health tech revenue cycle principles

Revenue CyCle PRinCiPles seRies

Part One

Getting Back to BasicsDerek Morkel, President & CEO

w w w . h t - l l c . c o m

Revenue Cycle Principles SeriesPart One: Getting Back to Basics

introduction:

The billing and collecting of health care claims, aka, “the Revenue Cycle” is an extremely complicated process. The complexity only seems to get higher as we deal with additional layers of regulation related to reimbursement and governmental requirements. Everyone involved in Revenue Cycle activities is continually asked to do more with less.

It is for this reason that we thought the time was right to start a series that focuses on the fundamentals/principles of billing and collecting — the basics. It is clear that in every highly technical and complicated business process, the basic questions are often forgotten on a day-to-day basis; yet it is always adherence to the fundamentals that dictates whether or not an organization is truly successful.

Consider this: it is interesting to note that even the most accomplished professional sports stars start every single year relearning the basics. NBA teams start training camps by doing catching, passing and dribbling skills — sometimes for weeks.

The basics count — they count each and every day and whether it is once a day or once a week, it is important that they are in focus.

In this series, we don’t aim to try and teach any technical skills — rather we are trying to answer more basic questions related to:

•Whyisthissoimportant? •Whatshouldwebefocusingonandhowoften? •Whatshouldourtimeallocationtothebasicsbe?

Human behavior and execution of the basics — understanding and excelling at these two things is the key to sustained success. The following quote from the book, Execution: The Discipline of Getting Things Done, by Larry Bossidy and Ram Charan captures the essence of this:

“Follow-through is the cornerstone of execution, and every leader who’s good at executing follows through religiously. Following through ensures that people are doing the things they committed to do, according to an agreed timetable. It exposes any lack of discipline and connection between ideas and actions, and forces the specificity that is essential to synchronize the moving parts of an organization. If people can’t execute the plan because of changed circumstances, follow-through ensures they deal swiftly and creatively with the new conditions...”

The basics count.

They count each

and every day

and whether it

is once a day or

once a week, it

is important that

they are in focus.


Question 1: Why is this so important?

This would seem to be the easiest question of them all to answer, but it is clear that many of us forget this — either periodically or permanently — revenue cycle is about collecting CAsH.

Every single hospital, physician practice, nursing home, etc. all depend on cash on a daily basis. Net Revenue is almost always the single largest line item on the income statement and Accounts Receivable is generally the largest and most liquid asset that any health care organization has on the balance sheet.

Our work is to collect it in the most efficient way possible.

As complicated as it all is, our work can be segmented in two focus areas on a daily basis:

1. Collect more cash2. Collect cash more efficiently

It sounds very simplistic, but if all of our daily activities were structured around either of these two areas, I would bet that our results would improve dramatically.

Perhaps an easier way to put this is that all of our daily activities (no matter what the job title) should answer one of the following two questions:

•Doesitimprovecashcollections•Isitimprovingaprocess(fixingabrokenonepermanently)?

1. Collect More Cash

There are many components of collecting more cash, but it can really be broken down into three main areas of focus — going back to the basics again:

•Cleanclaims•Billefficiently•Collectorproductivity

Thequestionforyouhereishowmuchattentionispaidtothesespecificareas?Aretheymeasureddaily,weekly?Doyouknowifyouaredoingbetterthisweekthanlastweek?Whatarethestrategiestoimprovetheseareas?Ifyouarethemanager,howmuchattentiondoyoupaytotheexecutionoftheseareasonadailybasis?

Ithinkifwecanallagreethatifweexcelledatproducingcleanclaims,billingthemefficientlyand having a productive collections process that we would collect more cash. The question you havetoaskyourselfishowisyourteams’resources(time)allocatedtoachievethesegoals?

If we focus on

and execute the

basics each and

every day, we will

be more likely to

succeed.


2. Collect cash more efficiently

Interestinglyenough,collectingcashmoreefficientlyisverycloselytiedtothesameareasof collecting more cash. The questions related to each area are slightly different, but the fundamentalissuesremainthesame—howmuchattentionispaidtotheseareas?

