Reducing Denials Through Intelligent Guided Registration. Guiding your registration process. WHITE PAPER Cincom In-depth Analysis and Review

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1 Reducing Denials Through Intelligent Guided Registration Guiding your registration process WHITE PAPER Cincom In-depth Analysis and Review

2 Reducing Denials Through Intelligent Guided Registration* Guiding your registration process Table of Contents Who Needs to Read This Paper Executive Summary Denial Management Vs. Denial Avoidance After the Fact? Or Before They Occur? Industry Overview WHITE PAPER Cincom In-depth Analysis and Review The Issues: What s Facing Today s Healthcare Providers? Inaccuracy of Captured Data Errors Can Be Caused by Registrar Errors Can Be Caused by the Patient Registration System Itself Errors Can Be Caused by Non-integrated Systems Inability to React Quickly to Change Expanding a Registrar s Skill Set Formal Training System Help Screens Electronic Payer Manuals Memos, s, and Notes The Solution: a Rules-Based Intelligent Guided Registration System It Doesn t Have to Be This Way! Ensuring Quality Data Reacting Quickly to Change * Patent Pending Dynamically Guided by Questions and Answers Immediate Benefits: the Registrar and Patient Experience... 9 Improved Employee Morale Increased Patient Satisfaction Improved Employee Morale Means Increased Patient Satisfaction Ultimate Overall Benefits: Increasing Revenue and More What s Next? About Cincom

3 1 Who Needs to Read This Paper Executive Summary All healthcare administration managers will gain value by reading this exploration of an alternative approach to denial management denial avoidance. However, directors and managers from the following disciplines will gain particular insight: Access Management Registration Admissions Revenue Recovery and Management Health Information Management Operations For most healthcare providers, a large percentage of claims aren t paid at all. Collecting for services rendered should be an easy, straightforward process. But thanks to inaccurate data, poor internal processes, and the use of the wrong technology, it doesn t always turn out that way. In addition, the many managedcare companies and government agencies seem to treat claim processing differently, each with their own set of complicated rules, mnemonics, procedure codes, policies, and standards. Today, healthcare providers are losing far too much revenue due to bad debt, claims underpayments and denials, unbilled services, and inappropriate credits (even fraud). And too many revenue cycles all too often result in extended accounts receivable and eventually, costly write-offs. In fact, 90 to 120 accounts receivable days are not unheard of for U.S. healthcare providers, and write-offs have risen into the 3% to 7% range. The sad reality is that most of these denials and write-offs could be avoided. Denial Management Vs. Denial Avoidance After the Fact? In reaction to this problem, organizations typically begin their denial management by overemphasizing back-end, after-the-fact cleanup. All this requires is a dedicated group of employees allocating all of their time to work on denials, re-billings, credit balances, refunds, and other incorrect reimbursements. Unfortunately, overemphasis on back-end cleanup takes away from working on and preventing the major cause of third-party denials and eventual bad-debt write-offs inaccurate data. Or Before They Occur? The quality of the data that enters the revenue cycle upfront is often the most important single factor in determining whether the resulting claim will be paid or denied. Achieving higher data quality is an internal process that is not only controllable, but can be dramatically improved. Hospital providers should concentrate on capturing accurate and appropriate information during patient registration in order to ensure payment for services rendered. If eligibility is not checked, or the necessary authorizations not captured, then the provider will be at risk for being underpaid or not being paid at all. Incorrect registrations are a major burden on any facility, especially when they include an overall negative impact on other components of the organization s world, such as employee morale, patient satisfaction, lost revenue, and much more. This paper addresses the many issues facing today s healthcare providers that are preventing them from capturing quality data. It also discusses the promise of an Intelligent Guided Registration system as a proposed solution for controlling these issues, and finally, it identifies the many added benefits of implementing such a solution.

