A third of the reimbursements collected in the demo phase of RAC were due to "wrong setting" denials, according to the Center for Medicare & Medicaid Services. This type of denial denotes hospitals that have provided patients with unnecessary care, mainly for keeping patients for overnight care when it was unnecessary. As we embark on a new year, financial leaders should ask everyone on their teams to make a resolution to address these problems before the RAC does it for them.
To help in this effort, I touched based with Karen Bowden, president of ClaimTrust, a Murfreesboro, TN-based consulting firm, which has worked with several hospitals in the demonstration project to develop RAC-proof admission screening criteria.
With the goal of ensuring consistent admission screening among patients, Bowden suggests hospitals begin by adding the following screening criteria:
Use Medicare's (and any other payer's) published procedures from inpatient only lists. This will provide case managers with a general guideline on whether a certain condition is acceptable to be rendered as inpatient.
Develop defensible criteria for "gray area procedures" that are sometimes billed as inpatient and other times as outpatient.
Select a case manager(s) to ensure consistent admission practices. This individual should have the authority to override screening criteria when necessary in order to approve inpatient cases on the sole basis that it can be clinically documented.
"All the administrators should be comfortable with the criteria for inpatient or outpatient admissions," says Bowden.
Review all RAC decisions. You should also keep in mind that each RAC decision should be reviewed by your team to determine if the RAC decision should be appealed. You need key measure to appeal a denial, Bowden says, and if you are appealing every decision with the same criteria set it will help.
"If the staff is too lax on these criteria or too aggressive, then you'll lose [the appeal]. Case managers need sensible criteria that define this area well for consistency, so if the RAC finds a 'wrong setting' denial the facility can defend it," explains Bowden.
Bowden also recommends building your criteria and then sharing it with your commercial payors for instant feedback. "Showing how other payers are looking at this can also be useful in your defense," she says.
With millions at stake for these RAC denials, establishing a simple set of criterion for everyone to work from is one quick and easy New Year's Resolution that every hospital and health system can tackle to make to 2011 a very prosperous New Year.
Late December is the time of year when we look at ahead with anticipation at what the future holds. With only days left in 2010, financial leaders will be shifting their thoughts back to financial forecasts. To help guide the planning, I checked in with two seasoned healthcare CFOs to get their insights on what 2011 may hold. These are five questions to which every CFO should have an answer.
1. What is one issue that you believe will influence your hospital/health system in 2011? Physician shortage: "People have talked for years about the primary care physician shortage… there's a lot of talking but not much is done about it. There are a large number of people hitting Medicare age and there are fewer physicians who are taking new Medicare patients. There doesn't seem to be any solution on the horizon."–Jeff Rooney, senior vice president and interim CFO at 430-bed St. Agnes Medical Center in Fresno, CA. EHR and Reimbursement: "Health reform is going to impact hospitals from a couple of different perspectives: the requirement to implement EHR and how it affects reimbursements. If you don't implement an EHR and you can't demonstrate meaningful use then your reimbursement will be potentially negative. This is the number one issue that will kick in in 2011. Though you have several years to demonstrate [meaningful use], if you don't get going in 2011 it will be difficult to meet the requirement in time."–John Ortiz, partner at Tatum LLC, a Atlanta-based executive services firm, and the former director of management services at Sisters of Charity Health System in Cleveland, OH.
