in 1 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

7 STRATEGIES to TRANSFORM your

REVENUE CYCLEAn Availity eBook

The healthcare landscape is changing with the times—can your existing processes support the new normal?

in 2 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

Change—as the old saying goes—is the only constant in life.

As a healthcare provider, you know this all too well. Over the last seven years,

you’ve had a front-row seat to seismic movements in the industry—from

the passage of the Affordable Care Act, to the development of Healthcare

Exchanges and value-based payment models, to the consumerism trend where

healthcare costs are shifting to the patient. Today, healthcare is transitioning

from a business-to-business relationship between the provider and the health

plan to one where the patient is much more involved in financial responsibility

and decision making.

When change happens this quickly, it’s difficult to take a step back and evaluate

how well your existing processes support the new normal. Take, for example, the

way you are currently managing your revenue cycle. Does it reflect where the

healthcare industry is moving—or where it once was?

In this eBook, 7 Strategies to Transform Your Revenue Cycle, Availity identifies

ways your hospital or physician practice can adapt to a changing healthcare

environment. Learn how to manage your revenue cycle in a way that addresses

the challenges of today.

INTRODUCTION

in 3 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

ONETrack Yield as a Metric

In the new healthcare environment, one of the first things to consider is how you

measure revenue cycle performance. Most likely, you are tracking key performance

indicators (KPIs) like “days in A/R” and “cash as a percentage of the cash target,”

which are helpful for understanding the short-term, but they don’t provide insight

into the overall effectiveness of the revenue cycle.

Tracking “yield”, which is calculated as cash collected÷net expected

reimbursement (e.g., based on the provider contracts), provides a better

indicator of how your revenue cycle processes are contributing to the overall

financial performance of your organization.

Yield: What you expect to collect vs. what you collect The following scenario shows how yield is calculated. For illustrative purposes, we

are using a single transaction, but in practice yield is a measure of total revenue

cycle transactions.

• A patient comes in for a routine exam where the gross charge for the visit

is $2,000. Based on the contract with the insurance company, the allowable

amount is 50 percent, or $1,000. The insurance company pays 80 percent ($800)

and the patient is responsible for the remaining 20 percent ($200). Therefore,

the provider’s net expected reimbursement in this situation is $1,000, which

represents a 100 percent yield. See Figure 1.

in 4 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

• But if any part of the claim is partially denied or paid incorrectly, and the

insurance company only pays $700 instead of $800, the insurance yield

decreases to 88 percent. Let’s also assume that the patient can’t pay the full

$200 but offers a partial payment of $100, for a 50 percent patient payment

yield. Now, the provider has a total cash collection of $800, while the net

expected reimbursement remains $1,000. Therefore, the provider’s total yield

shrinks to 80 percent. See Figure 2.

Why understanding yield is critical Yield represents a basis for how effective your organization is at collecting from

insurance payers and patients. If you identify a decrease in insurance yield, it may

suggest an increase in denials or underpayments. Decreasing yield on patient

collections is a clear indication that the revenue cycle processes that support

patient collections need to be addressed. The latter will be increasingly important

for providers as more healthcare costs shift to the patient under the guise of

consumerism in healthcare. The example above showed the provider earning a

50 percent yield on the patient payment, which will quickly become financially

unsustainable in the changing healthcare environment.

Track Yield as a Metric

Figure 1

Net Expected Reimbursement$2,000 gross charges

50% Allowable amount ($1,000)

80% Insurance portion ($800) 20% Patient portion ($200)

Net Expected Reimbursement = $1,000

Total Yield = 100%

Figure 2

Total Cash Collections$1,000 net expected reimbursement

$700 from insurance

88% Yield ($700 ÷ $800)$100 from patient

50% Yield ($100 ÷ $200)

Total Net Collected Revenue = $800

Total Yield = 80%($800 ÷ $1,000)

in 5 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

TWOUnderstand and Address Denials

Insurance denials negatively affect your hospital or physician practice in two

significant ways: First, they lower the amount you collect, thereby reducing

yield. Second, they affect patient satisfaction. When a patient receives a denial

notice from the insurance company, it starts a long and time-consuming search

for answers. If after weeks or months of communication and attempts to rectify,

the patient learns the denial was the result of a provider error, the relationship

between provider and patient may be irreparably damaged.

