehensive process. Take action within 48 hours of the denial, discovering the root cause of the denial and determining a plan to address it. Develop a reference document for action plans by category of denial; steps to include on a registration-related denial would incorporate a review of the front and back of the scanned insurance card, for example. If clarification about the situation is required to execute an effective action plan, research the denial by querying the

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Summary• Watch for errors in:

· Registration (Are data and insurance correct?)

· Medical necessity (Does diagnosis support procedure code?)

· Timely filing (Is the claim submitted within payer’s timeframe?)

• Follow up all denials within 24 hrs

• Develop appeal letter templates

• Track and categorize denials by service, payer and provider

· Pre-authorization (Did payer grant authorization?)

· Duplication (Has claim already been submitted?)

· Additional information (Is payer-required information included?)

· Coding (Does coding follow payer’s rules?)

payer through their portal or a phone call to their customer service center. If the denial represents a simple fix—a forgotten modifier, for example – correct the issue and resubmit the claim. If you are debating the payer’s position, forge ahead with an appeal letter. The written format allows you to state your case unequivocally, and attach supporting documentation. Maintain a ‘library’ of standard appeal letters in the cloud or a shared drive so that you don’t have to reinvent the wheel every time an appeal is needed. Forms for appeal letters may also be available through your practice management system or clearinghouse solution, allowing you to efficiently create an effective appeal by extracting information from the electronic remittance for the denied.

Whether your organization is focused on pre-vention or the management of denials once they occur, the key is to track them. To do so, you must systematically capture the reasons for the denials. This information can be gathered in your clearinghouse during the electronic remittance process, as well as by entry of correspondence you receive from payers about denied services. Cataloging denials enables you to monitor them by type, frequency and payer to reveal invaluable information about new opportunities to make your revenue cycle run more smoothly.

Recognizing that a significant minority of your revenue will soon come from patients directly, now is an opportune time to fine-tune your patient col-lections cycle. For many services, the post-service collections efforts may be the only opportunity to collect. Design this effort for success.

Ideally, whether the patient is insured or not, you can process any remaining patient responsibility on the patient’s securely stored debit/credit card, which the patient authorized to charge up to a specific dollar amount at the time of service. If this best practice is not employed, when services are rendered to a patient without insurance coverage, a statement is directly and immediately transmitted to the guarantor on file. For an insured patient, as soon as the claim is adjudicated, it is important to route the patient’s responsibility into the statement process to the guarantor on file.

Tighten your collections cycle to 90 days, commencing with a statement that is transmitted as soon as the amount of patient responsibility is established. Establishing a cycle of sending statements based purely on other factors, such as an alphabetical sort, just builds delays into the process. Start offering patients online bill payment options in conjunction with receiving paper statements. Plan this as the beginning of an effort to phase out paper statements altogether, moving to e-statements and online bill payment for as many patients as possible.

After the initial statement, transmit two more tatements, followed by a collections notice at 70 to 75 days. Combine the notice with contact from your business office within three to five days. Specify a due date on all statements, including your final notice. Stick to what your notice declares, performing each subsequent step in accordance with your announced intentions to pursue the amount further.

Some organizations have shortened the billing cycle even further by eliminating one of the statements, transmitting only two statements and one collections alert. Consider, too, that others have

migrated to a twice-monthly cycle, instead of setting the cycle at 30 days.

Shoring up your collections cycle may not shower your practice with money, but it ensures that you balance the high cost of attempting to collect from patients with the potential for results.

Work with a collections agency, but look for a partner that allows you to define your own terms, as well as one with which you are able to communicate seamlessly. Spending days each month preparing accounts for collections is a drain on your time.

An effective collections process isn’t well-rounded and fair unless it also includes a financial hardship policy. Develop a protocol to discount accounts—perhaps even a 100 percent adjustment, in some cases – based on a patient’s ability to pay. Alterna-tively, you might decide to respect the local hospital’s determination of financial hardship to the patient. Determining the details of the appli-cation process is important, as your organization must apply the policy in a consistent manner.

Shoring up your collections cycle may not shower your physician practice, ASC or CHC with money, but it ensures that you balance the high cost of attempting to collect from patients with the potential for results.

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6 Reengineer your collections cycle

Summary• Tighten collections cycle to 90 days or less

• Seek cohesive partnership with collections agency

• Create consistent financial hardship policy

Adjusted collection rate

Because contractual adjustments apply to most insured patients, collecting the full charge isn’t even a possibility. To capture your adjusted collec-tions rate, measure what is collected, divided by what should have been collected. Unless you track each line item—paid versus allowed—you’ll need to rely on your practice management system, loaded with your fee schedule for each payer by proce-dure code to accurately report this indicator.

Denial rate

The denial rate is the percentage of claims denied by payers. (Note that some may measure the rate based on the percentage of charge line items denied.) The lower this number, the better an organization’s cash flow— and the fewer staff needed to maintain the cash flow. Staff doesn’t have to intervene on clean, paid claims; only denied claims create the need for manual intervention.

Remember, too, that numbers can be misleading. Writing off accounts makes some of the indica-tors, such as DRO, appear more favorable, yet you really aren’t collecting money. Be sure to also add net revenue to your revenue cycle dashboard and monitor it on a monthly basis, at minimum.

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7 Develop a dashboard

A well-managed revenue cycle isn’t complete without measuring and monitoring key perfor-mance indicators. Decide on a set of metrics to consistently report, but ensure that these key indicators are included on your revenue cycle dashboard. And watch that dashboard!

Key indicators of revenue cycle performance include the following metrics:

Days in receivables outstanding (DRO)

Arguably the best overall indicator for how quickly your organization is turning receivables into cash, DRO is calculated by dividing total current receivables by the average daily charge. Remove your credit balance, which only offsets and thus, distorts receivables. Perform this same protocol with all of your performance indicators, but be sure to track your credits as well. Calculate your average daily charge based on the past 90 days (90 days’ worth of gross charges divided by 90, for example), or another period of time. Whether you choose 90, 120 or 365 days, make the choice and apply it consistently.

Percent of receivables over 120 days

Observe your aged trial balance, honing in on the category of receivables over 120 days. As aged receivables are more costly to collect and the probability of collection dips, the less receivables in this category, the better off you are. Monitor the percent of receivables over 120 days carefully, watching for consistency or, ideally, a reduction over time.

Percent of receivables over 120 days

Observe your aged trial balance, honing in on the category of receivables over 120 days. As aged receivables are more costly to collect and the probability of collection dips, the less receivables in this category, the better off you are. Monitor the percent of receivables over 120 days carefully, watching for consistency or, ideally, a reduction over time.

Summary• Compute your cost per procedure code

• Compare cost to payer’s allowables

• Determine each payer’s ‘hassle factors’

• Calculate percentage of business from payer

• Use administrative and clinical data to seek better contracts (fewer hassles, better terms, etc.)

ConclusionThe revenue cycle has many functions that draw upon the performance of a wide range of individuals in your organization: physicians, staff and managers. Consistent execution is every bit as important as optimum performance: an inconsistent approach can agitate patients as well as destroy your chances of achieving desired results. Whether you choose to use more sophisticated technology or make better use of the technology and staff you already have, you’ll find that active and attentive management of the revenue cycle helps avoid unpleasant surprises while achieving better revenue performance. Considering the many challenges that your organization will face in the coming decade, improving revenue cycle performance may be one of the wisest investments you can make in your organization’s future.

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