This article was written by Jean Hippert, senior vice president and managing director of PNC Healthcare.
Payment collection has become a bit of a gamble today for hospitals and healthcare providers across the United States with high risks and large amounts of cash at stake. The winners will be those healthcare providers that maneuver successfully through the massive amounts of data, lack of standardized denial codes, diverse payer requirements and a mix of both paper and electronic patient accounting systems to ensure that no money is left on the table uncollected. But the odds against full payment just got tougher with the government-wide spending cuts known as the sequester and the across-the-board reduction in Medicare reimbursements.
Healthcare financial managers are already squeezing every penny from accounts receivable and accounts payable systems. To the lay person, a 2 percent reduction may not sound too painful. To already cash-strapped healthcare providers, however, the costs add up. The Office of Management and Budget estimates the aggregate impact of the Medicare portion of the sequester to be nearly $11.4 billion in fiscal year 2013. That's just one of the effects.
Payments arrive at hospital back offices as one large dollar amount to reimburse for services rendered to a multitude of patients cared for at that hospital. On a good day, reconciling patient accounts to the single payment made by one insurance company is complex. With the Medicare reduction, the task is even more difficult. Some insurance companies are footnoting the reduction, while others are not. Some payers are using different codes, while other payments arrive with a lower dollar amount and no explanation. Additional resources — human and financial — needed for adjudication are simply not an option.
PNC is offering the following tips to healthcare CFOs and other financial executives.
• Digitize the revenue cycle. The healthcare industry has been taking the lead from financial services in abandoning paper-based processes for electronic alternatives, but much work remains. Technology converts paper invoices and payments into an image and lifts information (through optical character recognition technology) from that image to populate patient accounting systems. When payments match the billing, the process is automated. Only exception items require human intervention to resolve, freeing up resources to address new exceptions due to the Medicare reduction.
• Use business intelligence. Hospital administrators are scrutinizing medical services, closing or terminating those viewed as marginal. Big data analytics and business intelligence helps financial executives to make fully informed decisions in determining demand and operational efficiencies today as well as for planning for the future.
• Update business rules. Work closely with your financial service provider to evaluate your current receivables to determine patterns in how the payers are accounting for reductions in their payments. Based on that research, adjustments can be made to a hospital's technology platform and business rules. While this solution will not eliminate exception items, it will at least put a dent in the stack of those requiring adjudication.
• Utilization of standardized denial reason codes. The lack of standardization in how payers are communicating lower payments as a result of the Medicare reduction and the impact on the accounts receivable department at hospitals and other healthcare providers makes a strong argument for standardized denial codes in general within the healthcare industry. Efforts to create standardized codes today would be prudent with more changes in healthcare reimbursement on the horizon with the Patient Protection and Affordable Care Act.
Jean Hippert is senior vice president and managing director of PNC Healthcare, a part of The PNC Financial Services Group, Inc. Ms. Hippert may be contacted at Jean.Hippert@pnc.com or 410-561-9367.
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