According to Advisory Board, 67 percent of denials are recoverable and 90

percent are preventable.1 But preventing them requires a dedicated effort on

behalf of your hospital or practice. Start by focusing on Where, Why, and How. In

other words, what is the root cause of the denial in question?

WHERE the denial originated Throughout the revenue cycle there are multiple places where problems with

claims originate: at the beginning when patient demographic and insurance

information is collected, during the patient encounter when diagnoses and

interventions must be supported with documentation, and at the point where

claims are coded and billed. Don’t assume that where an issue was identified is

necessarily where it originated. Many providers have attributed denied claims to

coding problems when the real issue was bad information captured at registration.

1 Haines, Morgan. “An ounce of prevention pays off: 90% of denials are preventable,” The Advisory Board Company. December 11, 2014.

in 6 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

Understand and Address Denials

WHY it was denied In addition to knowing where in the revenue cycle a denial originated, you need

to know why it happened. What factors led to the denial? For example, if the

denial was the result of a missing pre-authorization, did the front office staff not

know it was required? Did they receive a denial, but the procedure had already

been performed? Was authorization received but not attached? This root cause

analysis provides insight into where gaps exist in your organization’s processes,

tools, and training. Remember, there may be more than one factor at play.

HOW you will address it Once you know the where and the why, you need a plan for how to address it.

The analysis might identify a need for staff training, new technology, process

reengineering—or all of the above. Sometimes the problem can be attributed to

departments that are outside the revenue cycle, and it’s important to be able to

go back to them with data and explain where the problem is and how to fix it.

67% of denials are recoverable and 90% are preventable.

in 7 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

THREEFocus on Upfront Processes

The root cause of many denials can be tracked back to problems early in the

revenue cycle—the patient access processes. Given the number of complex

activities that take place during this time, this isn’t surprising. While all parts

of the revenue cycle are critical, it’s important to expand your focus and look at

ways to streamline and improve the following areas:

Admission and registrationA patient’s address is a determining factor of insurance and benefit verification,

so if the address is incorrect, chances are the claim will be denied. Because these

demographic errors are often the result of a rushed staff trying to manually input

data, significant value can be derived from automating many of these functions.

Eligibility and benefitsInsurance payers routinely reject claims because the policy is expired or the

beneficiary is no longer covered. Consider implementing tools that automatically

check eligibility and benefits in order to reduce staff calls to the health plan.

Pre-authorization and medical necessity Many denials are the results of not meeting the payer’s requirements for medical

necessity or not getting pre-authorization for a prescribed course of treatment.

Physicians can spend up to 20 hours a week on administrative activities related

to pre-authorizations.2 One of the most important

things your organization can do now is to ensure

these approvals are conducted as early in the care

cycle as possible—either at the point-of-service or

before the patient arrives.

Point-of-service collectionsMake sure your organization has the tools and

processes in place to support cash collections,

which include everything from written financial

policies to point-of-service payment technology

tools. For more information, see Chapter 6: Collect

More Upfront.

2 Bendix, Jeffrey. “The prior authorization predicament,” Medical Economics, July 8, 2014. (Retrieved from: http://medicaleconomics.modernmedicine.com/medical-economics/content/tags/insurance-companies/prior-authorization-predicament?page=full)

in 8 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

FOURIntegrate and Automate Systems

How well do your existing systems support your revenue cycle? Many hospitals

and physician practices are struggling with data silos—information stored in

separate departments that isn’t accessible to those outside the department.

While it’s not a simple fix, finding ways to break down these silos and integrate

clinical and financial data across the continuum of care is critical. As you plan for

this, make sure your infrastructure supports the following:

Automated back-end functionalityWhile you are focusing on the front end of the revenue cycle, don't overlook

opportunities to improve downstream processes. Investments in touchless

or more automated functionality, such as claim-

scrubbing and denial management, will increase

productivity and decrease the cost associated with

manual processes.