4 2 Industry Overview As consumer demand for medical services grows, so do the financial challenges. And the numbers are staggering. According to the American Hospital Association, almost 32% of hospitals lost a total of $21.6 billion in 2000 approximately 6% of the nation s hospital expenses because they were unable to collect for services rendered and billed. 1 Unfortunately, most organizations have become sidetracked in their revenue-cycle efforts and spend more energy reviewing effects rather than root causes. Management routinely questions business-services departments regarding follow-up and writedown procedures. CFOs are told to reduce days in accounts receivable and increase cash flow. As a result, organizations have become focused on the back end of the revenue cycle, installing new patient-accounting information systems, initiating one-time AR cleanups, adding more resources, and pink-slipping a generation of patient-account managers. 2 As a result, The Gartner Research Group estimates that medical groups that work exclusively on denial management issues will potentially double in the next few years. The Healthcare Sector Revenue Cash Flow Dilema Payments to U.S. healthcare providers are reduced by 45 to 90 billion dollars (3% to 7% denial rate) each year through administrative and clinical denials. The Advisory Board in a recent report stated, Managed Care Organization denial rates carve out 12% of an organization s gross inpatient charges, which in the case of a small hospital, can average up to $3.3 million. On average, 67% of these denials are recoverable and 90% are preventable. Of the 15 billion claims, 25% to 40% are either rejected or denied at different stages of the billing and claim process. Only 50% of these rejected and denied claims are followed-up and resubmitted for billing. A Gartner Research report predicts that 40% of provider organizations that fail to make changes in the way they manage their revenue will struggle to remain in business by year-end Currently over 25,000 employees in hospitals and medical groups work exclusively on denial management issues and this is projected to swell to over 50,000 workers. Denial management is a component of revenue management. The evermore-complex sets of rules create an environment where providers cannot keep up and remain viable businesses without introducing new, sophisticated tools. Source: Web Magazine Fact File 1 Uncompensated Care: Is There a Cure in Patient ID Verification System?, by Neal Smith 2 Data Quality: The Elusive Key to a Healthier Bottom Line, By Beth Mansfield and Scott Mendenhall

5 3 The Issues: What s Facing Today s Healthcare Providers? According to a recent survey of 254 financial executives in the healthcare industry, the number-one issue that is most likely to impact their organizations over the next five years is unpaid care (e.g., write-offs, bad debt). Other issues including policy/regulatory issues with delayed payment for services, technology and staffing are close behind. 3 Future Trends of Concern Percent Indicating High Concern Inaccuracy of Captured Data How important is the data acquired at registration? Well, the quality of the data that enters the system upfront is often the most important single factor in determining whether the outcome of that eventual process will be positive or negative. Data is so critical to the success of the patient experience that hundreds of small companies have materialized, all offering services encompassing data: data entry, data quality, data checking, data submittal, data rework, and more. Many hospital claims may require extensive editing to complete missing or inaccurate information prior to filing, often due to poor information captured at registration. If patient access departments were able to provide quality information upfront, rework and duplication of effort could be avoided, denials could be reduced, and reimbursement time could be improved. 4 Unpaid Care Regulatory Delayed Payment Technology Staffing 60% 47% 45% 44% 70% Errors Can Be Caused by Registrar Ensuring data quality involves obtaining and verifying information before billing occurs. This is a direct responsibility of the registrar who gathers the information on the phone or in person. If a question is not asked or not answered appropriately, data may not be properly entered. Even when the question is answered properly, mistakes can still easily occur due to: Demand for Service 37% Misspellings Payer 28% Incomplete data entered Typos/transpositions Source: Healthcare Financial Management Association s 2004 Revenue Cycle Survey Contributing to the amount of unpaid care is the quality of the critical information captured during the first patient contact (via phone or walk-in) to your enterprise. The likelihood of this information flowing successfully, without error, from registration to discharge, depends on three major factors. The accuracy of the data captured and entered into the registration system The registration system s overall effectiveness and ability to react to change Invalid coverage mnemonics Even the right questions to ask may be difficult for the registrar to know, because the questions can vary with individual circumstances. Even when correct information on demographics (patient and guarantor), insurance eligibility and benefits, co-pay and deductible amounts, authorizations, pre-certifications, and medical necessity are all collected from the patient, some or all may change between registration and admittance. Therefore, verifying patient information should be done when actually admitted or before discharge. However, industry surveys show that only 50% of healthcare organizations actually verify this critical information prior to service. 5 The expectation of the registrar s knowledge beyond the system capabilities All of these combine to contribute to either financial success or problems downstream during the billing and reimbursement cycles. 4 A Blueprint for Better Information Quality: Advice From Larry English, by Millie Hast 5 Data Quality: The Elusive Key to a Healthier Bottom Line, By Beth Mansfield 3 Healthcare Financial Management Association s 2004 Revenue Cycle Survey and Scott Mendenhall