2. What do you anticipate will have the greatest effect on hospital's margins, and why? Accountable Care Organizations: "The financial pressures over the years have only increased and the margins have only become thinner. The margins on outpatient services are larger than on inpatient. The whole ACO model is where doctors and hospitals … will take a more comprehensive look at the [financial] pie—it's not the doctor's pie and the hospital's pie with different margins, now there will be one pie to divide."–Rooney
Meaningful Use: "Reimbursements are going to be reduced for hospitals if they don't effectively implement EHRs, and demonstrating meaningful use is extremely costly… so the ability to actually incur that cost as well as the possible downside impact if don't implement their EHR well could be a double whammy. It's one of the reasons you'll all see more independent hospitals looking for partnerships, alliances and acquisitions."–Ortiz
3. How should CFOs try to offset negative influences from the issues you mention? Lean and Six Sigma: "Healthcare, despite all the industry resources, is still behind on the deployment of process excellence and using Six Sigma and Lean initiatives to ratchet down costs. Administrators will say they've done a lot to control costs, but I'd say, 'I don't think we've done enough.' Regardless of what's been done, there's not going to be much margin to split in the coming years…we need to be very focused on costs for the next few years as we've been for the last four years."–Rooney
Cutting Costs: "They're going to have to better manage their operations; many feel they have done as much as they can but in my experience many in healthcare haven't done enough to lower their costs. Hospital executives are going to have to leave their comfort zones–it's really going to be a challenge."–Ortiz
4. What are the greatest financial challenges hospitals will face in 2011 and going forward the next 5 years? Revenue Cycle and Collections: "Not much different than what's been their challenge all along: collection and revenue cycle [management]. Now if you have real efficiency in one area then you don't have to focus on that. But it's a never-ending series of improvements."–Rooney
Reimbursements and EHR Implementation: "Though I know I said it before, the pressure on reimbursement is going to be big challenge–they are not going to go up for hospitals or physicians." – Ortiz
5. Do you anticipate a double-dip recession for 2011 or do you feel the economy is rebounding, and why? Slow improvement: "My feeling is that unemployment rates are still high … and healthcare is not immune. A lot of CFOs will tell you that bad debt and charity care have been skyrocketing and insured people can't afford their care. I don't see it getting better soon… it's not a pretty picture at least for a couple more years."–Rooney
Stabilizing: "I don't sense we'll experience a double-dip. The healthcare industry has experienced a lot of negative impact from the recession with more and more self-pay [patients], … but it's stable at this point and in some cases numbers are going down in terms of patients without insurance. Still I don't sense a momentum that would lead to a quick reversal; I think it's going to be slow and steady improvement."–Ortiz
While Rooney and Ortiz offer a quick glimpse of what some healthcare CFOs are anticipating for 2011, if you'd like to read more thoughts on what your peers anticipate for 2011, check out this recent article in HealthLeaders Magazine. Although there are many challenges ahead for healthcare leaders, here's wishing all hospitals and health systems a very prosperous new year.
Mike DeTolla, senior vice president of revenue management solutions for Picis LYNX Medical Systems in Bellview, Washington discusses the importance of charge capture for the process of reimbursement on oncology infusions and injections. [Sponsored by Emdeon]
Significant IRS tax changes are underway that could soon impact hospitals' nonprofit status. Milton Cerny, formerly with National Office of the IRS and now counsel with McGuireWoods LLP in Washington, D.C., has extensive experience in the application of the federal tax code to nonprofit organizations. He discusses what new regulations could mean for hospitals. [Sponsored by Emdeon]
Karen Bowden, president of ClaimTrust Consulting Services, a Tennessee-based in-hospital revenue cycle consulting firm discusses how RAC views "wrong setting" denials, and how you can prevent problems for your hospital. [Sponsored by Emdeon]
The American Medical Association estimates that nearly $210 billion annually is spent to process healthcare claims. Moreover, approximately one in five medical claims are processed inaccurately, according to the AMA 2010 National Health Insurer Report Card. These processing errors cost an estimated $15.5 billion to the healthcare industry, and the report notes that if insurers could improve that number by just 1%, they would save nearly $777.6 million.
The pressure for both payers and providers to operate more efficiently and cooperatively is becoming a necessity for all concerned—which is why many in healthcare are using their Six Sigma and Lean initiatives to make the interaction between payers and providers a collaborative effort to decrease claims adjudication woes. But there’s more afoot that will help morph this traditionally adversarial relationship.
Though Lean and Six Sigma initiatives offer a path providers can take to improve the claim adjudication process, the Health Insurance Portability and Accountability Act may open up another avenue. Tom Hughes, President and CEO of Georgia-based Medical Electronic Attachment, Inc., and a member of the attachment committee of HL7 which is part of the HIPPA regulation.