Clean claims •Doalldepartmentsinyourfacilityreconcilechargesdaily? •Doyouusechargecapturesoftware(cleanvs.completeclaims)? •DoyouuseCDMsoftware?

Billefficiently •What%claimsarebilledelectronically? •HaveyouverifiedthatallEDIpayorsarebeingbilledelectronically? •Doyouuseautomatedsecondarybillingsoftware?

Collector productivity •Doesyoursystemtrackthis? •Istheprocesssegmented?Bestcollectormatchedtotoughestpayor?

Theanswerstothesequestionscanprovidesomeinsightintotheefficiencyoftheprocess.Asignificantamountoftheefficiencyequationtodayrelatestohowtechnologyisusedinallphases of the Revenue Cycle. Technology should never be used just for the sake of it, but where itisappliedinthoughtfulandefficientmanner,itcanproducegreatresults.

Conclusion

Whetheritisbusinessorsports,thebasics/fundamentalsarethekeytosuccess.Doingthebasics correctly on a daily basis and having the tools to measure the basics is the foundation on which great Revenue Cycle results are built.

Today’s Revenue Cycle is highly complex and fragmented, yet at its core it is relatively simple. It isoftendifficulttobreakawayfromthemanytasksandchoresthateatupourtimeonadailybasis — but it is necessary to make sure that the basics are taken care of. After all, nothing makes any of us feel better than beating that cash goal month in and month out.

For more information, contact us today at 800-228-0647 or email [email protected]

HealthTech hopes that the information contained herein will be informative and helpful on industry topics. However, please note that this information is not intended to be definitive. HealthTech and its affiliates expressly disclaim any and all liability, whatsoever, for any such information and for any use made thereof. Recipients of this information should consult original source materials and qualified healthcare regulatory counsel for specific guidance in healthcare reimbursement and regulatory matters.

®

REVENUE CYCLE PRINCIPLES SERIES

Part 2

Getting the correct time allocation by focus areaDerek Morkel, President & CEO, HealthTech, LLC

®

Page 1

w w w . h e a l t h t e c h s o l g r o u p . c o m

Revenue Cycle Principles SeriesPart 2: Getting the correct time allocation

by focus area

Part 1 Recap:

The message of Part One was simple - our work is to collect cash in the most efficient manner possible.

As complicated as it all is, our work can be segmented in two focus areas on a daily basis:

1. Collect more cash2. Collect cash more efficiently

It sounds very simplistic, but if all of our daily activities were structured around either of these two areas, I would bet that our results would improve dramatically.

Perhaps an easier way to put this is that all of our daily activities (no matter what the job title) should answer one of the following two questions:

• Does it improve cash collections?• Is it improving a process (fixing a broken one permanently)?

These two basic principles can then be broken down into three main areas of focus:

- Clean claims- Bill efficiently- Collector productivity

Introduction:

It is hard today to pick up a healthcare magazine today that either focuses on finance or receivables management that doesn’t have an article on the importance of clean claims. The majority of these articles focus on the myriad of technical problems that cause claims to be reworked or rejected – thus creating problems downstream.

Our first paper in this series on the basics of Revenue Cycle had “clean claims” as the first main area of focus. Part 2 – much like the first in this series takes a slightly different angle to the same problem and starts at the beginning to answer some very basic questions about time and resource allocation.

Part One Recap:

Performing the

basics correctly

on a daily basis

and having

the tools to

measure the

basics is critical

in Revenue Cycle

management.

®

Page 2


Why is it important?

The key takeaway from Part One was that the entire focus of any Revenue Cycle operation is to collect cash in the most efficient manner possible.

Consider this: Industry statistics estimate the following relative to registration data and accuracy:

► 70% of the data required for billing comes from registration► Registration accuracy related to this data is ~ 50%► 50% of the denials can be traced back to admission based errors

Different studies have come up with slightly different numbers, but they all come up with the same basic conclusion – registration accuracy is the foundation for a successful Revenue Cycle process.

