Combatting 3 Big Revenue Cycle Challenges

A Cone Health revenue cycle executive shares strategies for reducing the health system's three biggest revenue threats: high-deductible health plans, uninformed patients, and the looming implementation of ICD-10.

At Greensboro, NC-based Cone Health—a six-hospital, not-for-profit health system with 1,242 beds and gross annual revenue of $2 billion—a number of revenue pressures are making it tougher than ever to collect payment for services provided.

"It's a combination of factors that are creating a major financial challenge," says Mike Simms, Cone's vice president of revenue cycle.

Simms outlines Cone's three biggest revenue threats and discusses the system's strategies to combat them:

1.High-Deductible Health Plans a Hurdle
Like most healthcare providers, Cone is experiencing a steep increase in the number of patients who have insurance plans with significant personal liability.

"We are seeing higher out-of-pockets with plans through the Patient Protection and Affordable Care Act and employer sponsored plans. We are seeing $5,000 deductibles and financial obligations that are $6,000 or $7,000 in total," Simms says.

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This creates a collections hurdle because patients are often unable to pay in full for services they receive. To mitigate the impact on revenue, Cone has recently begun working with a third-party vendor to offer a loan program for patients who need time to pay in installments.

"We needed a way to allow patients to finance the debt because we didn't want to have a lot of long monthly payment plans. So, about a year ago, we started using a firm that does recourse financing, and we've changed our whole payment plan methodology," Simms says.

"If a patient has a balance and can pay it within six months, we will keep that account internally. If they can't, they have to go to the vendor that does the financing. If their [credit] scores are good, we'll get paid in advance so we don't have to wait two or three years. We get funded immediately. We have to pay a small discount rate for this program, but it's better than waiting years to be paid."

2. Patient Education and Engagement Needed
Another area of concern, Simms says, is the lack of understanding many patients have with regard to their insurance coverage.

Through its pre-service center, Cone is committing time and resources to educate patients about their financial obligations, because engaged patients who comprehend their health plan benefits before the time of service are more likely to pay, he says.

"It all starts with educating patients on what their benefits are and what their out-of-pocket responsibility is. Staff at the pre-service center verify benefits and use a vendor tool to estimate out-of-pocket costs," Simms says.

"We are calling patients in advance and advising them, which also goes back to patient engagement. Giving them an estimate of what they are going to owe for the service is better than waiting 60 days after service and surprising them with a bill."

Cone is also making an effort to collect up front, Simms says. "We try to get payment over the phone or at least a deposit. [Patients] can also pay at the time of service if they don't want to pay over the phone."

While the work being done in the pre-service center represents a new way of doing business, Simms says it's imperative to have these conversations with patients and to collect money in advance of service if possible.

"Before I came to Cone in March 2013, there was resistance to asking for money up front, but it's a necessity in this business. If you don't talk to patients before they have the service, the chances of collecting go down significantly."

The results of this strategy have so far been solid. About 10% of Cone's total patient payments are now made up front. "That is a good number, and it's increased significantly over the last two years," Simms says.

To increase patient engagement, Cone has also been working with a vendor to improve the readability of its billing statements and has begun offering patients the option of making payments online through a patient portal.

"We started a process over a year ago to find a vendor who could produce a patient-friendly statement that is colorful and easy for patients to understand. We weren't serving our patients very well before regarding the billing statements," Simms says.

Since changing the statement and launching the portal, Cone's patient cash has gone up by 20%, Simms says, noting that at 2.5% the organization's cost to collect is below the industry metric of 3%.

3.ICD-10 Implementation
Assuming ICD-10 goes live as scheduled on October 1, 2015, it represents a significant potential threat to the revenue cycle, Simms says, because of the added specificity required for physicians' medical records.

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Cone is using its physician champions to encourage compliance with the new coding rules. "Our physician leaders are going out and educating, and we are trying to stress how important it is to be specific on the documentation," Simms says, noting that Cone's health information management department is also involved in physician training around ICD-10.  

Additionally, the health system's coders are now dual-coding in both ICD-9 and ICD-10 to be sure they are familiar with the new code set when it goes into effect later this year.

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However, no matter how effective these training efforts are, Simms says, it is likely that Cone will see an increase in denials when ICD-10 is implemented, at least initially. The good news is that CMS has said that in the first year after ICD-10 is implemented, the agency will not deny or audit claims just for specificity.

Leaders at Cone are working to minimize the impact denials will ultimately have on revenue and the cost to collect, Simms says.
"One thing we are always working desperately on is to reduce our denials as much as possible, and that is going to be even harder with ICD-10. We have a denials team in place, and we also have back up with our vendor," he says.

"We've tightened up some processes in our pre-service center to verify insurance benefits and collect as much as we can up front and are working with our managed care department" to cultivate strong relationships with payers and enhance revenue.