IN AMERICA, HEALTH CARE COSTS

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1 Impacts & Innovations Cynthia Plonien Six Sigma for Revenue Retrieval EXECUTIVE SUMMARY Deficiencies in revenue retrieval due to failures in obtaining charges have contributed to a negative bottom line for numerous hospitals. Improving documentation practices through a Six Sigma process improvement initiative can minimize opportunities for errors through reviews and instill structure for compliance and consistency. Commitment to the Six Sigma principles with continuous monitoring of outcomes and constant communication of results to departments, management, and payers is a strong approach to reducing the financial impact of denials on an organization s revenues and expenses. Using Six Sigma tools can help improve the organization s financial performance not only for today, but also for health care s uncertain future. IN AMERICA, HEALTH CARE COSTS were over $2.5 trillion and were expected to climb to $3.1 trillion in 2012 (Arthur, 2011). According to Thomson Reuters (2009), the U.S. health care system wastes $700 billion annually on systematic inefficiencies credited to unnecessary care, fraud, errors, and administrative practices. Administrative inefficiencies, inclusive of the failure Cynthia Plonien to capture revenue, account for 17% of health care waste. The hospital industry clearly recognizes deficiencies in revenue retrieval specifically due to failures in obtaining charges. The deficiencies have contributed to a negative bottom line for numerous hospitals. In general, implementing hospital programs to enhance the capture of charges requires the addition of labor through documentation specialists and auditors to make amendments and support billing processes. Such programs improve capture of revenue. However, they attach further cost of salary and benefits to internal personnel or for contracted services. Process Inefficiency - Revenue Retrieval The organization in this study is a 127-bed rural hospital experiencing issues with unbilled charges to Medicare resulting in lost revenue for the hospital. To CYNTHIA PLONIEN, DNP, RN, CENP, is Clinical Assistant Professor, University of Texas at Arlington, TX. The Sig Sigma Project was completed in conjunction with doctoral work at Texas Christian University. capture this revenue, Six Sigma principles were implemented to support process changes. Monthly, the central billing office sends notice that charges for Medicare patients placed in observation status cannot be billed without additional documentation. The hospital s accounting department initiates intensive chart review and appeals are made to Medicare for reimbursement. The identified defect in the system is related to nursing documentation. The clinical care nurses provide to observation patients equates to care provided to patients admitted with an inpatient status. However, documentation for reimbursement varies between the patients in observation status and those in inpatient status. Medicare pays a bundled rate of reimbursement for admissions classified as inpatients and pays procedure rates for patients classified as observation patients. Nurses consistently fail to document additional specifics Medicare requires for reimbursement for observation patients. Education for nursing staff related to reimbursement requirements occurs annually. Education has proven an inefficient means of problem resolution due to the low volume of observation patients and general turnover of staff. A clear opportunity for improvement exists in the capture of revenue through appropriate billing of observation services. Financial consequences of the failure to document specific details extend beyond anticipated revenue. The process of rebilling requires meticulous attention with numerous actions to the claim by the hospital, the central billing office, and Medicare. This painstaking process is costly in terms of money and time. Six Sigma Six Sigma is a process improvement initiative designed by leading manufacturing companies and recently adopted by health care organizations to achieve a competitive advantage (Antony, 2006). As a management philosophy, it focuses on eliminating waste, mistakes, and rework. Six Sigma does not try to manage a problem; it seeks to eliminate it (Chowdhury, 2001). This data-driven approach resolves errors of process. The basic philosophy is the idea that removing variability from upstream operations eliminates defects within the throughput and will yield defect-free outputs and best outcomes. The Six Sigma quality level is characterized by 3.4 or fewer defects per million opportunities (Arthur, 2011). The process involves identifying, measuring, and controlling variables that cause process or product variation. Any Six Sigma project has five basic phases. The term DMAIC refers to the following steps: 90 NURSING ECONOMIC$/March-April 2013/Vol. 31/. 2