A series of short quizzes (be brutally honest in answering these) might help illustrate where the problem starts and also what the solution is:

Quiz 1:Please rate the relative importance (by %) that you believe each of the three sections contributes to a well run Revenue Cycle process.

Functional Area % AllocationClean claimsBill efficientlyCollector productivityTOTAL 100%

Quiz 2:Please estimate the amount of the time that you (or your managers) focus on each of these 3 areas on a daily basis.

Functional Area % AllocationClean claimsBill efficientlyCollector productivityTOTAL 100%

Quiz 3:Please estimate the average talent level of each area relative to the others, i.e. best, average, worst.

Functional Area AllocationClean claimsBill efficientlyCollector productivity

Registration

accuracy is vital

to a successful

Revenue Cycle

program and

greatly impacts

a hospital’s

bottom line.

®

Page 3


ResultsThe answers to these three questions at most facilities will produce startling results. Almost every facility that I have ever visited or been associated with allocates the best resources to either the billing or collections function and almost never to the registration process. Registrars are often the lowest paid and least trained people in the business office and yet control not only the accuracy of the registration data, but are also the customer service face of the organization.

One of the most important positions in any Business Office is the one that checks registration accuracy (QA). Some facilities do not even have this position (or complete this function) and very rarely is the position filled by the best available person. It is truly amazing to think that a facility would not have their best person in admitting focused on this on a daily basis – especially since we have determined that 70% of every claims data comes from admitting.

The old adage of “Garbage in – Garbage Out” is still very relevant today in healthcare. Part One of this series established that to build an effective process there are three focus areas. The answer to Quiz 1 should provide you with the starting point that you need to take a fresh look at what resources you have allocated where – relative questions that need answering are:

• Do you have the right people in admitting?

• Do you provide them with right training and incentives?

• Is your best person responsible for admitting QA – DAILY?

• Do you QA all accounts? (Hint: QA for an account takes far less time than rebilling)

• How much of your time do you spend on this function daily?

• How important do you make this in terms of rewards and accountability?

ConclusionClean claims are the foundation - the building block of an efficient Revenue Cycle operation. I think that we all know this – the question is do we allocate the time and resources to make this a reality on a daily basis?

This paper did not touch on the many technology applications that are available today that can help improve the registration process and improve claims accuracy. The first step is to acknowledge that “clean claims” is the critical first step in the process and that it deserves the time and resources to make it successful. Making sure that everything is airtight at the beginning of any process in any business is critical – collecting receivables is no different. Billing efficiently and having superior collector productivity will be significantly enhanced if you get the first step 100% correct on a daily basis.

For more

information,

contact us

today at

800-228-0647

[email protected]



Part Three

The Fundamentals of Producing Clean and Complete ClaimsA more focused approach to reducing denials

Derek Morkel, President & CEO, HealthTech


Revenue Cycle Principles SeriesPart Three: The Fundamentals of Producing Clean and Complete Claims —

A More Focused Approach to Reducing Denials

Part One Recap

The message of part one was simple — our work is to collect cash in the most efficient manner possible.

As complicated as it all is, revenue cycle work can be segmented in two focus areas on a daily basis:1. Collect more cash2. Collect cash more efficiently

The two basic principles can then be broken down into three main areas of focus:

1. Clean claims2. Bill efficiently3. Collector productivity

Part Two Recap

Part two focused on matching your facility’s resources — both people and time to the key factors that improve clean claims and revenue cycle efficiency.

Making sure that all business processes are well established and communicated regardless of the process is critical. Collecting receivables is no different.

Billing efficiently and having superior collector productivity will be significantly enhanced if you get the first step 100% correct on a daily basis.

Introduction

The first two parts of our series focused on the broader aspects of why it is important to focus on clean and complete claims and the resources necessary to ensure success. Part three takes a step further to dig into the specific components of which processes produce both clean and complete claims. The end result of getting this right is not only better collections, but typically better net revenue, higher collections and greater efficiency.