6 4 Errors Can Be Caused by the Patient Registration System Itself The healthcare provider may have an installed registration system, but it may not be able to handle the myriad of insurance rules and codes. It may be a system that has not kept up with all the changes in the healthcare industry. The healthcare industry has lagged behind other industries in adopting technologyenabled processes and has not yet experienced the dramatic changes in practices seen in finance, retail, distribution, and other industries. 6 Without an up-to-date, comprehensive registration system, errors can occur due to: Incomplete insurance verification rules Inability to handle use of nicknames Inability to identify duplicate records Required fields causing the automation of non-quality Inability to support Medicare/Medicaid compliance Errors Can Be Caused by Non-integrated Systems There are many occasions when data created by one department may not be usable by another department. Most organizations are managed vertically. One department creates the data, but another uses it. The department that creates the data may not feel the pain of poor quality, but the department that uses it may feel lots of pain. Therefore, even though the registrar has acquired the correct information for registration, and the registration system itself has applied all of the right rules, the information being passed may not represent the correct data to transfer patient billing information accuracy. 7 Inability to React Quickly to Change More than the change itself, it is the ability to prepare for the impact of change that has always been the bigger challenge. There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. 8 Healthcare providers are a perfect example. Driving the registration process is a system of constantly changing rules that registration personnel must either know in order to complete the registration processes correctly, or depend on the system to be able to handle the change. In many instances, the registration process leads to a shortfall in expected reimbursements because of the lack of an up-to-date registration system. To complicate matters even further, different data capture requirements are mandated for different services and for different payers. In addition to this, insurance companies change coverage and policies on a regular basis. Healthcare providers have the flexibility to allow the new or changed policy into their network of accepted coverage. The problem is that, because changes happen so frequently, all of this changed information is not normally updated in a timely enough fashion. Internal communications in the form of memos or s, and even handwritten notes sometime become the normal method of communicating these changes. The challenge becomes how to keep the registrars up-to-date with all of the rule changes that are needed so they can capture the proper data. 6 Health & Health Care 2010, The Forecast, The Challenge, Institute for the Future 7 A Blueprint for Better Information Quality: Advice From Larry English, by Millie Hast 8 Machiavelli, The Prince 1513

7 5 Expanding a Registrar s Skill Set During patient registration, a registrar must ask the appropriate questions and have the specific knowledge of all insurance policies. Obviously this task is close to impossible, so the registrar typically relies on four forms of knowledge: Formal training System Help screens Electronic payer manuals Internal memos, s, and notes Formal Training Upon being hired, registrars generally receive little formal training and often have a limited knowledge of the revenue cycle. Yet they are expected to learn the nuances of dozens of claims systems. Extensive formal training of registration staff can be difficult and costly particularly with high staff turnover. On top of that, only doing initial training is insufficient as refresher training is normally needed to keep up with changes in rules, regulations, procedures, and policies. It s the typical scenario of once they learn the system, the system changes. Electronic Payer Manuals Most healthcare providers maintain electronic payer manuals. The manual has multiple purposes, but is sometimes relied upon to be the most up-to-date information source on insurance policies and carriers. Unfortunately, this manual is only as current as the hospital staff can keep it, and usually winds up at the registrar s station, printed out with post-it notes on many of the pages. Memos, s, and Notes As previously mentioned, changes occur so often that it becomes very difficult, if not impossible, to update the registration system as often as necessary. Therefore, the registrars are continually receiving memos, s, notes, etc., informing them of changes, which they must try to remember when registering patients. While each of these are helpful and aid in the performance of their job duties, registrars still make mistakes. In most cases, this happens not as a result of negligence, but most likely due to a lack of accurate information being readily available. System Help Screens System Help screens are intended to allow the registrar to search by insurance carrier. They should list all possible policies of that carrier, and should have the proper insurance mnemonic and coverage codes listed. Help screens can become outdated very quickly, and with most systems, need to be updated by the IT department. Unfortunately, these required changes can sit in the IT job queue longer than anticipated and aren t readily available to the registrar when needed.

