Over the years, healthcare has proved to be remarkably resilient against multiple attempts to control a supposedly unsustainable growth in costs. I say supposedly because costs keep growing so fast, and little seems to affect that trajectory even as we approach spending 20% of our GDP on healthcare.
According to the Kaiser Family Foundation, we now spend 10 times the amount we spent on healthcare in 1980. And although the rate of growth has ebbed and flowed, costs have always outpaced the growth in national income over that time period, and show no signs of ever growing slower than or even at the same rate as GDP in the foreseeable future.
Trying to slow healthcare cost increases without limiting services is like squeezing on a balloon. Squeeze reimbursements down in one area, and another one soon pops up.
But the rate of healthcare cost increase nationwide is a macro problem. Your challenge is managing a hospital, health system, or large physician group practice. That means your job is to grow the business—and let's not quibble about whether your institution is doing so only to maximize profits.
Yes, for-profit health systems are seeking profit first, and nonprofit health systems provide valuable and unprofitable services to their communities, but on the balance, you and many of your colleagues are out of a job when you can't grow the business or meet a targeted margin.
A big story in the New York Times has recently caught the attention of healthcare decision makers. Though it raises troubling questions about whether or not the for-profit hospital chain HCA has boosted profits at the expense of patient safety and quality—namely in the areas of dialysis and heart procedures in Florida—at least one of the tactics mentioned in the story just seems to make good business sense.
Here's the gist, according to the Times:
"In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged."
The way those two sentences read suggests that the hospital chain was up to something nefarious.
Now, I'm no defender of the sometimes-sordid way this corporation has conducted business over its long history. The $1.7 billion in fines paid to the government for tactics that took place under the leadership of former CEO and now Florida Gov. Rick Scott remains a giant black mark on its reputation.
Though legal, books and business school case studies could be written about the way HCA has used complex financial engineering to weave the company in and out of public ownership, meanwhile vastly enriching insiders as well as those who supplied it equity to undertake this bobbing and weaving business strategy.
But back to the billing and coding changes. What seems to have happened, at least on a grand scale, is that HCA got smart about how to better manage its ED and to better document the work its clinicians are doing on patients. On its face, what's wrong with that?
Let's be frank. Some of these changes, which have resulted in increased profitability, have been forced on hospitals and health systems through the threat of audit from both commercial payers and the dreaded recovery audit contractors authorized by CMS to review past cases. These RACs, as they are known, attempt to retroactively deny payment for poorly documented patient care. The reasoning is that such careful supervision, even retroactively, would cut down on Medicare fraud.
Perhaps the RACs have worked too well. In reality, many hospitals have done exactly the same thing HCA has—at least if they're paying close attention to the type of clinical documentation they need to be doing to avoid costly and potentially penalty-riddled audits later.
I talked recently with Gerri Birg, a managing director at healthcare consultancy Huron Healthcare, about changes in documentation strategies that hospitals have adopted in recent years in response to threats of audit. These are serious threats. In essence, improper and incomplete coding can result in the loss of payments already on the hospital's books—a huge threat to whether they will be able to carry on their missions going forward.
Over the past 12 years, Birg, a registered nurse and former administrative nursing manager at Henry Ford Health System in Detroit, has become an expert on clinical documentation strategies and consults with major health systems on how to do it better.
She says that in addition to the threat of audits, hospitals and health systems must be conscious of the fact that their quality and safety scores are generated directly from the codes applied to patients' medical records.
Inaccurate coding can mean hospitals get penalized once for not recording accurately the complexity of the treatment given, which may negatively affect quality scores, and they get penalized under fee-for-service payment by serial undercoding. Much of this undercoding stems from poor communication between physicians and coders, she says, and she works to fix that.
"Sometimes physicians feel they've told coders the story, but they do it in clinical and technical language," she says, meaning coders won't, and shouldn't, try to bridge the communication gap between what the physician knows he or she is treating but hasn't communicated. "The coder is very literal. If you think you've [implied] something to them, they won't code it. If you haven't said it in black and white, they don't assume anything. They can't. They can't put down something they think you mean."
It's a communication and education problem that when resolved, not only cuts down on the likelihood that hospitals will have to repay some of their reimbursement, but also increases their profitability—and the cost of healthcare.
"Sometimes multiple diagnoses aren't mentioned, but have been treated," she says. "We teach clinicians and coders how you document in a medical record to make sure you capture all diagnoses."
Many hospitals are putting case managers in the ER. Some of it is an answer to the RACs because they have picked up on medical necessity of admission to the hospital. Closer internal scrutiny of coding and the clinical processes surrounding it is all about appropriate admission, Birg says, because the hospital may not get paid if an admission is later judged to be medically unnecessary.
Indeed, much of HCA's recent profit gains, according to the Times story, revolve around its careful management of inpatient billing, specifically surrounding the reduction of costs in the ER, as well as careful triage of patients who, in HCA clinicians' determination, do not need emergency care and who can safely be sent to a less expensive care site.
It's undisputed that many uninsured patients use the most expensive area of care—the emergency room—as a de facto doctor's office, because they feel they have no other option. HCA will not treat those patients now unless they agree to pay in advance. My guess is that practically none of these patients elect to go that route when presented with the choice.
But in terms of profits, apparently, such measures amount to small potatoes compared with the changes in coding and billing that the company has encouraged.
Birg estimates that by using its documentation improvement programs, hospitals and health systems are "typically seeing a 3%-8% increase in their case mix. That can mean anywhere from a $1 million to $7 million annually."
Learning about the restrictions and what actually you're not getting paid for and putting processes in place to assist you so that at least you're getting the credit you deserve is smart business. If you don't do it, payers are happy to not pay you, says Birg.
It's up to you how far you're willing to push that envelope.
Philip Betbeze is the senior leadership editor at HealthLeaders.