Revenue Cycle Management

Thinking of buying more EHR than you can afford?

There wasn’t just one cause of the 2008 Great Recession, but certainly a major factor was the creative lending instruments banks used to qualify prospective home buyers. As is now well known, massive mortgage defaults among those homeowners undermined the integrity of mortgage-backed securities and came within a hair’s breadth of tanking both the American and global economies.

Leading up to 2008, people misunderstood what they were buying and didn’t see the potential for financial catastrophe. In 2017, are hospitals facing a similar scenario with healthcare IT, particularly electronic health records (EHRs)?

The potential seems real.

Last May, Becker’s Hospital Review reported on eight large hospitals that experienced a significant financial hit by choosing the same EHR. Of course, each hospital expects improvements in clinical productivity and operations to bring them back to pre-implementation income levels.

But might that still be true if there were, say, millions of fewer insured patients because the Affordable Care Act (ACA) were repealed? Are you so leveraged by an EHR purchase that a shift in the healthcare market would challenge your organization financially?

The benefits of healthcare IT are real but not immediate, requiring organizational and structural changes that could potentially take years to engineer. So what tactics should your organization employ when choosing and implementing healthcare IT that protects your financial solvency?

Be realistic and detailed about the costs of implementation. Completing an EHR implementation on or under budget requires investing time early in the project to accurately plan deployment.

"The accurately projected cost, including changes that need to occur with revenue cycle and clinical practices and the changes the labor force has to undergo, are predictable,” says Mitch Morris of Deloitte’s healthcare division. “But not everyone has the time and energy to predict what they are.”

Planning well—or, not so well—will have a measurable impact on your organization. As you move to new revenue cycle solutions and workflows, accounts receivable (AR) may grow by 60 to 90 days. Work hard to make sure the expansion of AR days is no greater, and plan on having sufficient funds to cover the temporary lag in receivables.

In 2014, Henry Ford Health System in Detroit completed their EHR implementation under budget. During the implementation, income fell 15 percent from 2011 to 2012, but the decrease was manageable and expected, and the health system has since rebounded to perform well. Compare that with Massachusetts-based Leahy Health, which experienced unpredicted EHR-implementation costs and ended up laying off 130 people to close the financial gap.

How much of a bite will EHR implementation take out of income? It depends on a number of factors. Suffice it to say that coming close to Henry Ford’s 15 percent figure is far better than dealing with Houston-based MD Anderson’s 76.9 percent drop in adjusted income over a 10-month period.

Clearly identify system costs post implementation. Some EHR systems are costly to maintain and require numerous additional resources for some time or forever after go live. Scrutinize these costs closely to have a realistic idea of how EHR acquisition will impact your budget.

To gain a realistic perspective on net revenue and total cost of ownership, New Jersey’s Valley Hospital gave themselves a 10-year window.

“… probably the most expensive part of an EHR project is the army of consultants, staff and project managers you need to have to pull everything together,” explains Valley CIO Eric Carey. “Our implementation has involved 20 [full-time equivalents] over at least one year."

It will take time—Five years? Seven years? Ten?—after implementation to determine whether or not that EHR is earning its keep. How long won’t be the same for every hospital, but no hospital will have a clear idea of value without closely tracking ongoing maintenance costs.

Minimize income dips during implementation. During discussions with your prospective EHR vendors, make sure that revenue cycle is a key topic of conversation. Establish goals and strategies to minimize the financial impact after switching from old system to new.

“Our target was to get back to baseline gross revenue within 14 days of go-live, and we exceeded that at all of our hospitals, getting back to baseline within 10 days,” says Margaret Schuler, revenue cycle vice president at OhioHealth in Columbus. “Now, less than a year after our first hospital go-live, we are exceeding our baseline performance metrics (i.e., under 5 days).”

Preparing for EHR implementation from the net income side is a process that has to be coordinated with actual system deployment, obviously, but with a different focus. Revenue cycle preparations will also look at workflows but with an eye toward performance indicators that directly impact the bottom line.

Subscribe, subscribe, subscribe. While most of the software industry transitions to a subscription business model, healthcare IT remains in the era of buying software and installing it on-site or in a nearby data center. The scenario is changing, to be sure, as vendors move systems onto the cloud and charge hospitals subscription fees for access. But it’s not happening so fast that numerous options are available.

Is an EHR subscription available to your hospital? The benefits may be worth identifying a subscription-oriented vendor.

Accessing an EHR in the cloud means no extensive implementation process on site, which usually requires buying a lot of new hardware. A subscription means you can avoid the typically huge upfront costs to put a system in place, and it also means fewer onsite staff required to keep the system running.