8 Denial 234 Denial Typical Registration Process Relies On: - 4 Weeks of Training - Online Training Manual - Payer Manual - HIS "Help Screen" - Periodic Updates to System - Additional Supervision Information Input Decisions Health Info System The claims are processed The Payer accepts or declines the claims Claims with ACCURATE information are paid 30 Days $ Patient Registrar Claims with INACCURATE information are denied Identify Errors Correct Errors Resubmit Claims ( Days) Denial 234 Denial 234 Denial 234 Denial Management Team Denial 234 Walk In's Incoming Calls Scheduled Appointments Denial 234 Denial 234 Denial 234 Relies On: Expert Business Rules at his or her fingertips A Rules-Based, Intelligent Guided Registration Process Guided Registration Input Health Info System The claims are processed The Payer accepts or declines the claims Claims with ACCURATE information are paid 30 Days $ Patient Registrar Claims with INACCURATE information are denied Denial Management Team Walk In's Incoming Calls Scheduled Appointments

9 7 The Solution: a Rules-Based, Intelligent Guided Registration System Scenario of a Manual Registration Process Picture a registration process that is cumbersome and errorprone as the admissions department has to manually retrieve, reproduce, create, and assemble the customized materials for each incoming patient. Multi-part forms are retrieved from filing cabinets, information sheets are pulled from staging areas or reproduced on a copier, and wristbands are produced on an embosser. In addition, all patient data is captured manually, which creates additional opportunities for error. Further complicating the communication flow, once the patient information is captured, it is manually routed to the appropriate department for patient care, patient tracking, or billing purposes. Ensuring Quality Data The old adage, prevention is the best medicine, applies to concentrating on data-quality improvements on the front end of a patient encounter (scheduling, pre-registration, and registration/admissions). One of the best opportunities for improving accounts-receivable performance lies in reducing the amount of time spent on redoing work on the back end of obtaining reimbursements. A fine-tuned organization that has accurate insurance information can significantly improve cash flow by identifying and collecting upfront any patient-responsible portions. 9 A guided patient registration process focuses on obtaining and verifying information before billing occurs. It is all about collecting quality information that ensures accurate account information about the patient. This type of solution allows all collected information to be entered and captured electronically. The solution should have the functionality to apply business rules to examine data as it is acquired to ensure that it is complete, consistent, and reasonable. It should be guided data collection at the point of admission and throughout the entire patient visit to ensure correct, accurate, and complete data gathering, thus reducing costly errors. Reacting Quickly to Change It Doesn t Have to Be This Way! A knowledge-based, guided registration solution empowers your frontline registrars (on the phone or face-to-face) to gather the correct patient and insurance information every time. Equipping them with a tool that enforces the rules will result in the accurate gathering of insurance and patient information, and will guide their questioning and information gathering through even the most unusual or complex registration scenarios. The value of an intelligent guided registration solution lies in its ability to simplify and improve the accuracy of registration, the decision support and process flow, and ultimately: Reduce errors when capturing and managing all of the patient registration data A knowledge-based system is driven by business rules, as opposed to conventional programming logic. This enables business users to focus on business issues, while IT personnel focus on IT issues. You can develop full-function, knowledgebased applications that are controlled exclusively by business criteria, expressed graphically and intuitively by your business experts. This important feature allows you to implement new business processes, policies, and procedures in minutes rather than days or weeks. You can rapidly modify applications to reflect changes to the way in which you run your business, including new offerings, new policies, new regulations, and new promotions. As such, business rules can be put into effect as soon as the business community defines them; thus eliminating time-consuming delays associated with application reprogramming and re-certification. Allow for rapid changes to rules and ensure that the registrars comply Decrease training time needed for registrars 9 Data Quality: The Elusive Key to a Healthier Bottom Line, By Beth Mansfield and Scott Mendenhall