An examination of the most common reasons for claim denials almost always provides some insight into what needs to be fixed to correct the errors. Even though the reasons we discuss here come from national or regional analysis of claim denials, it is always useful to analyze your own hospitals denials (at least monthly) to make sure that you are addressing the root causes at your own facility.

Most common causes for claim denials

Trailblazer Health Enterprises — one of the largest Fiscal Intermediaries (FI) analyzed claim denials from its database and published (June 2010) the following listing of principal causes for hospital claims denials.

1. Duplicate claim/service2. Non-covered service3. Medicare Advantage plan4. National Correct Coding Initiative (NCCI)5. Screening/routine services6. Patient supplies7. Beneficiary eligibility8. Medicare Secondary Payer (MSP)9. Provider eligibility10. Hospice

As a comparison, an analysis of several studies of physician claim denials produced the following list of the top 10 reasons.

Top ten reasons for physician claim denials are the following:

1. Incorrect or missing ICD-9 diagnosis2. Incorrect or missing modifiers3. Duplicate claim4. Additional information needed to process the claim5. Billed amount is correct6. Incorrect/missing CPT procedure codes7. Physician’s name and/or NPI number is missing or incorrect8. Incorrect or missing place of service code9. Incorrect or missing quantity, multiples or services10. Services are unbundled

There are a number of different studies regarding the cost to rebill and rework a claim denial — most of them identify the amount around $25-$35 per account. Whichever number you use, it is clear that it is very inefficient and expensive to rework a claim. Both of the listings also include a number of categories that would cost the provider additional reimbursement even if the claim is paid the first time.

A grouping of the reasons by functional area is extremely revealing and proves the point that an intense focus on the front end is critical to efficiency. The physician breakdown is slightly different as significantly more work is done by the billing function to produce a clean claim.

Category Hospital PhysicianAdmitting 6 2Coding 1 3Billing 1 3Charge Capture 1 1Administrative/System Setup 1 1

Page 2



Focus areas to improve clean claim rates & reduce denials

Admitting QA

The claims process actually begins with preadmission and then the admission process. Admitting staff not only need to be trained to make sure the right forms are filled out, but they also need to be able to verify that the patient’s insurance information is correct, collect any co-payments due and check that any necessary pre-authorization forms from physicians and insurances are on file. 70% of the data required to complete the billing process comes from admitting. As we can see from the denial analysis, 60% of the denials in a hospital can be directly attributed to admitting errors.

With each error potentially costing $25-$35 to correct on the back end, it makes sense to have a robust QA function for admitting. 100% of all the claims should be checked for the denial reasons listed above and your own analysis of your facility’s denials. The QA should also be done by someone who is knowledgeable about admitting. Quite often the task is relegated to a lower level employee and/or only done sporadically as an afterthought.

Tip: It is sometimes good to rotate this function between your admitting staff so they can see the errors being made throughout the department. It is also good to periodically have them sit with the billers to see what the result of an error is in the billing cycle.

On the back end, you need a clear understanding of where your denials are coming from in terms of both the reason for them and the payer involved. That means creating some type of denial management database. This will ensure that the QA process is always evolving and matching the current needs of your facility.

Charge Capture & Coding

Correctly documenting the services and procedures a patient receives during an inpatient stay or even in a visit to the emergency room — i.e. charge capture — is a vitally important step in the process. For example, if a clinician documents a medication the patient receives (by infusion) but forgets to record how the medication was delivered, the insurer won’t pay for the delivery, just the medication. It’s unlikely that the medication miraculously made it into the blood stream; thus, the fact still remains that the provider will not be paid correctly for the claim.

Implant charges are another typical culprit. Not only can missing implant charges cause potential denials, but they can also result in lost reimbursement — up to $40,000 for certain cardiac and neurological/spinal implants. Potentially a very costly error.