When looking for a new EHR vendor, or even in conversations with your current healthcare IT partner, ask pointed questions about their remote or cloud strategy knowing that it will save you both dollars and the headache of onsite implementation.

Beware the healthcare IT bubble. Returning to the introductory comparison with the 2008 housing crisis, it’s possible that healthcare could also be approaching a bubble that might burst should something dramatically impact revenue streams.

Writing in The Hill, Bryan Rotella of the Rotella Legal Group notes that millions of previously uninsurable (i.e., sick) people are now in the insurance market and driving up premiums, thanks to the ACA. Both insurers and health systems are merging left and right, creating organizations that might be considered, you’ve heard this before, too big to fail. And increased premiums for people previously insured at more modest rates will most likely drive them out of the insurance marketplace, weakening the system.

The question is, can your organization be so leveraged by an EHR purchase that a hit to your revenue stream because of an ACA repeal or a similar event would seriously impact viability? Would it require layoffs? Would it alter care?

Of course, it should go without saying that you also need to think about how much EHR you need and how much you can afford. The better-known systems include many, many bells and whistles that are nice but not essential. When selecting an EHR, make sure that you bring clinicians into the process and weigh their needs and desires against costs. Make the process transparent so that costs and benefits are obvious, leading to a realistic and cost-manageable choice.

Too often in modern society, we have a tendency to focus on what we think or imagine technology should be able to do. While it’s often beneficial to dream of a technology-enabled future and then create the tools that enable it, there has to be an element of financial reality in the program. Evaluate healthcare IT with more cold-eyed reality than starry-eyed imagination to make sure that a bursting bubble or revenue downturn is something your organization can weather.

D'Arcy Gue is Director of Industry Relations for Medsphere Systems Corporation. 

Yes, you can get ROI from a good behavioral health EHR, even without Meaningful Use

No, there is no Meaningful Use for behavioral health hospitals, and yes, some mental health clinicians remain skeptical about the proposed value of electronic health records (EHR).

And yet a steadily increasing number of behavioral health facilities nationwide have adopted an EHR to improve patient care and organization performance. According to a recent Behavioral Healthcare survey, most are satisfied with the decision to make an EHR part of their daily routine.

So, does that satisfaction make it a wise value proposition to adopt a behavioral health EHR? This highly relevant question about return on investment (ROI) is not limited to behavioral health facilities, but it might be a more pressing concern for organizations that cannot count on federal subsidies.  

What counts in determining ROI?

Because behavioral health care is complex and, more importantly, because it measures value in many non-monetary ways, we have to look at both quantity and quality.

“Some organizations have difficulty determining their EMR project's ROI,” writes business development executive Carol Turso in Behavioral Healthcare. “Common reasons for this are failing to see an EMR's strategic benefits and considering the initial cost as an expense rather than as an investment … An EMR is an investment because it provides long-term benefits and may be an important tool for reducing the cost of expenses.” 

Turso uses the example of a social services organization that over three years after implementing an EHR reduced bad debt by 93 percent, lowered outstanding accounts receivable of more than 151 days from 24 to 9 percent, and trimmed the time staff spent per week entering remittances and payments from 40 hours to 10 minutes. In every instance, these EHR benefits improve the organization’s bottom line. Even if they don’t technically create new revenue, they are still quantitatively relevant.

Qualitative improvements save time, prevent adverse medication events and reduce errors, which saves money. As the federal government shifts to a reimbursement model based on quality and patients vote with their feet, the qualitative approach starts to look more like a quantitative imperative.

How do non-clinical factors impact the evaluation of ROI?

You can build it, but they may still not come.

So, it’s difficult to exaggerate the importance of behavioral factors in ensuring the value of your behavioral health EHR. You must create buy-in, make clinicians feel as though they have a voice in the process, train everyone effectively on the system and take feedback on how to improve the solution and workflows after go live.

“Realizing full value of the [EMR] system typically depends not only on successful deployment of the system but also on adaptation of other organizational processes and workflows,” says an Institute of Medicine (IoM) paper that seeks to create a standard model for assessing the value of EHRs. “Functionality is also enhanced or constrained by the quality of implementation, including user training and acceptance, as well as the universe of technology with which it is used.”

The good news is that, for most behavioral health hospitals, the investment in EHR seems to be money well spent.