10 8 Dynamically Guided by Questions and Answers An effective, knowledge-based patient registration system guides registrars automatically through the minimum number of questions. It ensures that: Only appropriate questions are asked of each individual patient The rules are consistently followed by all registrars Key questions are answered and the proper data being entered is verified The answers provided are complete, sensible, and correctly entered into the registration system This means the registrar can consistently ask the right questions to shorten the amount of time required for registration, and increase the quality of that data. All they have to do is read and enter the answer to the question, which will then guide them to the next appropriate question based on the answer. The difference with a knowledge-based system is that the registrars don t have to rely so much on their own knowledge. They don t have to be trained as much on all the business rules or always know how these business rules are changing. Instead, they will be alerted by the registration system regarding which rules have changed or are scheduled to change. This type of information can easily be specified within the capabilities of the system itself.

11 9 Immediate Benefits: the Registrar and Patient Experience An intelligent guided registration system offers the potential to improve employee morale and increase patient satisfaction. For, as we all know, a lengthy and difficult registration process can have a negative impact on both the registrar and the patient. Improved Employee Morale Challenges Facing Employment in the Healthcare Industry Employment in healthcare occupations is expected to grow at twice the rate of nonhealthcare jobs. 10 Hospital employment costs continue to outpace compensation for all private industries % of current healthcare workers are considering leaving the field % of healthcare workers indicate that their supervisors do not meet expectations regarding their ability to achieve results through their management style. 13 Increased Patient Satisfaction In the highly competitive field of healthcare, providing customer service is a major concern to hospital management. Wanting to differentiate themselves in the competitive market space with increased customer satisfaction, healthcare providers want to lessen the internal time it takes to schedule or register a patient and make it a memorable experience. So the registrar personnel must be timely and accurate for the hospital to retain customers, provide satisfaction to them, while also capturing the correct information to guarantee payment by the insurance payer in a timely manner. A guided patient registration means: Accurate information Faster registration Fewer billing errors Total quality presented to the patient Optional web registration Improved Employee Morale Means Increased Patient Satisfaction What is the relationship between an engaged hospital workforce and a satisfied patient? A nearly perfect one, according to a recent study by survey research firm Press Ganey Associates, Inc. Press Ganey compared the customer satisfaction and employee satisfaction scores of 18 hospitals in their database. The correlation between the scores was.89 close to a perfect correlation of These kinds of statistics (especially 40% leaving the field) reenforce the turnover situation and prompt the providers to analyze what level of importance morale plays in that turnover rate. A knowledge-based application, when used effectively, can help in improving employee morale. In a knowledge-based application, the knowledge that an expert uses to make an informed decision is encapsulated into an application that can be used by a non-expert to make the same informed decision. In other words, a knowledge-based, guided patient registration system can be capable of collecting and applying the knowledge stored in the minds of your hospital s best registration personnel, and making that knowledge immediately available to lesserexperienced registration personnel in an automated, guided manner. This enables a registrar to very quickly become an expert. The more expertise the employees possess, the more productive and effective they will function in their roles. As a result, they will also experience a new level of confidence, which leads to improved job satisfaction. And job satisfaction leads to increased morale. And increased morale leads to retention. 10 American Hospital Association Bureau of Labor Statistics 12 Managed Healthcare Executive, June Ibid Patient Satisfaction PATIENT SATISFACTION VS. EMPLOYEE SATISFACTION Correlation Coefficient = Employee Satisfaction Correlation, of course, does not imply cause. But anyone who has worked in a hospital knows how employee satisfaction impacts patient satisfaction. Every aspect of a patient s care from admission to medical procedure and recovery to discharge is delivered or supervised by hospital employees. Engaged, satisfied employees create a positive patient experience, both through greater effort and superior attitude. Disengaged employees create the opposite Millions in Cash Wandering Through the Halls of Your Hospital, Calculating the Cash Value of Employee Engagement, by Matthew Simon

