RTE Strategies for Revenue Cycle Management

Transcription

1 Tutorials, M. Davis Research Note 18 February 2003 RTE Strategies for Revenue Cycle Management By 2005, care delivery organizations will have to adopt realtime enterprise strategies to survive the continued reimbursement shrinkage driven by prospective payment systems. Core Topic Healthcare: Critical Healthcare Applications for Business Efficiency and Improvement Key Issue How will the real-time enterprise be defined for healthcare organizations, and how will it be enabled by vendor applications and services? Strategic Planning Assumptions By 2007, Web-based billing and payment capabilities will reduce paper billing and mailing costs of CDOs by 50 percent (0.7 probability). Forty percent of CDOs that fail to implement key RTE transformations to revenue cycle management processes by 2006, will struggle to retain viability as businesses by year-end 2008 (0.7 probability). Healthcare provider organizations (providers) have struggled to achieve positive operating margins in an environment of declining service reimbursements driven by prospective payment systems, continued reductions in Medicare and Medicaid reimbursements, and pressures by healthcare payer organizations (payers) and employers to reduce medical service costs. All of these market drivers affect revenue cycle management (RCM). The real-time enterprise (RTE) principles of acquiring relevant information as soon as it is available and distributing it to the correct personnel resources and automated processes at the right time can be implemented to achieve better business and service decisions that improve RCM. The RTE is predicated on an event-driven viewpoint how long does it take to respond to, and ultimately resolve, a significant occurrence? In "The RTE 'Cyclones' Model Changes the View," Gartner provides a framework for analyzing RTE initiatives. The framework includes 10 major categories of end-to-end event-toresponse cycles "cyclones." We chose the cyclone metaphor to emphasize that achieving the RTE requires large-scale initiatives that are repeated on a cyclic basis to drive ever-more waste, inefficiency and poor customer service from organizations. Gartner's 10 cyclones are ranked into three levels of activity leadership, management and operation. RCM processes and transactions all apply to the operational cyclones. Adapting the cross-industry model to healthcare, Gartner places the RCM processes and transactions in the "order to cash" cyclone (that is, activities in sales, order handling, dispatch, delivery, billing and cash management in response to customer orders). Providers continue to struggle to manage the collection of fees for the services they provide; providers often receive much less Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 than 100 percent reimbursement for their services. In many cases, providers have negotiated discounted fees for services for some payer contracts, while collecting substantially less for Medicare and Medicaid services. In instances where precertification is required, or the patient is not eligible and must pay out of pocket, having this information up-front can have significant advantages to the care delivery organization (CDO). RCM has emerged as a methodology for evaluating reimbursement processes in a provider organization that optimizes the payment for services rendered. The RCM Status Quo In many CDOs, the focus on collecting fees for medical services is concentrated from the time the patient bill and insurance claim is created by the patient accounting system, until the time payment is received from the payer (see Figure 1). If the insurance claim does not include the appropriate billing information required by the payer, the claim can be rejected by the clearinghouse or by the payer (if it is sent directly from the provider) that is conducting the claim adjudication transaction. Or, the claim may be "pended" by the payer until the necessary insurance or clinical service information is collected. A major cause of rejected and pended claims stems from inaccurate and out-of-date patient coverage information; an issue that will be addressed in the claims attachment regulations of the U.S. Health Insurance Portability and Accountability Act (HIPAA). Providers often focus on correcting erroneous claims so that they can be processed by the payer, which requires additional rework associated with collection procedures based on phone calls and fax interactions with the payer. This rework negatively affects accounts receivable metrics and cash flow for the CDO. An RTE strategy based on linking RCM stakeholders via the Web can improve the RCM for CDOs. 18 February

3 Figure 1 The Effect of Self-Service Web Applications on RCM RCM Status Quo Rework Pended/Denied/Partially Paid Claims Failed Payer Edits Claim Claim Remittance Patient Accounting System Source: Gartner Research Claims Clearinghouse Payer Web and Web-based next-generation healthcare IT applications can help enable an RTE strategy. HIPAA-standardized transactions provide a foundation for establishing an RTE strategy for RCM. Payers moving toward HIPAA compliance are focused on creating Web-based services for eligibility, authorizations and referral transactions to provide more-timely information to providers. The Web also provides the capability to extend CDO applications for consumer self-service functions that affect RCM (registration, scheduling, and patient accounting) for direct patient/consumer interactions. This will improve the ability to collect accurate information further upstream in the RCM process. The best return on investment in RTE strategies for RCM will come from focusing on the front end of the patient management process. Patient management applications include enterprise master person index (EMPI), registration and scheduling solutions. The CDO's capability to collect and manage patient information relative to a pending service (rather than a delivered service) provides a proactive methodology for transforming the RCM process via RTE strategies (see Figure 2). The ability to have timely and accurate information on health insurance coverage through eligibility inquiries is a major operational enhancement for CDOs. 18 February

