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4 Ways to Thrive in the New Payment Environment

February 03, 2014

Reduced reimbursements are the most-cited threat to healthcare organizations, but strategic leaders can find ways to mitigate the potential harm by shoring up collections and getting serious about analytics.

When Robin Norman, senior vice president and CFO at Virginia Hospital Center, a 334-bed institution in Arlington, VA, looks ahead to the rest of 2014, the glaring issue she sees on the horizon for her organization is declining reimbursements.

"Our biggest challenge is the ongoing reimbursement reductions, primarily from government payers, and that train just keeps coming at you every year," she says.

Norman is certainly not alone in her assessment. In the HealthLeaders Media 2014 Industry Survey: Forging Healthcare's New Financial Foundation, 91% of respondents said they consider reduced reimbursements to be a threat to their organization, far outweighing the next two most commonly cited concerns, industry consolidation (37%) and overall healthcare reform (36%).

1. Integrate and Train to Prevent Leakage
While it may not come as a surprise to anyone in healthcare that reimbursements are a major cause for concern, the constant need to do more with less has Norman and her team looking for long-term solutions for containing costs and preventing leakage.

"The complexity in healthcare is unfortunate, even the complexity that existed before all the changes that are beginning to transpire," she says. "All those complexities lead to opportunities to make mistakes that are just human mistakes— like an honest registration error where something gets entered wrong or a physician doesn't document something correctly—and we don't get paid."

To improve its clinical documentation and protect the revenue cycle, VHC has worked to integrate its finance and clinical teams.

"We have a couple of people who work up on the units, and they will work with physicians to show them what to look for and train them on the spot, and that is what works best," Norman says.

This training effort will be more important than ever as ICD-10 is implemented in October, she notes. "We're going to put some more oomph into [training] this year with ICD-10 coming up. We'll be training physicians by their specialty rather than in broad brushes. It will be specific to what they need to know, and it allows us to get in front of them in general for training, which also helps them in their own billing and revenue."

Additionally, VHC is in the process now of expanding its revenue cycle integration by moving its large employed physicians group to one billing platform.

"They are on varying systems and varying approaches, and they are in the process of a major upgrade that will put them all on one system and one approach… While there is a lot of short-term pain, there is a lot of long-term gain in helping that revenue cycle go a lot more smoothly," Norman says.

2. Fight the RACs
When it comes to collecting payments, RAC audits are another key trouble spot, according to Norman. As Medicare ramps up its efforts to identify and correct what it considers to be overpayments, it is becoming harder for providers to hang on to their reimbursements for care provided to Medicare beneficiaries.

"RAC audits in particular are challenging in their depth and breadth with the whole process to appeal," Norman says. "RACs have been a big challenge, even bigger than the revenue cuts that have come from Medicare."

Unlike many hospitals and health systems that don't fight RAC auditor findings, VHC has "taken the opposite approach, and we have been very aggressive, but it adds a whole new layer of cost to defend yourself and defend yourself well," Norman says.

"You have to get it right on the front end to collect, but you have to defend yourself on the back end, too. It takes more staff and more time," she adds.

Norman says VHC monitors its RAC appeals and "looks for trends that we can fix on the front end. We have a couple of integrity auditors, and their job is to follow up when we are seeing these trends… We have people who are working on the front end to see why we are not getting paid."

3. Get Serious About Using Analytics Tools
To enhance its ability to find revenue leakage, VHC is going live with a new analytics system in April that will help it identify particular physicians or units that create higher-than-average denials. "We will be tracking denials so we can understand where they are coming from and fix [them] on the front end," Norman says.

Even without the new technology, Norman says she can identify some areas where leakage is a concern, but also adds that the need to provide quality patient care and keep physicians happy complicates efforts to tighten the reins.

"Radiology is one area where we have some leakage," she says. "There is a tug between service and accessibility and getting insurance verification. Physicians want to take care of patients, but if a test like an MRI needs an insurance pre-certification, you have that tug of having to call first, while the patient is waiting and the doc is unhappy."

"We have to think about where we set that line. If I'm the worried person sitting there as the patient, I care about how long I have to wait. The whole challenge is we want to do the right thing and treat the patient right away, but we also have to make sure we get paid for it," Norman says.

4. Find Opportunities in Reimbursement Cuts
While reimbursement cuts are certainly a source of anxiety for VHC, Norman says new payment structures based on quality and outcomes have given providers an opportunity to evaluate their delivery models versus the cost of delivering care. Norman says VHC has "embraced" this chance, which she sees as "an objective way to show we are a quality hospital."

"With value-based purchasing, the most concrete thing in our world has been Medicare value-based purchasing," she says. "We started early on understanding that and working to improve those metrics, and that has had huge dividends… Whether we agree that they have picked the right measures or not, they have picked reasonable measures, and now we can have comparative data."

Value-based reimbursements have also encouraged VHC to reexamine its mission, which it has recently adjusted to meet the new imperatives in healthcare, Norman says.

"Our focus was on being the best hospital, and that has not stopped, but now we want to be the best value hospital with the highest quality and lowest cost while also having the highest patient satisfaction and engagement. By striving to be the best, we have slowly but surely been able to move our numbers… It is why we are growing when a lot of our competitors are shrinking," she says.

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