The HL7 standard encompasses a range of operational, training, policy and technical issues. eXtensible Markup Language (XML) syntax is the basis for the HL7 Clinical Document Architecture Standard, and the attachment itself is carried inside the binary data segment of the X12N 275, or the 275 standard. This syntax standard is specifically designed for and by the healthcare industry to facilitate patient data exchange between computer applications and systems.
The attachments would work as follows, Hughes says, the payer sends a 277 to request the 275 information (using the payer control number as the method to link these), and the provider then sends the 275 in the same envelope with the 837 (using the provider assigned). The attachment committee’s goal is to help the industry establish a common language among computer applications regardless of platform, architecture, or programming. The committee is further defining a standard that will make payers and providers capable of sending and receiving detailed claims or encounter information such as diagnoses, test results, observations, treatment modalities, and so forth, in a specific HL7 format.
Though it has been a long time in the coming, Hughes explains that portions of this standard are now completed and have been submitted to Health and Human Services for final approval. As of 2004 all payers are supposed to take claims electronically, the problem, however, is that the form in which documents are attached has been undefined and is causing miscommunication and claims processing delays.
Some payers have taken a proactive stance with electronic claims by creating provider networks. These networks are designed to give providers direct access to relevant information on the payer’s system, which enables both parties to share data electronically, perform claims transactions online, and provide centralized technical and billing support. By electronically streamlining the communication process between the payer and provider, these provider networks save time and administrative costs and they eliminate the need to process paper claims. Moreover, these systems allow for both payers and providers to use remote workers affording all involved with additional savings.
However, a uniform approach to how documentation is attached remains to be defined by HL7.
“Right now, there are solicited and unsolicited attachments, and only the payer decides if they will accept them. A payer would rather pay a claim instantly than send it back to ask for more information. Payers don’t want unnecessary attachments—you don’t want four million claims all with attachments,” he says.
While the HL7 standards await final approval, payers and providers must continue to look for ways to make their relationship generate more profit and less waste and strife—true symbiosis is the only way everyone will come out ahead.
The past year proved to be a very busy one for healthcare financial leaders. More than a few stories kept everyone abuzz wondering how new laws and mandates would affect their organizations' bottom line. So much happened this year, in fact, that it was challenging for me to decide which areas affected financial leaders most in 2010 and which will continue to affect them in 2011. Here’s a look at my top six choices for financial game-changers:
Healthcare Reform. For years to come healthcare reform will sit atop everyone’s list of game-changers for the industry. For several years hospital administrators won’t know the full extent the legislation will have on their bottom line. What financial leaders do know is that they will likely have more patients coming through their doors, though they will also likely not have enough physicians to meet the demand.
Then again, others in healthcare argue that reform may just be the bottom line boost of which CFOs dream. Though reductions in Medicare are anticipated, they may be offset by an influx of self-paying patients. While government payments to hospitals that take a disproportionate number of uninsured, low-income patients will be cut, there will be less of these types of patients—so less charity care.
Cost Cutting. Let’s face it, the economic recession has been very painful for healthcare, not just for the banking industry. This year found CFOs really digging in to find the areas they needed to cut. The goal was not to lay off any more members of their staff in 2010 (kudos to most hospitals for succeeding at that). Financial leaders took up the torch for many cost cutting initiatives ranging from predictive modeling to automating their supply chains. One healthcare leader went so far as to shave his head when his hospital employees helped the organization cut $7 million in costs. Financial leaders got creative and frugal, then just when the government declared the economic recession officially finished, CFOs were hit with another blow: reimbursement cuts.
Changes in Reimbursement. For years Medicare reimbursement cuts have been proposed and ultimately blocked. And although there was a last minute delay on the cuts that were supposed to take effect Dec. 1, it looks like Medicare reimbursement cuts may become a reality for diagnostic imaging and the like. After President Obama described Medicare Advantage as a "waste" and Congress agreed, $132 billion worth of cuts to the program over 10 years appeared in the health reform package—with the first payment cuts expected to occur in 2011.