4 Figure 2 Applying RTE Principles to Upstream RCM Processes Provider RTE for RCM Payer Web Services Eligibility/Authorization/Referrals Patient Enterprise Scheduling Web Self-Service Functions Eligibility Authorizations Scheduling Preregistration Patient Medical Necessity Accounting System Claims/Remittance/Claims Status Claims Clearinghouse Payer Enterprise Registration Payer Web Services Eligibility/Authorization/Referrals Source: Gartner Research CDOs must begin to establish RTE strategies for the upstream processes that affect RCM. Key processes to evaluate are the enterprise scheduling and registration processes and environments. The key factors to consider are: Identifying potential service reimbursement issues when preregistering or scheduling the service. Knowing the eligibility of the patient for services or having a payer authorization before the patient is admitted for the service is crucial to improving RCM. The RTE strategy must provide a mechanism for the CDO's registration and scheduling personnel to determine whether a service is covered by the patient's payer in a more-timely fashion minutes rather than hours or days. CDOs have reported double-digit percentage reductions in claims denials when accurate patient information is collected at the front end of the service process. One approach could be to collect the information on patients needing services a day or two in advance via electronic data interchange (EDI) transactions and exchanging this information with payers on a batch basis to determine eligibility/authorization issues before a patient is admitted for medical procedures. A second method would be to create a real-time link with the payers' information systems, to determine eligibility/authorization as patients schedule or preregister for CDO services. Both methods can improve RCM and provide the necessary information to the CDO's personnel to identify uninsured services. CDOs must determine which payers can provide 18 February

5 real-time Web transactions for these services to establish an appropriate RCM improvement. The creation of a real-time link with payers is the optimum RTE strategy. Appropriate RTE strategies in this area ensure that the final bill is accurate and that the claim submitted to payers will, with a high probability, be processed more quickly and at the maximum reimbursement level. Conducting medical necessity checking at preregistration and scheduling events to reduce or eliminate failed advance beneficiary notice (ABN) procedures. A largely unpublished issue concerning CDO RCM is the amount of money that is written off because of failed ABN procedures (from hundreds of thousands to millions of dollars per month for some CDOs). If a medical procedure is conducted on a patient, and that procedure is not covered by the payer, then the CDO will absorb the cost of the procedure unless the patient acknowledges that he or she will be responsible for paying for that procedure. The patient must sign an ABN form to acknowledge responsibility for payment. An RTE strategy for improving ABN procedures is to implement rules engines for medical necessity checking in scheduling or registration systems to identify ABN requirements before the procedure is even scheduled drastically reducing or even eliminating failed ABN processes. Representative vendors providing medical necessity checking rules in their enterprise scheduling systems are Epic Systems, McKesson, Cerner, IDX Systems (for IDXtendR) and Unibased Systems Architecture. Applying RTE Principles to Downstream RCM Processes The CDO focus for downstream RCM processes will also be transformed with an RTE strategy. Key factors to consider in this transformation are: Improving patient payment processes by providing access to accurate service statements (bill presentment) and the ability to pay against those statements via the Web. Providing patients with information about what amounts of the service they are responsible for paying enables an improvement to the payment process. Clear identification of a patient's selfpay portion of the medical service has resulted in improved collections for this component of the medical bill at many CDOs by as much as 50 percent. The capability to "push" this information to the patients via the Web reduces the amount of manual effort the billing office personnel have to spend on working these accounts. The RCM effect is a reduction in account receivable days for the CDO because billing information and bill payment 18 February

6 services on the Web expedite the information flows between the stakeholders for transacting business. By 2007, Webbased billing and payment capabilities will reduce paper billing and mailing costs of CDOs by 50 percent (0.7 probability). Using claim status checking transactions to reduce account receivable days. CDOs using claims status checking transactions can determine which transactions are problematic and begin to resolve the reimbursement issues much sooner. This process could also be used to execute the billing of secondary insurance providers faster. Key Facts: CDOs must use RTE strategies to improve RCM methodologies. The Web is an enabling technology for executing RTE strategies for RCM improvements. RTE strategies must focus on upstream RCM processes for optimum improvement. These strategies include internal and external RTE components. Web links with RCM stakeholders (payers, patients and clearinghouses) that support integrated data flows between stakeholder applications provide the best ability for delivering the correct information to the right healthcare resources at the right time, to make the best business/service decisions. Acronym Key ABN Advance beneficiary notice CDO Care delivery organization EDI Electronic data interchange EMPI Enterprise master person index HIPAA U. S. Health Insurance Portability and Accountability Act RCM Revenue cycle management RTE Real-time enterprise Bottom Line: Forty percent of CDOs that fail to implement key RTE transformations to revenue cycle management processes by 2006, will struggle to retain viability as businesses by yearend 2008 (0.7 probability). CDOs must begin to embrace RTE strategies immediately. Compliance with the U.S. Health Insurance Portability and Accountability Act's (HIPAA's) electronic data interchange (EDI) transactions can be used as a foundation for this approach. RTE strategies based on Web technologies that extend applications that support revenue cycle management (RCM) will enable optimum RCM improvements. 18 February