Maximizing Revenue Cycle Management

With profit margins of 3 percent or less and costs rising, hospitals are looking for ways to collect what they’re owed as quickly as possible. Numerous forward-thinking facilities are combining strategic finance and technology initiatives to streamline the business end of the caregiving process.

One of the greatest challenges for a hospital’s revenue cycle is how to bring in money owed to a hospital in a patient-friendly, cost-effective manner, says Tracy Berry, senior vice president of revenue management at Centura Health, in Englewood, Colo., a 12-hospital system and the largest healthcare provider in the state of Colorado. Centura’s revenues totaled $1.8 billion in fiscal year 2009.

Issues such as complex contractual reimbursement arrangements and verifying patients’ insurance benefits can contribute to the difficulty in estimating a credible out-of-pocket amount. Centura employs ClearQuote, a web-based patient cost estimation tool from Financial Healthcare Systems. ClearQuote analyzes contracts with third-party payers and estimates the percent of charges the patient would be required to pay.

“ClearQuote estimates the patient’s responsibility,” says Berry. Historically, patients did not know how much they might owe for services, “so you were off on the wrong foot at the back end of the cycle if you collected too much or too little at the point of service.”

Centura focuses on collection at the point of service, says Berry. Best practices suggest a 1 to 2 percent point-of-service collection rate as a reasonable goal, and Centura collected 1.1 percent at the point of care in January—in contrast to a 0.4 percent rate 18 months ago, she says.

For post-discharge collections, Berry says Centura partners with outside firms to collect from patients who are uninsured or owe a balance after their insurance company pays for service.  Therefore, Centura has focused on vendor management for about a year and a half, she says, using Agency Manager, a middleware vendor management tool from Connance. Centura was able to reduce costs by 20 percent in both early out (early-stage payment from the patient) and bad debt cases after putting requests for proposals to vendors for these types of accounts. Agency Manager distributes accounts from Centura to the appropriate vendors, helping to ensure more timely payment.

‘Revenue cycle redesign’

Digital documents also can help reduce a facility’s revenue cycle management costs. Good Samaritan Hospital (GSH) in Vincennes, Ind., was spurred to look into “revenue cycle redesign” through an improvement process that began 13 years ago, when about 80,000 active patient file folders had inundated GSH, says Chuck Christian, director of information systems and CIO at the 232-bed acute care facility.

The flood of files meant the accounting department spent a great deal of time filing and searching for documents such as final bills, face sheets, insurance inquiries and patient demographics, Christian says. The improvement process led GSH to acquire a document management and scanning system (Optika, recently acquired by Oracle).    

The system is used on the front end of the revenue cycle to scan billing documents and patient identification, such as drivers’ licenses and insurance cards. With the documents online, there are no more lost or misfiled forms and there is no longer a need for manual filing, he says.

The system enabled GSH to initially decrease its Patient Account staff by four full-time filing staff, according to Christian. Since the revenue cycle redesign process began, GSH has reduced accounts receivable (A/R) processing time by more than 25 percent over 13 years and decreased its patient account staff by seven FTEs—while increasing its account volume by roughly 10 percent, Christian says.

“The application has grown with us over the 13 years and [meets] all of our current requirements. It is very cost-effective, [with regard] to annual maintenance and upgrade expense. I’m from the old school: If it ain’t broke, don’t fix it,” he adds.

Docs and documentation

Most billing processes involve an “Encounter Form,” an information collection sheet printed when the patient arrives that is forwarded to the physician immediately before the exam, says Bill Howard, IT director at Coastal Carolina Healthcare (CCHC), a 10-practice multi-specialty group in Newborn, N.C. At the end of the exam, a copy of the form goes from the physician to a checkout clerk to the billing department. Then, after an exam charge is calculated, the form goes to the patient’s insurance company or to the patient.

That’s a lot of hands for one bill to go through before any charges can be billed and revenue can be realized, says Howard.

“Three years ago, CCHC switched to an automated electronic process, where the receptionist enters a patient’s arrival in the GE Healthcare Centricity [system]. This triggers a cascade of events ending with a notification to the physician, in the AllScripts Enterprise 11.1.6 system, that the patient has arrived,” Howard says.

The software notifies the physician of an “Arrived” patient on the electronic schedule, and the physician uses a Fujitsu Lifebook mobile tablet to click “Chart,” which shows the patient’s history, medications, lab tests and test results, Howard says.

The critical charge components are automatically captured based on the treatment codes selected during the exam and when the visit is over, the resulting charge information will flow from the EHR system back to CCHC’s practice management billing system, GE Healthcare’s Centricity Group Management, he says.

The money trail could get even rockier in coming years. Stimulus funds will be a shot in the arm for many facilities, but as revenue cycles tighten, streamlined systems can yield a more reliable return on investment all the while providing good quality healthcare.