Access to real-time dataWhen healthcare information changes, providers

need access to the updated information at the right

time and in the right place—their workflow. Real-

time solutions, such as automated authorizations,

in 9 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

Integrate and Automate Systems

rules libraries, and payer connectivity can ensure your organization has access to

the most current information at all times.

Mobile and digital technology

Compared with most other industries, healthcare is behind the curve when

it comes to offering online and digital tools to streamline processes. A 2015

survey found that patients want to be able to schedule appointments online,

receive email and text appointment reminders, and securely access their health

records online 24/7.3 Younger patients, especially the millennial generation, are

increasingly looking for these features, and healthcare providers who want to

attract them must invest in these technologies.

3 Goodman, Matt. “Nielsen Survey: Patients Want Docs to Use Technology More Often.” Dallas/Fort Worth HealthCare Daily, December 18, 2015 (retrieved from: http://healthcare.dmagazine.com/2015/12/18/nielson-survey-patients-want-docs-to-use-technology-more-often/)

Consider patient access solutions that automate the following manual processes:

• Propensity-to-pay determination• Address verification and improvement• Social security verification• Red flag alerts• Automated charity care determination • Out-of-pocket estimates • Medicaid eligibility pre-screening• Automated approval process for payment

arrangements• Medical necessity checking• Network status• Coordination of benefits• Registration quality assurance • Insurance eligibility and benefit verification

Invest in Automation

in 10 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

FIVEEngage and Educate Patients

When employers subsidized the majority of their employees’ healthcare costs,

people rarely scrutinized their bills. If they had a co-pay, they paid it, but

they were unlikely to spend much time analyzing their explanation of benefit

statement, unless there was an unanticipated patient charge. The rise in high-

deductible health plans means people are paying more out of pocket, which is

prompting many to become more discerning healthcare consumers.

A recent study asked 1,000 U.S. consumers what could be done to address their

top healthcare payment and billing pain points, and the top three answers all

spoke to the need for having upfront information about treatment, costs, and

payment options.4 As you look to address these

expectations, consider the following:

Financial educationThe rising cost of healthcare is frustrating for

patients, in large part because many don’t

understand their coverage. One study found

that only 14 percent of respondents accurately

understood the concepts of deductible, co-pay, co-

insurance, and out-of-pocket maximum.5

4 PwC Health Research Institute, "Money matters: Billing and payment for a New Health Economy," May, 2015.5 Carnegie Mellon University. (2013). Consumers Don't Understand Health Insurance, Carnegie Mellon Research Shows [Press release]. Retrieved from http://www.cmu.edu/news/stories/archives/2013/august/aug1_understandinghealthinsurance.html.

in 11 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

When patients are confused or frustrated about a bill, they are less likely to pay

on time—or at all.

While some larger health systems can provide financial counseling, this isn’t an

option for most providers. An alternative is to provide financial guidance prior

to the visit, through email or patient packets. This approach makes it harder to

address a patient’s individual financial situation, but it’s a step toward helping

them better understand what they owe and why.

Upfront estimates Healthcare is one of the few “services” people purchase without knowing ahead of

time what their costs will be. In 2013, a student researcher called multiple hospitals

across the country to get pricing for a hip replacement. The news report on the

cost disparity—which ranged from $10,000 to more than $100,0006—was widely

covered in the media, in large part because it validated the frustration many people

feel with the lack of visibility into healthcare costs. Implementing tools that allow

your staff to quickly and accurately estimate and communicate the cost of a patient

visit or procedure can deliver the transparency patients want.

Engage and Educate Patients

Just 14% of survey respondents accurately understood the concepts of deductible, co-pay, co-insurance and out-of-pocket maximum.