12 10 Ultimate Overall Benefits: Increasing Revenue and More In conclusion, to focus on improving the quality of data gathered and recorded at the front end is not the only way to make the leap to better financial performance, but it is potentially the best way. Achieving higher data quality is an internal process that is not only controllable, but is a process that can be dramatically improved. And when it is improved, the overall benefits are many. This paper started out talking about denial management and how most healthcare providers overemphasize back-end cleanup. But as the title implies, reducing your denials starts at patient registration by avoiding the errors that cause them. In fact, the quality of the data that enters the revenue cycle upfront is the single, most important factor in determining whether the resulting claim will be paid or denied. Reducing accounts-receivable days, bad debt and denials, and improving upfront cash collections and resource utilization are just a few of the many benefits that can be realized with an intelligent guided patient registration solution. Reduced Denials and Much More Elimination of insurance certification and compliance errors Reduced insurance and managed-care denials and rebilling activities Reduction in the number of non-covered services rendered Reduced time in accounts receivable and improved cash flow Reduced write-offs to bad debt Reduced need to resend patient bills Reduced need for costly rework and error correction Reduced time to implement changes in rules

13 11 What s Next? This paper has discussed the many issues facing today s healthcare providers, particularly those issues that add costs and unnecessary loss of revenue associated with denials. Denial management has historically been a tool for working on denials after they occur. However, this paper has presented a discussion on an Intelligent Guided Registration system as a proposed solution for avoiding these denials at the front end, before they occur. And finally, it has identified the many benefits of implementing such a solution. For more information about Cincom Intelligent Guided Registration for denial management, us at igr@cincom.com. About Cincom For nearly 40 years, Cincom's software and services have helped thousands of clients worldwide simplify the management of complex business processes. Cincom specializes in the five areas of business where simplification brings the greatest value to managers who want to grow revenue, control costs, minimize risk, and achieve rapid ROI better than their competitors. Cincom serves clients on six continents including BMW, Citibank, Boeing, Northwestern Mutual, Federal Express, Ericsson, Penn State University, Milacron, Siemens, Rockwell Automation, and Trane. For more information about Cincom's products and services, contact Cincom at CINCOM (USA only), send an to info@cincom.com, or visit the company's website at

14 12 Cincom has helped some of the world s leading organizations transform corporate information into a competitive advantage through leading software and service solutions. Here are just a few: American Bankers American Community Mutual Insurance American General Annuity American Ordnance LLC American Power Conversion AmerUS Life Insurance Company AT&T Atlantic Mutual Insurance Company Aurora Healthcare Bertelsmann Music Group Blue Cross Blue Shield of South Carolina Christian Children s Fund Citibank Cubic Corporation (Cubic Defense Systems) Duke University Medical Center Dun & Bradstreet Ericsson Inc. Fannie Mae Federal Express Federal Reserve Board Gencorp/Aerojet General Dynamics OTS Aerospace, Inc. GKN Aerospace North America, Inc. Great American Insurance Company Hallmark Highmark Kansas City Power & Light KDI Precision Products, Inc. Litton EOS Mayo MCI WorldCom Meijer MetLife Morgan Stanley & Company Nationwide Northwestern Mutual Financial Network Penn State University Pepco Prudential Financial Purdue University Sallie Mae Temple University Thales ATM, Inc. (Airsys) The Trane Company Verizon Washington University in St. Louis

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