By Jonathan Farr

The competitive climate for hospitals is at a fever pitch, with mergers and acquisitions adding further complexities to the marketplace.

This is not a time for simply resting on past achievements or a reputation for touting service lines: astute leaders recognize that they must optimize every level of clinical, operational and financial performance in order to capture and retain market share and meet payer/employer demands for value-based care.



This is hardly a time to falter with the revenue cycle management process or risk claim denials that threaten the financial stability of the health care organization. Annual losses from denial write-offs can be as high as five percent. Too often, hospital leaders see up to 15 to 20 percent of initial denials with the first billing, and must rework or appeal one out of every five claims, leading to administrative costs and inefficiency.

These issues really impact not-for-profit hospitals, which struggle when the barrage of denials begins to strain limited resources. In fact, reworking denials can prevent these organizations from achieving success within their revenue cycle management, often to the extent of compromising the quality of care they deliver. For-profit institutions are not exempt from these problems, although the pressures to optimize RCM are ever-present.

Historically, finance and medical care have operated in silos as the natural order of the fee-for-service environment. Bundled payments, accountable care organizations and other reimbursement models, however, are changing this paradigm. Today, hospitals must strike a balance between the care provided by physicians and payer reimbursement.

While not-for-profit hospitals can learn from the for-profit sector and seek new opportunities for maximizing revenue and enhancing performance, for-profit institutions can always benefit from fresh approaches and innovations to optimize revenue cycle management.

Revenue cycle management in the real world
Let’s look at a real-world scenario in which a large not-for-profit hospital system located in a largely urban area in the southeast United States sought a Revenue Cycle Management auditing (RCM) solution to effectively address challenges related to denials management, appeals and Medicare local market rules.

The overall goal was to ensure clinical and operational excellence while supporting the financial viability of the organization. The hospital had undergone significant expansion over the past few years, bringing massive sets of disparate data to be reconciled and reviewed, and adding significant complexity to RCM processes throughout the enterprise.

Addressing authorizations
Specific issues regarding treatment authorizations were particularly challenging, impacting the organization's ability to mitigate claim denials for treatments provided in the outpatient infusion therapy center. These occurred primarily when there was a deviation in the plan of care, burdening clinical and operational teams to secure authorizations for treatment necessitated by a change in the patient's health status. These approvals were not processed with the payer for a variety of reasons.

Too often, the claims were denied, even though the care was rendered, leading to a write-off for the hospital system. While the overall operating system (OS) registered the charges, it failed to confirm reauthorization. The hospital also had trouble documenting medical necessity in order to ensure reimbursement. Again, the OS was burdened with claim denials stemming from documentation failure.

Seeking the right, cost-effective solution
Revenue cycle leaders at the not-for-profit hospital evaluated several vendor solutions. Because the hospital had already invested substantial funds in its existing OS and analytic tools, they did not want to discard or replace the OS with an equally expensive transaction-based model. After reviewing various product offerings, the hospital found that every option failed to have the capabilities they needed to effectively address its issues.

Finally, they chose an actionable “real-time” or near real-time data analytics platform that was powered by an RCM optimization tool. Used worldwide by leading health care systems, telecom companies, utilities, retail and other complex industries, this RCM optimization tool can audit and trigger efficiency actions in a way that is non-intrusive. What’s more, the solution’s efficiency platform overlays existing systems to help health care organizations compare massive amounts of data across their total enterprise, detect exceptions and problems, and guide actions and interventions to improve efficiency.

The health care organization saw that the actionable RCM solution had the reconciliation and analytical tools that would help them to gather and compare data enterprise-wide, detect deviations, issue alerts and offer an integrated workflow to guide the 'fixes' they would need.

Even better, they did not have to discard their OS because the RCM solution would overlay the current installation, provide the needed analytics and drive the corrective actions needed. The new RCM solution eliminated the need for large upfront acquisition costs, representing a financial transaction that would fall within their tight budget.

Results and ROI
The RCM solution and its powerful action-driven analytic tools have now been utilized for more than six months. Savings related to denials and write-offs continue to accrue and were upwards of $800,000 in the first six months of operation in this clinical area.

Back-end processes have been streamlined, relieving stress and time constraints imposed on the clinical staff. Inadequate or missing documentation of medical necessity have been addressed, allowing the hospital to transition charges to patient self-pay or to initiating a change in the course of treatment.

The RCM solution represents the forward trend in data analytics RCM: helping hospitals increase net revenue by three to four percent, with ROI multiples of between eight and ten. It also allows a hospital to use any data from any OS to set up sophisticated validations to detect issues immediately.

By simply overlaying an actionable “real-time” data analytics system, managers can quickly gain control of aggregated data, and detecting/resolving issues that impact revenue integrity, as well as clinical and operational performance, in a way that is the most cost-effective.

About the Author: Jonathan Farr, MHA is senior vice president, North America, EFFY. He has prior experience managing general acute hospitals, surgical hospitals, emergency-centric hospitals, behavior health hospitals, and a large physician practice, both for-profit and not-for-profit, urban and rural, domestic and international. Jon earned a Master’s Degree in Hospital Administration from the Medical College of Virginia and is a member of the American College of Healthcare Executives.