6 Kliff, Sarah. “How much does hip surgery cost? Somewhere between $10,000 and $125,000,” The Washington Post, Feb. 12, 2013. (retrieved from: https://www.washingtonpost.com/news/wonk/wp/2013/02/12/how-much-does-hip-surgery-cost-somewhere-between-10000-and-125000/)

in 12 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

SIXCollect More Upfront

Collecting money from patients hasn’t always been a priority for healthcare

providers. Even when a co-pay was due, front desk staff would sometimes offer

to bill patients who couldn’t pay it, rather than have a potentially uncomfortable

conversation at the check-out desk. Today, with the percentage of patient

responsibility increasing, that’s no longer financially feasible. A recent study found

that physician practices collect from 59 percent of patients at the point of service,

while hospitals collect from 35 percent. Those collections, however, represent just

35 percent of fees due for practices and 19 percent of the patient responsibility.7

Increasing upfront collections takes commitment from the entire organization.

It starts by having the right policies and programs in place, and ensuring your

employees have the training and resources they need to be successful.

Change the payment conversationTalking to patients about what they owe and their payment options can be

difficult, and having resources available at the point of service can minimize

staff discomfort and reduce patient anxiety. For example, customized scripts

that prompt employees on what to say when discussing these topics can guide

staff through conversations with the patient. These talking points can articulate

your hospital or practice's financial policy.

7 Availity Research Study, The Impact of Consumerism on Provider Revenues. April, 2015.

in 13 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

Collect from 59% of patients at the point of service

Represents 35% of fees due

Offer a discount for payment in fullThe longer it takes you to collect a dollar from a patient, the less that dollar is

worth. When you factor in the staff needed to collect that dollar, along with

printing and mailing costs, the value of that dollar quickly erodes once the

patient walks out the door. For self-pay patients and those with high-deductible

plans, consider offering discounts if they pay in full upfront. Depending on the

contract with the insurance payer, discounts may or may not be allowed for

those with a comprehensive health plan.

Consider patient payment plansIf full or discounted payment upfront isn’t an option for patients, another

alternative is offering a patient payment plan. These programs are growing

in popularity among hospitals and physician practices because they allow

patients to apply for a no-risk, no-interest loan that features extended terms.

For participating providers, patient payment plans allow them to receive

guaranteed payment—at a reduced percentage—shortly after the patient visit.

Once again, this is an opportunity to reduce administrative costs associated

with trying to collect from patients.

Collect More Upfront

Point-of-Service Collections

PHYSICIAN PRACTICES

HOSPITALS

59%

35%

Collect from 35% of patients

Represents just 19% of fees due

35%

19%

in 14 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

SEVENCommit to Ongoing Staff Training

Throughout this eBook, we have identified strategies to help your hospital or

physician practice adapt to a changing healthcare environment. But for these

initiatives to be successful, they must be accompanied by robust training

and educational programs. Whether you are implementing new technology,

reengineering workflows, or offering new patient programs, ensuring your staff

has the required skills is critical to a successful rollout. Here are some other

things to consider:

Focus holisticallyWhen people understand how their individual roles affect the entire organization,

they are more likely to take ownership of their performance. You can foster this

culture by implementing cross-training initiatives where employees learn the day-

to-day responsibilities of their colleagues in different departments. Not only does

this help to break down organizational silos, but having more people trained in

different areas can give you more opportunities to balance resource allocation.

Emphasize customer service In a healthcare environment, patients are frequently under stress, and how your

employees manage these interactions can affect how patients view the level of

care they receive. Therefore, it’s important to provide training that promotes

customer service qualities like empathy, patience, and clarity.

Measure training effectiveness Training initiatives can have dramatic results on yield.

Make sure to track the results in order to demonstrate

ROI. Use HFMA’s Map Keys8 to evaluate how you’re

performing against key revenue cycle metrics, both

before and after the training initiatives.

8 HFMA (2012) "MAP Keys: The industry standard for measuring revenue cycle performance." Healthcare Financial Management Association.

in 15 7 Strategies to Transform Your Revenue Cycle | An Availity eBook

Change can be difficult. But sticking with processes that no longer

support your financial and organizational objectives can be even more painful.

Work with your stakeholders to understand the issues that affect patient and

payer yield and, work across the organization to address them.

For information on revenue cycle solutions for healthcare providers,

visit Availity.com.

CONCLUSION