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The 5 Biggest Healthcare Finance Trouble Spots

December 02, 2013

Healthcare finance executives have had more than their share of challenges to deal with in 2013. Which ones top the list—and will continue to be headaches in 2014?



Dennis Dahlen, senior vice president of finance and CFO at Phoenix-based Banner Health

Healthcare finance executives have had more than their share of challenges to deal with in 2013. Which ones top the list? Based on the many conversations I've had with senior hospital and health system leaders this year, here are five biggies.

1. Revenue Cycle Management
The revenue cycle has reemerged as a major concern for finance leaders because collecting payment has become more challenging in 2013 thanks to the continuing growth of high-deductible health plans and a tougher denials environment with payers.

"Three years ago, I would have been in the camp that said that revenue cycle optimization seems like old hat. But the tactics have changed, and today the revenue cycle is all about denials management," says Dennis Dahlen, senior vice president and CFO at Phoenix-based Banner Health. "There are the RACs on the Medicare and Medicaid side and the commercial payers are now doing the exact same thing. Then we've got consumer-driven health plans and high-deductible policies. Now, it's not just fighting to be paid for every claim. You've got to fight with the payer for the claim, and then you've got to fight for the scraps that the patient is responsible for, and that's a whole different game. The tactics have changed, so we've got to change with it."

2. RACs



Mary Ann Freas, senior vice president and CFO at Southwest General Health Center in Middleburg Heights, OH
Dahlen is far from the only CFO to mention the Centers for Medicare & Medicaid Services' recovery audit contractors program to me this year. I've heard from many finance leaders that RACs are becoming more aggressive in their claims denials, which creates major headaches for providers.
Karen Testman, senior vice president, financial operations at MemorialCare Health System, a six-hospital organization based in Long Beach, CA, says that while she agrees with the concept of reducing improper Medicare payments—CMS's stated goal for the RACs—the administrative work it creates for providers is a "nightmare."

"As a taxpayer, I can certainly understand that you don't want someone abusing the system so that the government is paying for a fraudulent situation or claims they shouldn't be paying, but [RAC auditors] are getting into arguing about medical necessity, and we get caught in the middle," she says.

Mary Ann Freas, senior vice president and CFO at Southwest General Health Center in Middleburg Heights, OH, says the after-the-fact RAC review gives the auditors an unfair perspective.

"It is frustrating to have significant dollars taken back based on an auditor's retrospective review of the provider's delivery of care based on their professional judgment at the time. … It is particularly frustrating because the dollars have already been expended on taking care of those patients. … We don't expect this process to go away. It's a proven revenue source for CMS," she says.

3. Two-Midnight Rule



Jerry Arndt, senior vice president for business services at Gundersen Lutheran
As if dealing with RAC denials wasn't already difficult enough, CMS upped the ante with its two-midnight rule, which went into effect on Oct. 1. According to the new rule, providers will be reimbursed under Medicare Part B unless a patient is hospitalized for two midnights or more. That's of great concern to hospital finance executives, who believe the rule will result in reduced reimbursements and unhappy patients. Medicare patients on observation status are typically responsible for a 20% copay and do not receive coverage for some medications administered in the hospital or for postacute care.

To Jerry Arndt, senior vice president for business services at Gundersen Lutheran, a 325-bed integrated healthcare organization based in La Crosse, WI, the two-midnight rule feels like a punishment for running a competent, well-managed shop.

"It's just another one of those absolutely classic examples of being penalized for being efficient. If you can discharge somebody with a one-night stay, then it will get paid as an observation as opposed to discharging them at 12:05 a.m.," he says. "It's another example of having to choose between doing what is right and what maximizes revenue, and this is really, really getting to be a difficult situation."

4. Costly IT Investments



Craig Richmond, associate CFO and vice president of revenue cycle at Cleveland-based MetroHealth System
Installing a systemwide electronic health record and upgrading other IT capabilities are necessary for future success but come with a high price tag and an ROI that is often difficult to demonstrate in the short term.

Rick Hinds, executive vice president and CFO at UC Health in Cincinnati, says spending millions for an EHR is necessary for providers to remain competitive but notes that leadership needs to look at more than dollars when determining the ROI.

"It's hard or nearly impossible to justify the investment needed for a state-of-the-art EHR with hard-dollar savings," Hinds says. "You have to look beyond that to the intangible benefits, the improvements in delivery of care and positioning your organization to be competitive in the future."

Craig Richmond, associate CFO and vice president of revenue cycle at Cleveland-based MetroHealth System, agrees that defining the success of an IT installation should be done in broader terms than just the balance sheet.

"You can look at ROI in many different ways," he says. "You can look at ROI from a financial perspective. You can look at ROI from mitigating compliance risk. There are a lot of different ways you can look at it. Don't even call it an ROI, but look at the value proposition associated with it."

5. Health Insurance Exchanges



Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital in Oceanside, NY
As healthcare providers brace themselves for the impact of the health insurance exchange products that will begin providing coverage on Jan. 1, 2014, perhaps the most difficult element involved is the uncertainty surrounding how they will impact revenue and bad debt levels.

Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital in Oceanside, NY, says he is skeptical that health insurance exchanges will deliver on the financial promise of decreasing bad debt and providing more insurance coverage to low-income healthcare consumers.

"We don't know what the heck is going to happen in the first year. It's likely that it's going to take some time to develop. It may actually take several years to develop really the trends and the impact of what will ultimately occur under reform," he says. "The whole plan hinges on the expectation that you would get the young folks to buy insurance and that you would take those premiums that they would pay to help subsidize the entire health system. But, in many cases, they don't see themselves as needing health insurance, are not paying into it, and generally not using it. ... I just think that it more than remains to be seen if it will work."

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