EFFICIENCY UP. COSTS DOWN. The Benefits of an Automated Healthcare Revenue Cycle

Transcription

1 EFFICIENCY UP. COSTS DOWN. The Benefits of an Automated Healthcare Revenue Cycle 1

2 Executive Summary Do more with less. It s a tall order for healthcare providers facing elevated quality expectations, increased regulation, and decreasing reimbursements. It s reality nonetheless. Business as usual is not an option. Hospitals must find practical ways to trim expenses in their day-to-day operations within their own walls, without sacrificing quality and productivity. They must reduce costs while simultaneously increasing efficiency, quality, and productivity. These seemingly unattainable goals are well within reach, at least when it comes to the revenue cycle, because of technology. 2

3 Situation Analysis In 1960, healthcare spending accounted for only 5% of our Gross Domestic Product in the U.S. Today it represents approximately 18% of GDP ($2.7 trillion). The Centers for Medicare & Medicaid Services Office of the Actuary estimates healthcare spending will reach $4.4 trillion in the next five years, or 20% of GDP, and 34% of GDP by 2040 if it continues to increase at historical rates. The known reality is that our historical pace of escalating healthcare cost is unsustainable. Every organization must adapt to radical changes, else it will cease to exist. And the changes are many. Reform and the Regulatory Landscape The Patient Protection and Affordable Care Act aims, among other things, to reduce the cost of healthcare for individuals and the government by increasing insurance coverage options and affordability. The onus, however, ultimately falls on hospitals to provide higher quality care, in a more streamlined delivery method, for less money. Sounds simple, right? Meaningful Use is another federal government program that provides financial incentives for the meaningful use of certified technology to improve patient care. To receive payment, providers must meet CMS thresholds for a number of objectives in three stages with increasing requirements for participation. Quality and Patient Satisfaction The entire industry, from newly formed ACOs to market-leading technology companies, is focused on better care coordination among providers, and engaging patients in their own care. CMS is encouraging their efforts with reimbursement penalties for avoidable hospital readmissions. Reimbursements Speaking of reimbursements, Medicare hopes the ACA will help it spend around $460 billion less during the next decade. When the nation s largest payer makes a cut of that magnitude, it affects every hospital and healthcare organization in the country. For each $100,000 reduction in Medicare inpatient revenues, a hospital reduces its total staff by 1.69 FTEs, 20% of whom are RNs. Health Services Research 3

4 The shift toward a value-based purchasing model will also save an estimated $214 billion. These changes are trickling down from CMS as well as private payers, who are looking to curb costs in their own ways. State health insurance exchanges and other low-cost options are expected to increase transparency, competition, and consumer choice, standardize rates across geographic markets, and reduce the overall discrepancy in payers contracted rates with hospitals. Modern Healthcare reported that 11 million Americans will gain health insurance coverage in 2014 either through new health insurance exchanges or Medicaid, and that CMS expects the use of goods and services among the newly covered to contribute significantly to spending increases. Another 8 million previously uninsured people are expected to gain coverage in The jury is out, says Modern Healthcare and others, on whether the ACA s policies will succeed or fail in controlling overall healthcare costs. So what are the takeaways from all these trends? 1. Healthcare reform is about improving quality, and reducing costs. This is a plain concept in theory, but implementing at the point of delivery with patients is the real challenge for hospitals and health systems that are already starting to be measured and paid by their ability to deliver better care at a lower cost. 2. Healthcare providers already face a lot of financial pressures, and it s not getting easier. According to the American Hospital Association Annual Survey, the shortfall for Medicare payments relative to hospital costs in 2011 was more than $20 billion. For Medicaid it was closer to $30 billion. CMS most recent reimbursement cuts and penalties will widen that gap unless hospitals find ways to reduce costs. These dynamics suggest that the most immediate and practical cost-cutting will take place in hospital business operations. 3. It s clear that the only way for hospitals to counter these financial pressures is to find ways to do more with less. Some analysts estimate hospitals need to cut 20% to 30% of total costs in the post-reform landscape. That s a big number, especially when they are expected to simultaneously improve quality, patient outcomes, care coordination, and patient satisfaction. Medicare/Medicaid Hospital Payments-To-Cost Shortfalls Billions $0 -$3 -$6 -$9 -$12 -$15 -$18 $ $2.3 -$2.0 -$15.0 -$7.1 -$21.5 -$10.4 -$20.1 -$7.8 Medicare Medicaid American Hospital Association 4