According to the Behavioral Healthcare survey mentioned above, the majority of those with an EHR are satisfied and putting the system to good use. Among all respondents, 23.6 percent said the EHR they use improves patient care, 18.1 percent cited the elimination of paper storage as a prime benefit, and double-digit percentages identified improved care, reimbursement and clinical outcomes as valuable results.

How can we determine if our new EHR is earning its keep?

Every behavioral health organization has to track dollars, cents and hours, so at least in those areas you can use the EHR to monitor change and increase in value over time, even if pre-EHR tracking was less than judicious.

At the core, an ROI evaluation is still a costs-versus-benefits analysis. It’s just a little more complex with behavioral health IT. If you’re not yet working with some sort of tracking system and evaluation scheme, consider starting with a table of costs and benefits. Circulate the list to clinical, administrative and technical leaders and then update until all feel confident the table is comprehensive.

To get a more complete picture of actual value and return, the IoM model looks at three overarching components: expenses, benefits and potential impacts to revenue. Each category is divided up into numerous types in an effort to determine with specificity what is the value of a particular EHR investment.

“… benefits of robust information system implementation might include savings to an organization from the reduction or more effective deployment of full-time equivalents (FTEs) associated with more efficient business practices, decreased morbidity and mortality due to more consistently delivered, high-quality care, avoided complications from improved preventive care, and enhanced patient experience and outcomes through the opportunities afforded by EHRs and patient portals for engagement,” reads the IoM paper.

 It’s worth spending some time reviewing the IoM tables if you are questioning the value of your EHR or considering different solutions.

Can you afford a comprehensive EHR with reliable ROI without federal government help?

Absolutely.

There are many behavioral health EHRs out there with dramatic differences in both price and payment structure. Some acute care hospital EHRs also adapt well to the behavioral health environment. Yes, some of these systems are expensive and require substantial upfront expenditures for software licensing fees, infrastructure, consultants, network, etc. But other less expensive and robust options require almost no spending upfront if you have the infrastructure in place, and enable you to pay as you go via subscription.

Ultimately, much of the ROI for the healthcare IT system you choose is dependent on how you make it work for your behavioral health facility. Create organizational buy-in (especially among clinicians), evaluate workflows and how they might change to accommodate the EHR, and choose a solution that incorporates behavioral health-specific functionality and is a realistic financial fit.

Put the foundational pieces in place and the likelihood of positive ROI increases dramatically, even if that federal subsidy never materializes.

D'Arcy Gue is Director of Industry Relations for Medsphere Systems Corporation. 

Are you ready for the oncoming wave of revenue cycle change?

A few weeks ago, I offered up 10 best practices for successful revenue cycle management. Any practice that implements these regular behaviors will be on a more stable financial foundation. The truth, however, is that things are changing rapidly in healthcare, which is news to exactly no one. So, on top of these 10 recommendations, you also have to manage changes that impact revenue. 

The impact of the Affordable Care Act (ACA) on the insurance market, for example, means deductibles and out-of-pocket expenses are going up for many insured patients, which increases the importance to your practice of collecting payment right after the patient walks in the door.

"The chance of collection drops by 50 percent once the patient is seen," Michael Orseno, director of revenue cycle management with Regent Surgical Health, told Becker’s Hospital CFO. "Focus on hiring competent staff to obtain the correct insurance information and collect out-of-pocket costs up front. It is worth every dollar to pay competent staff to collect every dollar you are owed."

As a HIMSS Revenue Cycle Improvement Task Force whitepaper explains, “Historically, healthcare providers … have designed their revenue cycle systems and processes around business-to-business (B2B) relationships  … with the shift in the marketplace to consumer-directed healthcare (CDH) and the 2010 signing of the [Affordable Care Act (ACA)], providers are now ill-equipped to efficiently handle the expected dramatic increase in consumer payments.”

So, how many dollars are we talking about as healthcare transitions from B2B to a focus on consumers? Potentially, enough to bankrupt many practices. The HIMSS Task Force predicted out-of-pocket expenditures would grow by 68 percent from 2007 to 2015 as the ACA gained traction.

According to medical markets research organization Kalorama Information, direct payments to providers by patients will continue to grow by about 9.5 percent annually and reach $608 billion by 2019.

The expectation is the technology will help make revenue cycle more efficient, but even if you have the technological tools to enhance revenue cycle management, remember that best practices and policies are the keys to making those tools work. The old adage holds here just as it does anywhere—technology + efficient, functional processes enhances function; technology + dysfunction just creates more dysfunction.

Adds Jeff Noonan, senior director for global services firm Alvarez and Marsal's healthcare industry group, "I've seen organizations that have great operations and great culture utilizing ancient technology, but they make it work. But, I have never seen bad operations make great technology work."

