In addition, the hospital paid short
shrift to the back-end process of
data analytics, which created a
threefold problem that exacerbated
the delay in detection. First, it
allowed the contractor to be the
keeper of the KPIs. Second, the
hospital did not formulate those
KPIs to include measurements that
would have revealed the contractor’s
difficulties. Third, the hospital was not
scrutinizing the data that it did have.
Several areas can be monitored to
gauge the health of a revenue cycle.
At the claim level, there are six dollar
amounts that are vital to track: the
amount approved, the amount paid,
the amount disallowed, the amount
of the deductible, the amount subject
to co-insurance, and the amount of
co-payment. Also at the claim level,
the number of days elapsed with no
response should be updated daily. In
addition, each claim record should list
the dates and reasons for all denials.
At a summary level, there are two
percentages to watch. The first
is collections as a percentage of
reimbursement allowed per contract
rates, which may be termed as
either the net collection rate or
the adjusted collection rate. “Net”
and “adjusted” denote that the
denominator is reduced by write-offs
and adjustments. By taking those
into account, the net collection rate
is a true measure of the efficiency
of the revenue cycle. The gross
collection rate, a simple division of
collections by amount charged, has
its uses, but it masks the performance
of the revenue cycle because
the write-offs and adjustments
are not related to efficiency.
A second important summary level
percentage to track, the first pass
resolution rate, is a measure of
claims paid on the first submission.
A closely related measurement,
the first pass claim acceptance rate
(FPCAR), is less useful because it does
not take into account the amount of
collection realized. The FPCAR is a
statistic that applies to contractors
that clear and submit claims.
Also at the summary level is a
calculation that is important for any
business, not just healthcare: days
sales outstanding, which measures
how quickly the revenue cycle is
managing to get claims paid. Taken
together, days sales outstanding
and the net collection rate are the
beginning-to-end measurements of
the efficiency of the revenue cycle.
While on the topic of summary level
reporting, it is advisable to report A/R
net of credit balance accounts. The
net figure better approximates the
realizable A/R. Facilities that do not do
this contend that the credit balance
accounts reflect unsettled issues and
their dollar levels are in flux. However,
credit balance accounts should be
adjusted often to minimize distortion.
Much analysis must be done
periodically after a month closes.
However, some facilities leak revenue
because they fall into the trap of
looking at events only after they are
collected at the end of the month close.
Some events should trigger quick,
high-priority follow-up. These include
payer actions such as downcoding
and underpayment, as well as internal
actions such as adjustments, refunds,
and write-offs. To enable a quick
response, HIM software must be
configured to surface occurrences
of these events immediately.
Managing a Cutover
The rural community hospital
mentioned at the beginning of this
article unfortunately illustrated
a number of oversights in its
implementation of the new revenue
cycle IT system. Legacy system
charges lay dormant without a
way to continue servicing them.
Physicians were not trained in time
for the cutover. Incomplete bills and
denials piled up to daunting levels.
What components of planning
help to prevent these outcomes?
At the time of a cutover, there are two
distinct life cycles to be aware of. The
first is the life cycle of new charges as
they move from patient scheduling
through collection. The second is the
life cycle of legacy charges as they
move from the legacy system to the
new system. The second life cycle
is often not adequately addressed.
The solution is to map exactly how
a legacy charge, in any stage, will be
incorporated into the new system. The
alternative is to ensure that, over and
above the time and attention demands
of the new system implementation,
adequate time and resources are
dedicated to seeing the legacy charges
brought to final dispositions.
The hospital mentioned earlier that
experienced the implementation
problems relied on a single doctor
to represent all physicians and their
various tasks. He saw his role as
confined to attending meetings
and commenting on readouts from
other team members. Successful
implementations always require the
inclusion of large, representative
swaths of clinical personnel on
the implementation teams. Their
roles are to serve as advocates for
the education that is needed and
as being responsible for ensuring
the readiness of their colleagues.
Another problem was that the hospital
chose a train-the-trainer method
of education over the more costly
options of having either the vendor or
a consulting company provide training
and then failed to follow through on
executing its chosen method properly.
The train-the-trainer model can work
well, but it depends on attaining a
critical mass of trainers in the first wave
of training to sustain the roll-out. This
hospital did not achieve that critical
mass. After the cutover date, it had
too few trained personnel doling out
instruction in piecemeal fashion to staff
that persisted in being undertrained.
Waves of education must be timed
to when the recipients will get their
hands on the system. Training
people too early results in time lost
to refreshing their knowledge and
frustration from groping through
manuals or notes or frantically trying
to buttonhole colleagues for answers.
Education must not be confined
only to data entry. For example,
clinical personnel need lessons on
finance and what documentation
is needed to drop a clean bill.
At cutover, the hospital experienced
a wave of errors, denied claims,
other issues, and questions—all of
which could be expected, but were
not planned for. The response was
to apply patches to the most visible
failures at any given moment.
Errors and denied claims were not
analyzed systematically for root
causes. Issues were not prioritized.
There is no way around performing
root cause analysis concurrently
with dropping bills and resubmitting