Of course, when Medicare reimbursement rates decrease, the commercial payers tend to fall in line with similarly reduced payments. Not to mention that the medical loss ratio portion of the reform bill will take effect in 2011 for payers will likely trickle out and be reflected in more stringent contract negotiations between providers and payers. After all, payers don’t want to lose money either.
Business-Expenses Rule. Did you miss this one? If the process of getting reimbursed by payers isn’t paper- and labor-intense enough for most finance department, the IRS is looking for more details on your interaction with your vendors. So, get ready for more paperwork in 2011. As of last week, the Senate failed to adopt language that would repeal the Health Care Reform Laws provision on business expense reporting. The business-expense or 1099 rule will require the annual reporting of expenses to individual vendors in excess of $600—that likely encompasses all of your vendors.
High Deductible Health Plans. It seems whenever payers are involved, someone, other than them, loses money. High-deductible health plans have been around for years, however, the slow economy has forced more than a few businesses nationwide to foist healthcare costs onto their already financially beleaguered employees. Lo and behold, a few years into this economic mess and more companies are using these health plans than any other. That doesn’t likely bode well for hospitals, however. Though it’s still too early to tell, you can bet that hospitals will likely take a loss on folks who have these types of plans, because many may not have the out-of-pocket deductible money readily available when illness befalls them.
Mergers and Acquisitions. The healthcare landscape is changing more every day, not just because of legislation, but due to a bevy of merger and acquisition activity. For the most part, these transactions bring about a lot of positives. They help hospitals stay open in the communities they serve and they often help the purchaser grow into untapped markets. Growth equals a stronger bottom line and also gives the purchaser greater leverage with payers during contract negotiations. Expect to see more M&A activity in the coming year and be sure to watch that one of these transactions doesn’t put you at a disadvantage in your market.
As 2010 draws to a close, try to keep all these challenges in perspective. No one knows what lies ahead for 2011, so the best financial leaders can do is keep informed and make educated “guess-timates” on the financial forecast for this year and beyond.
Brenda Snow, Executive Vice President of Strategic Planning at Firstsource, a global business process outsourcing provider of revenue cycle management services, discusses how the Medical Loss Ratio will impact the healthcare industry. [Sponsored by Emdeon]
Perhaps these days the mantra for hospital financial leaders should be based on a familiar seven dwarfs tune used in the Disney classic Snow White: “We dig, dig, dig and we dig, dig, dig, all the day long through. In a mine, where a million diamonds shine.”
How true it is; after all, you’ve likely taken a pick-axe to your budget more than a few times in search of savings, but also in the hopes of finding a hidden gem or two that might offer your facility a glimmer of profitable possibility.
It’s the latter that is infinitely challenging to CFOs; perhaps that’s because in order to uncover the diamonds you need to do more than randomly swing that pick-axe—you need a tool that gives you the precise location of the diamonds among the rocks.
The solution? High-ho, high-ho it’s off to data mine we go!
Data mining, or predictive analytics, can overhaul the conventional hospital billing process, plus offer administrators a much-sought after link between the clinical and the financial. These tools can be used to gather the data needed to support high quality care for a better value while improving the charge recovery process, increasing staff productivity and better controlling costs.
Without a doubt, there’s money in the data details, though it’s important to realize that not every data mining effort is going to yield billions. Nevertheless, this technology often reveals a few million in unnecessary losses—and these days that can make the difference between red and black for hospital bottom lines.
One area that can benefit from data mining automation is charge recovery; just ask Jason L. Adams, FACHE, vice president of revenue cycle for MultiCare Health System. MultiCare is an integrated health organization made up of four hospitals (Allenmore Hospital, Good Samaritan Hospital, Mary Bridge Children's Hospital and Tacoma General Hospital), numerous primary care and urgent care clinics, multi-specialty centers, and hospice and home health services. This not-for-profit system based in Tacoma, WA has grown steadily over the years and today is the area's largest provider of healthcare services in Southwestern Washington.
Most CFOs know that they and their teams are more than likely missing a few million due to revenue leaks each year, but determining where to put the plug is a hit or miss process unless you have the necessary data to pinpoint the problem—such was the case at MultiCare. Their steady growth, while positive, was also opening the system up to more opportunities for revenue leaks.