Another modern complicating factor is that both payers and providers are crossing over into the other’s domain. Providers are starting up health plans; payers are investing in provider networks. How will this alter the revenue cycle? We don’t know, as Carrie Pallardy explains in Becker’s Hospital CFO, which leaves physician practices with best practices as basically the only way to prepare for an unknown future.

If it seems like revenue cycle management tasks are sapping your practice resources, consider outsourcing, especially for coding and billing.

"As hospitals and physician practices grapple with intense pressure to optimize revenue cycle management processes, outsourcing has emerged as a powerful solution to the challenges of a rapidly changing healthcare model," said Black Book Managing Partner Doug Brown.

An experienced revenue cycle outsourcing team can perform activities like reviewing the payer mix and reimbursement profile for payers much more quickly than your back-office staff. For practice decision makers, detailed reports defining the insurance payer mix are invaluable when it comes time to make critical contracting decisions.

What you don’t need now is another layer of complexity on top of the numerous changes you already face. But revenue cycle management perhaps warrants more attention simply because more efficiency in this area pays for investments elsewhere.

Until healthcare in America becomes something other than a business, healthcare providers have to focus intently on the bottom line. If you put your practice on a firm but nimble footing, changes will seem more like gentle waves lapping at the shore than an inundating tidal wave.  

Mordy Pelleg is the founder and president of Medsphere's MBS/Net division, a proven provider of essential tools and services necessary to effectively manage physician practices. 

Are you leaving money on the table that your practice needs?

For clinicians working in the complex American healthcare system, getting paid for every single procedure, service and visit has always been something of a challenge. Yes, fee-for-service medicine created a fairly linear relationship between effort and remuneration, but even in that scenario many hospitals and practices have teetered on the edge of solvency, in part for lack of efficient billing practices.

Indeed, in a poll conducted last year by Cardinal Health, decision makers said reimbursement is the number one problem facing health systems today.

Now healthcare is moving toward a quality-based payment model that equates compensation with value, leaving fee-for-service in the rear view. Especially for organizations that struggled to bill comprehensively before, what might be the impact of this change now?

The truth is, we don’t yet know. As Carrie Pallardy writes in Becker’s Hospital CFO, “What healthcare revenue cycle management will look like once the value equation is finally deciphered remains to be seen.”

Still, the same practices and principles that applied to fee-for-service revenue cycle management will endure moving forward, even if they become doubly important. If you effectively bill now, you will be better prepared for future dynamic changes to the system.

10 basic revenue cycle best practices

  • Scheduling is the first line of defense and accurate demographics and insurance information are essential. Confirm that the patient has coverage and understands co-pays are expected at the time of service. Identify self-pay patients and make them aware of the payment policy.
  • Attempt to collect outstanding patient balances when speaking with the patient on the phone, or make sure they are aware that payment will be expected the next time they visit.
  • Designate a pre-certification and authorization lead staff member to obtain approvals for diagnostic testing or procedures to avoid denials and thereby loss of revenue.
  • Ensure accurate and comprehensive medical records to document billable services. From an insurance standpoint, if it’s not documented, it didn’t happen. EHRs, now commonplace amongst physician practices, help tremendously by lowering the duplicate patient record rate, which the Healthcare Financial Management Association says improves the accuracy of information.
  • Verify the capture of all billable charges, confirm that they are coded to the highest specificity, and bill patients in a timely manner.
  • Correct claim errors that create denials quickly and efficiently; even better, designate a staff member responsible for this task. If recurrent errors become a trend with a particular provider or staff member, make sure they are aware of the correct process or procedure.
  • Post payments in a timely manner to hasten the revenue cycle process. Use electronic remittances as often as possible and establish a threshold for small balances that are automatically written off.
  • Audit insurance follow-up reports to maximize reimbursement. Insurance companies have different timely filing restrictions; auditing this report will help avoid financial losses.
  • Monitor accounts receivable on a regular basis. Assign a staff member to review reports and establish benchmarks for the collection process.
  • Send patient statements on a pre-determined regular schedule. 

What you probably noticed is that the keystone of revenue cycle management success is effective communication. The frontline staff has to be gentle and caring, yet persistent, resilient and unyielding. Do you already have people on staff with strong personalities and the ability to communicate effectively without being abrasive? Build many of these best practices around those people and chances are good your revenue scenario will improve. 

Mordy Pelleg is the founder and president of Medsphere's MBS/Net division, a proven provider of essential tools and services necessary to effectively manage physician practices. 

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