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Ten Strategies for Capturing All Reimbursements

Jeff Drake, for HealthLeaders Media, May 4, 2009

Healthcare employs more people than most other sectors of the U.S. economy. Spending is predicted to rise to $2.6 trillion this year and account for 18% of the gross domestic product. There are certainly plenty of opportunities to earn a good living taking care of others.

If asked, however, most people in healthcare would presumably say their initial reason for working in the industry had something to do with helping or caring for people. This is one of the reasons our nation's healthcare is the best in the world. It can at times also create an unintended conflict with a provider's fiscal health. Patient care and even certain aspects of patient satisfaction are completely dependent upon a facility's financial well-being.

In the past several months we've seen an assortment of macroeconomic factors affect hospitals, physicians and other providers' abilities to provide care and sustain their operations. Medicare and Medicaid reimbursements continue to decline. Investment income is disappearing. National unemployment is higher than it has been in many years, adding to the record count of uninsured Americans who still need care. Admission volumes are down. The increasing popularity of consumer-directed care, high-deductible health plans and health savings accounts has created more patient financial responsibility and less reliance on insurer reimbursements.

These factors have made an already complex and difficult proposition for healthcare providers even more overwhelming. Cancelled or delayed capital expenditures, layoffs, program cuts, and even bankruptcies and closures continue to dot the headlines. According to Thomson Reuters more than half of U.S. hospitals are reporting operating losses.

In many ways the healthcare industry's reaction to the current economic situation is telling of pre-existing problems. Many hospitals that entered the downturn in poor financial standing have simply not been able to endure the added pressures. Holes in hospitals' administrative and financial practices have been exacerbated. Best practices still exist, though, amid all the doom and gloom; according to the same Thomson Reuters report the half of the nation's hospitals show a profit, so they must be doing something right.

At the most fundamental level, in order to maintain long-term operational viability hospitals have to rededicate themselves to the financial side of healthcare. The hospitals currently operating at a profit presumably carried out this approach in times of prosperity and as a result are better prepared to weather unforeseen and uncontrollable financial pressures. That's not to say patient care should not remain priority one, but if the books consistently bleed red then there is ultimately no chance of fulfilling the core mission. Providers must operate as businesses first—even not-for-profits—and help their patients understand that without adequate payment for services they will cease to exist.

This is a real paradigm shift for many providers, but is never more true or important. During the more than 35 years I have worked in healthcare, I have seen the industry move through numerous peaks and valleys and each time have been fortunate to witness some best practices from providers who emerged successful. Healthcare may be more resistant to the cycles of our economy than some other industries but is clearly not immune. The one common denominator for successful providers is a strong emphasis on the financial side of the business, which naturally allows for better patient care and even patient satisfaction. In my experience there are several specific strategies providers use consistently to manage this balance.

Enhance internal processes to capture all reimbursements
Within an organization's existing patient population there are usually opportunities for additional revenue that can be capitalized upon with better processes.

  • Reduce claim denials and bad debt. The more accurate a hospital can be on the front end, the lower the claim denial rate and AR days. Using technology to automate and replace manual processes can empower administrative and financial staff to work faster, more efficiently, and more accurately. Manual processes often lead to error, which leads to denied or rejected claims and potential bad debt, which is currently crippling hospitals.
  • Check every self-pay patient for Medicare and/or Medicaid coverage. On average, 10% of patients who receive treatment as "self-pay" qualify for Medicare or Medicaid. Eligibility checks should be performed prior to service and after service, if necessary, to identify retroactive coverage. The federal government estimates that spending on Medicare and Medicaid will rise from about 4% of gross domestic product in 2009 to nearly 6% in 2019 and 12% by 2050, so providers should take every measure to capture legitimate reimbursements and avoid writing off debt. Doing so can be especially costly for safety net facilities serving a primarily indigent population. In a six-month period in 2008, New Jersey-based Meridian Health identified more than $1.7 million in billable Medicaid charges it may otherwise have written off.
  • Verify medical necessity compliance. Hospitals performing outpatient tests or treatments from physician orders should validate medical necessity compliance. Providers will not be reimbursed for denied claims and cannot bill patients without a signed advance beneficiary notice of non-coverage. The medical necessity validation process can be performed in advance of the patient visit for all scheduled procedures and just prior to service on unscheduled procedures. An automated medical necessity validation process and a smooth order entry process can dramatically improve hospital/physician relationships and save precious staff time.

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