2 define, measure, analyze, improve, and control (Chowdhury, 2001). The DMAIC framework encompasses a wide variety of quantitative tools for multiple stages. Tool selection depends on many factors, including project scope and timing. Although the use of this process in health care is in its infancy, research shows the use of Six Sigma clearly produces benefits in terms of error reduction, improved patient care, decreased cost, and enhanced revenue (Antony, Antony, & Tanner, 2011). Six Sigma Process Define. The first step in the problem-solving process is defining the problem, product, or service line targeted for improvement. In the project hospital, the problem appears to be process inadequacy. Revenue is lost due to inaccurate billing resulting from defective documentation by nursing staff assigned to the care of patients admitted with an observation status. The purpose of this project is to increase efficiency of the billing system by eliminating documentation errors at the point of service. For the current project, tools beneficial in this phase are Value Stream Mapping and the Process Flow Chart (Trusko, Pexton, Harrington, & Gupta, 2007). Measure. The measurement step defines how frequently defects occur. In the problem presented, determining the incidence of lost charges is the critical measurement for evaluation. Other measures need to be developed and monitored as part of the Six Sigma DMAIC process. Tracking appeal rates and their success is vital to identifying the effectiveness of the back-end resource-intensive audits (Waymack, 2004). Measuring all allowable observation charges that are not captured for billing should lead to the creation of a comprehensive database, providing a wealth of information that can be used for analysis, comparison, and performance improvement. Inclusi - ve to data for measurement is establishment of internal and external benchmarks for acceptable performance in the prevention of lost charges. The following concepts and tools will be used to increase understanding of the problem: descriptive statistics as a historical summary and identification of variables for measuring performance (Trusko et al., 2007). Analyze. The analyze phase begins the convergence of possibilities toward a root cause analysis. The phase focuses on key variables so problems can be fixed by the organization. What if? scenarios emerge from this process (Trusko et al., 2007). Cause and effect analysis, regression analysis, and failure modes and effects analysis are key analysis tools in this phase (Trusko et al., 2007). Improve. Performance improvement activities start with this step. The improve phase has been designed to identify actions remedying the root cause of the inefficiency (Trusco et al., 2007). Without the focus and analysis that precedes this step, there is not a way to ensure efforts applied to the most critical and cost-effective areas (Waymack, 2004). Various approaches could reduce the incidence of lost charges. The current method of capturing lost charges is through random audits by a central billing office known as back-end scrubbing. The hospital accountant is notified of a charge opportunity. The accountant researches and appeals appropriate claims. Some hospitals hire on-site documentation specialists to do concurrent reviews of all records to secure charges. The interest of this author is to determine whether there is an opportunity to resolve the issue up-front by initiating charge capture at the point of admission with documentation prompts for allowable charges. Testing the hypothesis occurs during this phase of Six Sigma (Trusko et al., 2007). Control. The key to success of a Six Sigma project is sustaining improvements and ensuring new problems do not arise. The control phase incorporates the validation of results and the refinement of the solution (Trusko et al., 2007). Effective documentation identifying purpose, needs, critical checkpoints, target conditions, and handling of nonconformities all contribute to achieving consistency of practice. Documentation practices allow us to minimize opportunities for errors through reviews and instill structure for compliance and consistency (Trusko et al., 2007). Control involves a method to evaluate performance and initiate a monitoring system to reduce future errors (Woodard, 2005). Oversight responsiveness to variations and the adaption of processes requires decision support systems to facilitate knowledge management and the acquisition and dissemination of information. With regard to attaining and maintaining control, the availability of needed information technology may pose the greatest challenge in controlling ongoing performance (Gowen, Stock, & McFadden, 2008). Tools and concepts required for this phase include control charts, documentation, training, communication, and business review (Trusko et al., 2007). Rural Hospital Project The DMAIC consists of two parts. Part I, understanding the problem, consists of define, measure, and analyze (Trusko et al., 2007). The objective is to recognize the significance of the problem, learn the process, and establish a baseline and a causative relationship between the problem symptoms and the process variables. Part II, solving the problem, consists of improving and controlling (Trusko et al., 2007). The hospital is actively engaged in the first part of the process. A small team has been coordinated through the chief nurse consisting of representatives from nursing, medical management, finance, and a facilitator of Six Sigma methodology. The problem has been defined using the Six Sigma tools of Value Stream Mapping and Process Flow (see Figures 1 & 2). Current work revolves around the measurement NURSING ECONOMIC$/March-April 2013/Vol. 31/. 2 91

