Abbeville (S.C.) Area Medical Center recently underwent a revenue cycle review that identified inefficiencies that, if addressed, would increase revenues by $200,000 a year, a big improvement for this 25-bed critical access hospital.
Tim Wren, CFO of the hospital, says drops in elective procedure volume spurred the hospital to examine the efficiency of its revenue cycle. "People are holding back on elective surgeries and that was a great source of income," he says. Volume fell in 2009 and has fallen 5 percent more this year.
Although Abbeville is a county-owned hospital, it is not supported by tax dollars and has to balance its budget. In 2009, Abbeville laid off 13.5 FTEs, an 8 percent reduction out of 280 employees. Despite the continued fall in volume, "we've been having a better year than last year," he says. This year, the hospital has hired back three people and no more layoffs are expected this year.
The intensive analysis, which was performed by Quorum Health Resources, helped Abbeville identify key inefficiencies in its revenue cycle. The learnings it provides can be applied to other, larger hospitals because revenue cycle does not change much with size, says Mr. Wren. Here, are six key inefficiencies identified by the analysis.
Under-coding in the ED. The review found the hospital's emergency department was not coding claims high enough for services. "We were performing the service and not billing the right level of four levels," Mr. Wren says. "We were meeting all criteria for level 3 and billing at level 2. We'd always done it that way and no one had really questioned it before." Fixing this problem alone is expected to increase revenues for the hospital by $100,000 a year, or about half of the total revenue increases expected from the review.
Not collecting at point of service. As more people move to high-deductible plans, collecting from the patient at the point of service has become more important. As at many hospitals, these changes snuck up on Abbeville and, as a result, "We didn't do well in this area," Mr. Wren says. "If you don't collect it at the point of service, you have to wait 60-90 days for the payment to be processed."
Collecting co-payments will encounter patient resistance, Mr. Wren says. Patients are going to say, "Why is the hospital going to ask me for the money when I have insurance?" The hospital is considering an ad campaign. "We really need to get the word out that we are going to be asking for payment," Mr. Wren says.
Taking too long to code. The study found it took an average of 8.19 days after discharge to code the bill, compared with the benchmark of four days. Mr. Wren says coders will have to be held accountable to a higher level of productivity. "We've got good people," he says. "We want to get them up to a higher level of efficiency and we believe they can do it."
Taking too long to send out bills. The average time it took to send out bills after discharge was three times the best practice. There was a wide variation among types of payors in the amount of time it took to get the bills out. For example, it took an average of 20.13 days to send out a Blue Cross bill, the best rate, compared with 13.31 days to send out a Medicare bill, and 23.14 days to send out a self-pay bill. The hospital is still investigating why that is.
Gaps in case management. The hospital's one case manager works five days a week and when patients are admitted on the weekend, the physician on duty has been putting them on observation. "The patient is in a holding pattern," Mr. Wren says. "Nothing gets started until Monday." No labs, x-rays, respiratory and other services are performed, even though those services are available on weekends.
To address the gap, the hospital plans to hire a part-time case manager for weekends and other times the case manager is away from the hospital. This 0.4 FTE job should pay for itself and would be easy to fill by a case manager moonlighting from one of the larger hospitals in the area. The hospital also plans to educate its physicians on the importance of placing patients appropriately and only using observation status when it is truly the best course of action for the patient. "Physicians need to understand the financial end of the process," Mr. Wren says.
Too little charity care. The study found low-income patients who should have been identified as charity care recipients were being billed and ending up in the hospital's bad debt rate.
High days in accounts receivable. While the hospital has a good score on the average number of days a bill stays in accounts receivable, "we could probably do even better," Mr. Wren acknowledges. "We might be able to pick up four or five more days at the beginning of the process, by getting our coders to improve their processes and procedures."
Looking forward
It will take a year to implement all the recommended changes, but once they are in place, the extra revenue realized from those changes will help the hospital's bottom line.