Charge capture should be a daily discipline that is the responsibility of many different departments in the hospital. Much like the admitting QA function a review/reconciliation should be part of each department’s responsibilities. If this is completed each day correctly by every department, then the amount of charge capture errors should be greatly reduced.




Technology

Much of what we have discussed so far can be accomplished by improving the originating processes and having a review function. However, it is important to note that there are many applications available today that can aid in the review and control process and make it even more comprehensive. Almost all of the parts of the revenue cycle discussed within this series are prone to human error — even the review/QA process.

Technology applications like CDM maintenance software, Charge Capture, Medical Necessity, Bill Scrubbers, etc. should be an integral part of the front end of any hospital’s revenue cycle. It is not possible for any human being to remember or review all the line items of a hospital CDM — it can only be done properly by software. The same can be said for Charge Capture and Bill Scrubbing. These applications can scan thousands of claims in seconds looking for potential errors. It is for this reason that these should be integrated into the setup, review and QA functions at the hospital.

Eliminating one $40,000 error provides an attractive ROI for all the applications listed above.

Conclusion

On the front end, a variety of seemingly unrelated steps in the process — including payer contract negotiations, admitting, charge capture and billing — all contribute to the potential success or failure of getting a claim paid correctly and on time. A process that focuses on the components discussed within this document will result in a much higher clean claims rate.

• Clean claim focus by all departments — not just admitting

• Robust review/QA function — including use of technology applications

• Continuous feedback — monitoring of QA results and denials keeps the focus on current issues

By promoting a culture of cross-departmental cooperation that attacks the breakdowns in various steps in the claims life cycle, denial rates will begin to fall, collector productivity will increase and CASH will improve.

As complicated as

it all is, revenue

cycle work can still

be segmented into

two focus areas on a

daily basis:

1. Collect more cash

2. Collect cash more efficiently


Part Four

Boost collector productivity through segmenting and value-added processingDerek Morkel, President & CEO, HealthTech

Revenue Cycle Principles Series — Part FourBoost collector productivity through segmenting and value-added processing

Introduction to Part 4:

The first three segments of this series has focused on the importance of producing clean and complete claims; making sure that we allocate the necessary resources to achieve this and finally to make sure that the process has the right structure to ensure success.

One of the points made in the first segment was that the best way to achieve collector productivity was to have a comprehensive program focused on clean and complete claims the first time. Outside of the fact that there are countless studies that have proven this point, pure common sense will tell you that rework is far more time consuming than getting it right the first time.

Unfortunately it seems unlikely that we will achieve a completely error free revenue cycle in the near future. The complexity of the process; the manual nature of the constituent parts and the payor provider dynamic all contribute to the fact that even the most efficient hospital still needs collectors to resolve claims. The task is then how to make them more productive.

How do we improve collector productivity?

One of the keys to improving the back end of the process – collector productivity – is to match your resources to the areas that fit their talent/experience level. Much of what is done in the collection process is relatively repetitive and can be done by less experienced collectors. There are also technology solutions that can automate certain of the non value added processes, thus allowing your collection staff to focus on the tougher to collect payors/accounts.

Part 1: Collect more cash more efficiently

3 basic areas of focus:» Clean & complete claims» Bill timely» Collector productivity

Part 2: Match resources to needs

Key to revenue cycle is clean & complete claims:» Where are your resources

allocated?

Part 3: Focus areas to improve clean & complete claims» Admitting QA» Charge capture & coding» Effective use of technology

Page 1


» Collect more cash» Collect more

efficiently


Segmenting payors by level of difficulty

Most hospitals deal with a wide range of payors in the collection process. There is often a high degree of variability within the group of payors as to how long they take to pay; what is considered a high $ claim; requirements to pay the claim without medical records and what the resolution process is. It is probably not a positive fact for the healthcare industry that Medicare is typically the most efficient payor.