5 Best Practice Reform is moving us quickly to a value-based healthcare purchasing system that rewards providers for effectively managing an entire episode of care, and producing a quality outcome for the patient at a lower cost. Selling more single events for the sake of a reimbursement, as some hospitals did in the past, would now be counterproductive. Not only are hospitals getting paid less per patient, but hospital executives and analysts say they are likely to continue experiencing flat or declining patient volumes for a number of reasons: slow economic rebound patients seeking less care because they are unwilling or unable to pay out-ofpocket costs successes in treating patients effectively without hospitalization increasing number of patients who are held for observation instead of being admitted payment and delivery model reforms to better coordinate care and improve outcomes Modern Healthcare So how do hospitals deliver the same or better service, at a lower cost, and remain financially sound? They start by examining and refining what they can control within their own walls. Clinical decision-making is obviously part of the equation, and value-based purchasing and ACOs are set up to reward clinicians efforts to reduce costs. Let s assume, because of these incentives, that any inefficiencies in the delivery of care (i.e. pure clinicals) will be addressed as hospitals improve care coordination and quality. These large variations in [Medicare] spending suggest that up to 30 percent of health care costs (or about 5 percent of GDP) could be saved without compromising health outcomes. The White House CFOs should take a hard look at other day-to-day operations that can and should be improved. The administrative and financial operations of a hospital, from Patient Access to the Business Office, may not represent the same scale of expense as some clinical areas, but they directly impact the hospital cost/ revenue structure. Tightening operational efficiency and accuracy in these areas will reduce costs immediately. A $1 reduction in Medicare inpatient revenues represents a $1.55 reduction in overall net patient revenues. Hospitals offset 90% ($1.40) of these losses by reduced operating expenses, and the remaining $0.15 is lost profits. Health Services Research $1.55 Overall Revenue Reduction for every $1 Medicare Revenue Reduction $1.40 Expense Reduction $.15 Lost Profits $1.55 Overall Revenue Reduction 5

6 Automating the Revenue Cycle Workflow Everything that happens in a hospital or health system touches the revenue cycle in some way. Errors are costly. Inefficiency is, too. A technology-driven workflow is the silver bullet that addresses both. The hospital industry will likely not meet the challenges of the new environment without information technology being an enabler of cost reduction and of process optimization. Smart healthcare systems will attempt to technology-enable the core operational processes and then enhance those solutions to achieve improved performance. Deloitte Consulting Since the first patient insurance eligibility solutions were introduced in the late 1990s, new technologies have created accuracy by removing human error, and increased efficiency by saving users time. The latest, most innovative revenue cycle solutions automate the entire process from start to finish, with as little human interaction as possible. Hospitals that still rely on manual process to manage core revenue cycle functions need to implement a more streamlined, cost-effective process. PATIENT ACCESS CLAIMS PATIENT ENGAGEMENT order clearance insurance coverage demographics prior authorization medical necessity patient payment estimates financial clearance charity assessment and enrollment patient payment collections scheduling discharge planning and instructions claims prioritization and management claims reporting contract variance detection and reimbursement management denial management payment posting RAC management eligibility and EOBs collections follow up scheduling charity care lab results statements discharge instructions Technology can absorb up to 80% of the Patient Access and revenue cycle workflow, saving users time and saving the hospital money. 6

7 Touchless processing means users only work pre-screened accounts with actionable follow ups and let technology take care of the rest When the pre-registration workflow is fully automated, technology identifies and presents only those patients who need follow up by staff in order to be cleared prior to arrival, eliminating unnecessary human intervention and creating a more efficient, accurate and productive workflow. typical patient access work queue patient access work queue with Touchless Processing 7