“We were using another tool that was rules-based,” explains Adams. “And it would dump our paid claims into the system and then look at our potential lost charges. So we thought we were doing a pretty good job of tracking this type of problem.”
Still, Multicare wanted to begin to do some predictive analytics modeling, so in early 2010 they decided to invest in a technology by Apollo Data Technologies, a Chicago-based company. Adams explains that the software helped detect anomalies and trends in patient, billing, and clinical data. This data began to show areas where MultiCare was losing revenue as well as ways they could improve their financial performance, and prioritize resources.
The program utilized a similar approach to how retail businesses track their customers charge habits, Adams explains. The program uses advanced statistics to flag errant accounts and claims with a greater degree of accuracy.
“At first I didn’t think we’d find anything [in lost revenue due to charge capture]. We went live in June and three months later we had already realized $1 million in missed charges.”
The analytics uncovered was that nearly 1% of their $1.6 billion annual net revenue was leaking out of their bottom line without anyone realizing it. With the software in place, in less than three months they were able to identify over $1 million in missed charges and by the end of the year they anticipate capturing over $2 million.
Adams speculates that the $2 million figure may have been higher still, but the data actually pointed them in the direction they needed to go in order to nip the problem at the root. Adams and his team were able to see which clinicians were missing opportunities to code additional procedures that had been performed.
For instance, the system flagged specific diagnosis which usually have lab tests associated with them if the lab test codes were missing. In doing so, they were able to capture all the charges associated with a diagnosis and then alert clinicians to be aware of their mistakes.
Plus, Adams and his team can spend less time resolving missing charges, which helps them more efficiently allocate staff resources. Since the charge capture process is no longer as time-intensive, Adams can also allocate clinical staff to higher-value activities. Moreover, the data mining tool is maximizing MultiCare's investment in their EMR because the system links the patient's record with financial information to help the system determine cost/benefit around specific care and service lines.
“This program has helped us create more lean practices and eliminate redundancy for charges,” Adams says. “We’ll always need humans for healthcare delivery, so you’re always going to have variations in the charging practices of these people...With the data mining and predictive modeling we can identify those trends and get to the root cause analysis and make the necessary adjustments quickly.”
Every few months, my husband and I go through and balance our budget. It’s not a favorite activity for either of us, but now with our new baby we have to find new and creative ways to keep our costs low so we can stay in the black. We tend to cut down on unnecessary items, like magazine subscriptions or entertainment, and I hate to say it, but charitable donations. What we wouldn’t dream of cutting is the money we put aside for healthcare.
Our family’s prudent approach to budget cuts isn’t necessarily a reflection of what the government does when it makes budget cuts, evidenced by the recently released “chairman’s mark” preliminary report. Created by the bipartisan National Commission on Fiscal Responsibility and Reform, this not yet final report (and considered by many to be just a starting point) makes recommendations for how to reduce the nation’s debt.
To reduce the national debt by $4 trillion by 2020, the report recommends trimming 58 programs including defense and space exploration, Social Security and, naturally, Medicare and Medicaid. Certainly a lot of programs are going to take a knock if the recommendations in this report are approved, but these recommendations may just financially weaken healthcare beyond repair, and delay the sought after quality of care improvements.
As it stands, many CFOs have already trimmed the fat from their budgets over the last three years. They’ve renegotiated supplier contracts, payer contracts, joined group purchasing organizations, and cut length of stay. If that weren’t enough, they along with the CEO and hospital board took heat for making personnel cuts to help buoy the bottom line and keep their hospital’s doors open. While they’ve watch their staff numbers dwindle in the name of financial viability, the number of uninsured and underinsured patients has steadily risen, as have their Medicare and Medicaid populations (though healthcare reform may address this in the future).
The economic recession aside, now a 23% Medicare and Medicaid physician payment cut looms (as of Dec. 1 and another 1.9% cut will take affect as of Jan. 1). Now they will need to treat more patients and be paid even less money to do so.
