How many directors of patient financial services (PFS) have told their organizations that they have enough cash? Cash makes everyone happy--and those who manage receivables and patient financial services for a living learn the lesson fast.
While cash flow has been a constant, nagging issue for PFS departments for many years, financial managers at today's healthcare organizations (HCOs) are increasingly attuned to the importance of comprehensive revenue cycle management. Cash flow obstacles and reimbursement erosion by payer groups have resulted in the full emergence of the processes behind managing cash flow. The principle of supply and demand has escalated interest in revenue cycle management to all-time highs. Demand for cash reserves, improved bond ratings, continual capital investment and the need for inflation management have required focused attention, not just on maximizing growth, but also on optimizing opportunities for impacting net reimbursement.
The supply side of cash management has come of age in healthcare. Once solely the domain of PFS and the finance department, the business aspects of healthcare now encompass multiple departments and levels of management across an enterprise. For Rex Healthcare, the emergence of revenue cycle management teams resulted in the coordination of multiple efforts, including the selection of Web-based technology, to generate increased cash flow and improve financial performance.
Multiple Source Problems
Established in 1894, Rex Healthcare is a 394-bed acute care, community hospital in Raleigh, N.C., and a member of the UNC Health Care Family. Rex's 3,000 employees provide a full spectrum of healthcare to Wake County and the surrounding area.
In the new millennium, Rex faced momentous financial problems due to system conversions, reliance on outdated processes and staff instability. Accounts receivable (A/R) days were 113 net, and within PF8, cash-posting backlogs were up to 8 percent of billed A/R. Contractual adjustments were over budget by up to 5 percent. Credit balances, due to over-contractualization, represented nearly 10 percent of billed A/R.
Inefficient communication, along with priority and process disconnects, allowed millions of dollars a year to hemorrhage from numerous areas, including denied claims, underpayments and contractual/ process errors. More than 50 PFS employees relied on a paper-intensive system to process more than 170,000 claims and 300,000 explanations of benefits each year. The PFS call center was overwhelmed with up to 1,000 billing-related calls each day.
The problems emanated from various points in the organization. PFS had experienced four directors and five managers in three years. The enterprise's best-of-breed system design led to 140 different applications in use across the HCO. Individual departments generated massive amounts of data, but integrating and converting the data into meaningful information was an arduous task. Rejected and denied claims were not being efficiently worked or accurately reported.
Use of e-mails, Excel spreadsheets and Access database tools became the common integration and communication method for too many staff, but this "virtual integration" approach was also frustrating, labor-intensive and error-prone.
During this time, Rex also created a denials management process within the confines of the existing financial system. However, it generated too much paper, lacked consistency and created rework. Also, it lacked payer-inclusive rules and the critical operational reports necessary to make solid management decisions.
Rex Healthcare needed to improve its financial performance. Hand-in-hand with that objective, the HCO wanted to prepare for future expansion. To do so, it had to reduce its dependence on paper, improve enterprise communications and stop the cash drain from denied claims, underpayments and poor processes. All internal processes--communications, generation of reports, interdepartmental data sharing--had to be optimized for efficiency.
Investigating the Internet
Before searching for a technology solution, enterprise managers and departments embarked on an internal analysis of the organization, identifying key steps ill the revenue cycle, quantifying the cash holes and flowcharting a number of internal processes for redesign. Interdepartmental teams then tackled the delineation of internal objectives in areas such as compliance, ABN (advance beneficiary notice), revenue cycle, denial management, financial procedures and supply chain.
Denial management was a key PFS performance area and a priority for improvement. PFS also initiated a proactive internal denial strategy while conducting a search for alternative solutions. Although enterprise managers evaluated stand-alone, in-house document imaging and revenue management systems, they ultimately decided that in-house products were too costly and that Rex lacked the necessary resources to develop and support an in-house solution.
During regularly reserved time slots to learn about new products from vendors, the PFS team was introduced to Web-based services for healthcare business offices. Team members conducted a cost-benefit analysis that demonstrated that Internet applications could benefit Rex by eliminating the high-end cash outlay, while enabling operations to rapidly achieve positive financial and operational results.
In fact, the analysis identified a $250,000-per-month opportunity, along with immediately tangible benefits associated with imaging and automated workflow. As a result, Rex selected i.suite from Third Millennium Healthcare Services Inc. of Decatur, Ga. The products included Web-based denied claims management, document imaging and electronic remittance advice management systems. The systems overlay Rex's existing patient financial system.
IT at Work
Implementation was complete within 90 days, and Third Millennium's integration methodology required about 80 direct hours of Rex resources. Third Millennium trained the Rex staff on-site. The patient accounting users were trained in about four hours.
Third Millennium maintains the servers and software, reducing Rex's equipment cost to two scanners and several large monitors and upgraded monitors for staff using the workflow product. Fees are based on the number of subscriptions and transactions. Utilizing existing Internet access allows campuswide access to information without hard-wiring the facility.
Rex uses the information technology to convert paper explanations of benefits, correspondence, insurance cards and waivers into electronic document images and index all of the documents to the patient level. Now, PFS and other departments can rapidly access the documents on their desktops.
Third Millennium receives electronic remittance advisements via the transfer technology. The files are parsed into single electronic payment records and indexed to the patient level. At the time of indexing, table-generated rules create automated work lists via posting processes or electronic feeds.
Denial management is seamlessly integrated through the product's incorporation of Rex business rules with the electronic and manual images. This process automatically creates critical workflow and simultaneous issue-tracking. The system then automatically routes claims to predesignated staff or departments for follow-up and completion. All staff queued within the work lists have access to work lists and the associated documents on their desktops, sorted in priority order. The automated workflow eliminates numerous manual reports, e-mails and spreadsheets.
For Rex users, a key feature of the Internet system's denial management functionality is efficient access to information. Third Millennium produces numerous detailed reports on the status of rejected and denied claims. Staff reliance on availability of other resources to run reports on denials has been virtually eliminated. Rex managers can access and extract data within seconds of the request. Preset report parameters allow access to claim issues by payer, which are uniformly categorized and quantifiable.
The extracted files are downloaded to Excel, where root cause and pattern analysis occurs by standardized criteria, including payer, physician, location of service and responsible party. Access to the information needed to pinpoint problem areas and direct staff has been greatly enhanced. Tracking and monitoring problem claims, medical record requests, time-dated correspondence and other critical issues affecting the revenue cycle are now standardized.
Calculating the Benefit