"I'm cautiously optimistic about the future," Mr. Wren says. In the past couple of years the hospital has hired three new physicians, a general surgeon and two internists, who can bring in volume to counteract lower demand for services.
Tim Wren, CFO of the hospital, says drops in elective procedure volume spurred the hospital to examine the efficiency of its revenue cycle. "People are holding back on elective surgeries and that was a great source of income," he says. Volume fell in 2009 and has fallen 5 percent more this year.
Although Abbeville is a county-owned hospital, it is not supported by tax dollars and has to balance its budget. In 2009, Abbeville laid off 13.5 FTEs, an 8 percent reduction out of 280 employees. Despite the continued fall in volume, "we've been having a better year than last year," he says. This year, the hospital has hired back three people and no more layoffs are expected this year.
The intensive analysis, which was performed by Quorum Health Resources, helped Abbeville identify key inefficiencies in its revenue cycle. The learnings it provides can be applied to other, larger hospitals because revenue cycle does not change much with size, says Mr. Wren. Here, are six key inefficiencies identified by the analysis.
Under-coding in the ED. The review found the hospital's emergency department was not coding claims high enough for services. "We were performing the service and not billing the right level of four levels," Mr. Wren says. "We were meeting all criteria for level 3 and billing at level 2. We'd always done it that way and no one had really questioned it before." Fixing this problem alone is expected to increase revenues for the hospital by $100,000 a year, or about half of the total revenue increases expected from the review.
Not collecting at point of service. As more people move to high-deductible plans, collecting from the patient at the point of service has become more important. As at many hospitals, these changes snuck up on Abbeville and, as a result, "We didn't do well in this area," Mr. Wren says. "If you don't collect it at the point of service, you have to wait 60-90 days for the payment to be processed."
Collecting co-payments will encounter patient resistance, Mr. Wren says. Patients are going to say, "Why is the hospital going to ask me for the money when I have insurance?" The hospital is considering an ad campaign. "We really need to get the word out that we are going to be asking for payment," Mr. Wren says.
Taking too long to code. The study found it took an average of 8.19 days after discharge to code the bill, compared with the benchmark of four days. Mr. Wren says coders will have to be held accountable to a higher level of productivity. "We've got good people," he says. "We want to get them up to a higher level of efficiency and we believe they can do it."
Taking too long to send out bills. The average time it took to send out bills after discharge was three times the best practice. There was a wide variation among types of payors in the amount of time it took to get the bills out. For example, it took an average of 20.13 days to send out a Blue Cross bill, the best rate, compared with 13.31 days to send out a Medicare bill, and 23.14 days to send out a self-pay bill. The hospital is still investigating why that is.
Gaps in case management. The hospital's one case manager works five days a week and when patients are admitted on the weekend, the physician on duty has been putting them on observation. "The patient is in a holding pattern," Mr. Wren says. "Nothing gets started until Monday." No labs, x-rays, respiratory and other services are performed, even though those services are available on weekends.
To address the gap, the hospital plans to hire a part-time case manager for weekends and other times the case manager is away from the hospital. This 0.4 FTE job should pay for itself and would be easy to fill by a case manager moonlighting from one of the larger hospitals in the area. The hospital also plans to educate its physicians on the importance of placing patients appropriately and only using observation status when it is truly the best course of action for the patient. "Physicians need to understand the financial end of the process," Mr. Wren says.
Too little charity care. The study found low-income patients who should have been identified as charity care recipients were being billed and ending up in the hospital's bad debt rate.
High days in accounts receivable. While the hospital has a good score on the average number of days a bill stays in accounts receivable, "we could probably do even better," Mr. Wren acknowledges. "We might be able to pick up four or five more days at the beginning of the process, by getting our coders to improve their processes and procedures."
Looking forward
It will take a year to implement all the recommended changes, but once they are in place, the extra revenue realized from those changes will help the hospital's bottom line.
"I'm cautiously optimistic about the future," Mr. Wren says. In the past couple of years the hospital has hired three new physicians, a general surgeon and two internists, who can bring in volume to counteract lower demand for services.