Segmenting the payors into buckets like – 1) most difficult 2) medium difficulty 3) least difficult will allow you to then match your best collectors to segment 1) and so on. Today there are companies that have been started just to help hospitals segment their payors into similar buckets – I am not sure it is that complicated. Take a list of your Top 10 Payors and sit down with your collection staff and ask them to assign each one to a group – they will do a pretty effective job in less than 10 minutes. To validate this, you can calculate what the average number of days it takes for claims to pay for each payor. It should match fairly closely to your collector’s survey.

Once you have done this, you will probably realize that not every claim for the toughest payor is difficult to collect – it is often just a subset – say high $ claims. You now have a segmented roadmap to match up to your talent and experience level. The matrix is also a useful tool for deciding where to slot in new employees. Some facilities have even used this as the basis to start hiring a pool of entry level people that are entirely focused on the easy payors and the parts of the collections process that don’t require high levels of experience to add value – e.g. statusing of claims.

The result should be a well thought out matching of talent and experience to deal with the thornier claims and payors – improving cash collections and potentially lowering your cost to collect. This one project thus meets both of the overriding principles – more cash, more efficiently.

Using technology to focus on value added processes

As with any part of healthcare today, there are various technologies in the marketplace that have been designed to improve a process. The collections arena is no different. In the previous parts of this series we have mentioned some that can assist in making sure that claims are clean and complete – these are the most important tools for improving collector productivity.

There are however some newer tools that can dramatically improve collector productivity by automating some of the processes that are currently being done manually.

Automated claims statusing

Claims statusing is a task that takes up a significant amount of a collector’s time. A typical patient claim status takes 7-10 minutes via a web portal and roughly double that amount when done telephonically. The information is then taken and either copied into the patient accounting system or transcribed into the patient’s account. Unless there is something immediate that the collector can do with that account, the collector has added little or no value to the process.

There are tools available that can automate this process (myClaimIQ AutoStatus). Either through a direct connection to the payor database or through automating the web data extraction process, the account status can be extracted and put back into the patient accounting system without any collector intervention. The process is typically done

+ =


overnight with each response mapped to the hospital’s standard collector codes. The automated functionality also eliminates any possibility of keying data errors back into the patient accounting system.

This process then allows the collectors to focus on value added activities like dealing with the harder to collect claims. The responses from the payor are also now in a separate database and can thus be used as a denial management tool and/or a QA function.

Integrated eligibility checks & denial management

The results from the auto status tool typically fall into 3 areas:

1. Needs immediate action - Payor doesn’t recognize the claim, or recognizes but denies claim

2. Needs follow up - Payor recognizes the claim but has not determined the status

3. No follow up unless payment not received - Payor pays claim as planned

In the case of point 1 – claim needs immediate action, it is now possible to use the tool to automatically route the claim to either the denials team or to have the eligibility status of the claim run against the payor database as this is the most common cause of claims rejecting initially.

The eligibility step can be automatically done through the software, thus saving a collector from doing another repetitive date entry function.

Estimated payment contract compliance prior to payment

Software that calculates payment compliance to managed care contracts has been in place for a long time now. It is typically used once the payment has been received from the payor. This can now be moved forward in the timeline to the point where the payment data is received by the AutoStatus tool. This then streamlines the process and saves the facility 14-21 days in addressing any payment related issues.

Each of the 3 areas that we have addressed under technology have been focused on eliminating or reducing non value added tasks that are being performed by experienced and expensive collection staff.

Conclusion

I think everyone would agree that a significant amount of work is done in healthcare and in the collection process specifically where the tasks performed are extremely routine and the person performing them doesn’t necessarily add any value to the process – it is merely data extraction and data transfer. Unfortunately in most cases these tasks are performed by highly experienced and well compensated employees.

In certain instances (like claims statusing) some of this can be replaced by technology. In the areas where experience and expertise counts it is thus prudent to match your resources appropriately by segmenting your receivables by payor.

The combination of segmentation and using technology appropriately can produce meaningful results in accelerating the cash cycle and also reducing the cost to collect.



health tech revenue cycle principles

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