3 Figure 1. Observation Revenue Process Improvement: Value Stream Map Goal: To capture all of the revenue on patients who are discharged post observation in hospital. Observation status is missed. Patient dis charged from observation without proper documentation. Admissions Patient is admitted via ED or patient registration as a direct admit and treated. H: 0.7 hours L: 0.1 hours Nursing Unit Patient is sent to the 2nd or 3rd floor for observation. H: 0.3 hours L: 0.1 hours Case Management Case manager reviews chart for IP/OP criteria. Patient status change is determined post observation as inpatient or discharge. H: 1 hour L: 0.5 hour HIM Codes the medical record and analyzes for errors and omissions. H: 116 hours H: 0.5 hours H: 720 hours L: 2 hours L: 2 hours L: 0.3 hours Corrects mistakes of data analyst. Corrects mistakes of staff Payer Charges are sent to payer and hospital is reimbursed. H: 96 hours Billing Office Billing reviews accounts and removes charges that are not verifiable or reimburseable. H: 48 hours Data Analyst Reviews patients to determine if all charges are captured on patient post discharge. Nurse Auditors Audits and/or seeks corrections for errors found by HIM. H: 960 hours H: 108 hours L: 480 hours L: 8 hours phase, adding representatives of the central billing office from the parent corporation. The team is intent on eliminating waste, improving efficiency, and adding revenue that is not currently received. Conclusion Commitment to the Six Sigma principles with continuous monitoring of outcomes and constant communication of results to departments, management, and payers is a strong approach to reducing the financial impact of denials on an organization s revenues and expenses. Using Six Sigma tools like DMAIC will enable the improvement of the organization s financial performance not only for today, but also for health care s uncertain future. $ continued on page NURSING ECONOMIC$/March-April 2013/Vol. 31/. 2

4 Figure 2. Observation Revenue Process Improvement: Current Process Flowchart Goal: To capture all of the revenue of patients who are discharged post observation in hospital. Admissions Patient is admitted to ED, direct admit, or transferred from surgery. Patient is worked up and assessed for OBS status. Did patient meet OBS criteria? Patient is changed to inpatient status, discharged from the hospital, or diverted to other facility. Nursing Patient is worked up, monitored, and tested before seen by case management. Patient s status is changed to OBS in ADT/Invision and transferred to appropriate floor. Nurse auditors review the chart to determine what needs completion and with whom (physicians, finance, case management, etc.). Case Manager Is the patient a cardiology patient and is it Friday? Hospital staff determines if patient should be diverted to another facility or stay as OBS patient until Monday. Case manager reviews OBS patient with Milliman to determine if patient meets criteria (done every morning, 7 days a week). Patient diverted? Did patient meet OBS criteria? Patient stays in OBS status and reviewed again by case manager (maximum stay has been 116 hours) Finance/HIM Hospital reimbursement is completed. Chart goes to cash business office for billing to payer. Completed chart goes to HIM for coding. Is chart completed and ready for reimbursement of OBS status charges? OBS = observation NURSING ECONOMIC$/March-April 2013/Vol. 31/. 2 93

5 Impacts and Innovations continued from page 92 REFERENCES Antony, J. (2006). Six sigma for service processes. Business Process Management Journal, 12(2), Antony, J., Antony, F., & Tanner, T., (2011). Six Sigma in healthcare industry: Some common barriers, challenges and critical success factors. Retrieved from Six%20Sigma%20in%20Healthcare%20Sector%20-%20Public % 20Service%20Review%20Jou..pdf Arthur, J. (2011). Lean Six Sigma for hospitals. New York, NY: McGraw Hill. Chowdhury, S. (2001). The power of Six Sigma. Chicago, IL: Dearborn Trade. Gowen, C., Stock, C., & McFadden, K. (2008). Simultaneous implementation of Six Sigma and knowledge management in hospitals. International Journal of Production Research, 46(23), Thomson Reuters. (2009). Waste in the U.S. healthcare system pegged at $700 billion in report from Thomson Reuters. Retrieved from Oct-2009+PRN Trusko, B., Pexton, C., Harrington, H., & Gupta, P. (2007). Improving healthcare quality and cost with Six Sigma. Upper Saddle River, NJ: FT Press. Waymack, P. (2004). Light at the end of the tunnel for denials management. Healthcare Financial Management, 58(8), Woodward, T. (2005). Addressing variation in hospital quality: Is Sig Sigma the answer? Journal of Healthcare Management/ American College of Healthcare Executives, 50(4), NURSING ECONOMIC$/March-April 2013/Vol. 31/. 2