8 Let s examine the financial impact of increased efficiency at the most granular level of Patient Access. A) Susan, a registrar, makes $18 per hour (including benefits) in the pre-service financial clearance area of a community hospital. She spends 40 hours per week reviewing patient accounts, checking for errors, and following up when necessary. She enjoys her job and performs very well. The Director of the department has recognized Susan s potential to make valuable contributions in other areas, but is unable to assign any more work to her. The Director decides to implement new technology that automates the pre-service financial clearance process. With the new technology, Susan only has to work 20% of the accounts she previously handled, and the Director is able to assign Susan other important projects. VALUE SUMMARY: Susan was able to use 80% of her time for other projects, saving the hospital approximately $30,000 a year. The department did not have to hire an additional employee to supplement Susan s work, saving the hospital approximately $40,000 a year. Susan was able to contribute in areas that more directly affected patient care and quality, and supported the hospital s strategic objectives in the post-reform landscape. Susan was happier in her job. The new responsibilities motivated her to work hard and continue her own professional development. B) Debbie is Director of a Pre-Registration Department for a large, suburban health system. She manages a team of 20 in the department and has recently become aware of new technology that automates many of the tasks her employees perform every day. She gets approval from the CFO to implement the technology, even during budget cuts and planned layoffs, and within six months is able to report to the CFO that her department is performing at a higher level and has reduced costs. VALUE SUMMARY: Because technology absorbed much of the workflow in the department, Debbie was able to reduce her total personnel budget by 80%, or 16 FTEs, or $480,000 (at a modest $30,000 each). Employees left voluntarily or were reassigned to other important roles in the hospital. The increased accuracy in Debbie s department led to reduced workload in the business office. Debbie was praised for her efforts by the CFO. She, in turn, praised her team for their accomplishments and their impact on the hospital. 8

9 Additional ROI The operational efficiencies and reduced costs created by an automated revenue cycle workflow are reason enough to implement it, but the complete return on investment reaches much wider. ROI Accuracy Speed Timely throughput and sharing of information throughout internal workflow Greater productivity per FTE Full compliance with pre-service clearance goals and KPIs Improved patient satisfaction Better coordination between departments and facilities Improved physician relations Avoidable claim denials and rejections eliminated All appropriate payer reimbursements captured Reduced pre-service workload for front end staff Unnecessary back end work eradicated Increased upfront collections Reduced days in A/R Reduced bad debt write-offs Reduced cost to collect Improved charity assessment and enrollment Contribution to better patient outcomes Preventable hospital readmissions avoided Reimbursement cuts/payer penalties avoided Revenue Cycle KPIs of Payment Reforms Efficiency Reduced administrative costs Eradicated unnecessary rework on front and back ends Greater individual and departmental productivity Fewer overall number of FTEs (reduced or reassigned) Improved overall patient experience Improved patient compliance with follow-up care/discharge instructions 9

10 Conclusion New technologies remove unnecessary human intervention and replace manual workflows in the healthcare revenue cycle, reducing administrative cost when systemic cost cutting is essential for survival. It creates a new model of speed, accuracy, efficiency, and productivity in business operations. It also allows healthcare providers to focus on quality of care and patient outcomes, with confidence that routine but very important administrative and financial tasks are being handled with the best results, at the lowest cost. Automating the revenue cycle won t solve every new challenge for hospitals, but it s a really good place to start. Credits United States White House: The Economic Case for Health Care Reform U.S Social Security Advisory Board: The Unsustainable Cost of Healthcare, 2009 Centers for Medicare & Medicaid Services: cms.gov Health Services Research: How Do Hospitals Cope with Sustained Slow Growth in Medicare Prices? 2013 Modern Healthcare: Obamacare s Positive Economic News, Sept. 21, 2013 American Hospital Association: Trendwatch Chartbook, 2013 and Annual Survey, 2011 Modern Healthcare: The New Normal? Aug. 10, 2013 Deloitte Consulting LLP: Radical Cost Reduction white paper, 2012 Passport internal research 10

11 About Passport Passport creates solutions to enable hospitals and healthcare providers to improve business operations and achieve Payment Certainty for Every Patient. Founded in 1996 and headquartered in Franklin, Tenn., the organization is among the nation s fastest-growing Software-as-a-Service companies. The Passport ecare brand of patient access and payment certainty solutions are delivered to more than 2,500 U.S. hospitals and more than 9,000 other healthcare facilities in all 50 states. passporthealth.com 720 Cool Springs Blvd., Suite 200, Franklin, TN