What’s makes this list of recommendations so infuriating to healthcare leaders is that if it takes effect, folks in healthcare will be swimming upstream against a very hard current. You see, the 18-member committee is suggesting that the Medicare and Medicaid situation be remedied by savings made through payment reforms, cost-sharing and malpractice reform and long-term measures to control healthcare cost increases. Translation: expect to be paid even less for Medicare and Medicaid.
While the “chairman’s mark” proposes a repeal of the sustainable growth rate formula (SGR), it also recommends that payments be gradually lowered over the next 10 years, including a pay freeze for the next two to three years. The savings for this change would be substantial for the government—$24 billion by 2020. But for health systems, hospitals and practices already operating on thin margins, this is a potentially devastating decline in reimbursements.
Unfortunately, the bad news doesn’t stop there, however. If the recommendations take affect, they will also accelerate cuts to the disproportionate share payment (DSH) to hospitals, and will cut Medicare Advantage and home health, as well as federal spending on graduate and indirect medical education. Moreover, CMS will need to establish a new payment system (commencing 2015) to reduce healthcare costs and improve quality—and no one knows exactly what that could mean for healthcare providers.
The American Hospital Association and nearly every other major healthcare organization released statements pooh-poohing this committee’s recommendations, which isn’t surprising. I suspect most healthcare financial leaders were distressed too. I reached out to one health system, to gauge their reaction:.
“Coupled with cuts we’re anticipated to incur over the next four years, even if we are fortunate enough to avoid penalties for readmissions, value-based purchasing and hospital acquired conditions, this [report] just boggles the mind,” says John W. Winfrey, vice president and CFO for DCH Health System.
The west Alabama Health System serves seven counties and has a varied payer mix across all four of its facilities, which include the 583-bed DCH Regional Medical Center, the 204-bed Northport Medical Center, the 61-bed Fayette Medical Center and the 56-bed Pickens County Medical Center.
Just based on the current reform act, Winfrey says he’s anticipating being paid $3.4 million less (2.4%) less in fiscal year 2015—and that’s providing that his volumes don’t change; which is an unlikely scenario.
“I’m very concerned that they are suggesting additional cuts to physician reimbursement on top of what may happen in December,” he says. “I was shocked [by these recommendations]; they are taking healthcare reform to a new level.”
While none of the proposed cuts are good for healthcare, some of them actually make very little sense, especially if the goal of the Administration is to actually improve the quality of care. While CMS will have to draw up some quality measures, frankly if the purpose of the DSH payment is to help fund hospitals that serve indigent patients, cutting money supporting this isn’t likely to provide much impetus for quality to improve.
Most facilities still need to at least cover the expense of the care so they can keep on providing it. And, with the number of physicians expected to decline in the coming years, why on earth would this committee recommend decreasing funds to educate more physicians. The cost of educating these providers can’t possibly save the government enough money that it will offset the human losses that will be incurred by having throngs of patients who can’t get in to see a physician when they need to.
“This country is going to see a major loss in older physicians who will hang it up earlier and possibly lose younger physicians as cuts are made on Graduate and Indirect Medical Education,” adds Winfrey.
There are a few recommendations that actually may prove helpful if they were to be approved. They include:
Required rebates for brand name drugs as a condition of participating in Medicare Part D.
Comprehensive medical malpractice liability reform to cap non-economic and punitive damages and make other changes in tort law.
Expansion of cost-sharing in Medicare to promote informed consumer health choices and spending.
Expansion of accountable care organizations, bundled payments and other payment reforms.
Reduction of federal spending on Medicaid administrative costs.
Unfortunately, while these other items could be positive steps toward helping healthcare, they will do very little to offset the financial cuts that would come along with the rest of the report’s recommendations if they are approved. The simple fact is, and that seems to be consistently lost on our government, is that while not-for-profit hospitals and health systems are not in business to make a profit, realistically they must make some profit in order to stay open and perform their mission to serve the uninsured and underinsured populations. If these kinds of payment cuts keep taking place, eventually one of two things will happen: those that can’t afford care will not be treated, or the hospitals will just go out of business. Either course won’t produce positive long term results for anyone.