Health Tech Revenue Cycle Principles

Revenue CyCle PRinCiPles seRies
Part One

Getting Back to Basics
Derek Morkel, President & CEO

Revenue Cycle Principles Series
Part One: Getting Back to Basics

introduction:

The billing and collecting of health care claims, aka, “the Revenue Cycle” is an extremely
complicated process. The complexity only seems to get higher as we deal with additional layers
of regulation related to reimbursement and governmental requirements. Everyone involved in
Revenue Cycle activities is continually asked to do more with less.

It is for this reason that we thought the time was right to start a series that focuses on the
fundamentals/principles of billing and collecting — the basics. It is clear that in every highly
The basics count.
technical and complicated business process, the basic questions are often forgotten on a day-
They count each to-day basis; yet it is always adherence to the fundamentals that dictates whether or not an
organization is truly successful.
and every day
Consider this: it is interesting to note that even the most accomplished professional sports stars
and whether it start every single year relearning the basics. NBA teams start training camps by doing catching,
passing and dribbling skills — sometimes for weeks.
is once a day or
The basics count — they count each and every day and whether it is once a day or once a week,
once a week, it
it is important that they are in focus.
is important that
In this series, we don’t aim to try and teach any technical skills — rather we are trying to answer
they are in focus. more basic questions related to:

• Why is this so important?
• What should we be focusing on and how often?
• What should our time allocation to the basics be?

Human behavior and execution of the basics — understanding and excelling at these two things
is the key to sustained success. The following quote from the book, Execution: The Discipline of
Getting Things Done, by Larry Bossidy and Ram Charan captures the essence of this:

“Follow-through is the cornerstone of execution, and every leader who’s good at executing follows
through religiously. Following through ensures that people are doing the things they committed
to do, according to an agreed timetable. It exposes any lack of discipline and connection between
ideas and actions, and forces the specificity that is essential to synchronize the moving parts of an
organization. If people can’t execute the plan because of changed circumstances, follow-through
ensures they deal swiftly and creatively with the new conditions...”

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w w w. h t- l l c . c o m

Question 1: Why is this so important?

This would seem to be the easiest question of them all to answer, but it is clear that many of us
forget this — either periodically or permanently — revenue cycle is about collecting CAsH.

Every single hospital, physician practice, nursing home, etc. all depend on cash on a daily basis.
Net Revenue is almost always the single largest line item on the income statement and Accounts
Receivable is generally the largest and most liquid asset that any health care organization has on
the balance sheet.

Our work is to collect it in the most efficient way possible.

As complicated as it all is, our work can be segmented in two focus areas on a daily basis:
If we focus on
1. Collect more cash
and execute the 2. Collect cash more efficiently

basics each and It sounds very simplistic, but if all of our daily activities were structured around either of these
two areas, I would bet that our results would improve dramatically.
every day, we will
Perhaps an easier way to put this is that all of our daily activities (no matter what the job title)
be more likely to
should answer one of the following two questions:
succeed.
• Does it improve cash collections
• Is it improving a process (fixing a broken one permanently)?

1. Collect More Cash

There are many components of collecting more cash, but it can really be broken down into three
main areas of focus — going back to the basics again:

• Clean claims
• Bill efficiently
• Collector productivity

The question for you here is how much attention is paid to these specific areas? Are they
measured daily, weekly? Do you know if you are doing better this week than last week? What are
the strategies to improve these areas? If you are the manager, how much attention do you pay to
the execution of these areas on a daily basis?

I think if we can all agree that if we excelled at producing clean claims, billing them efficiently
and having a productive collections process that we would collect more cash. The question you
have to ask yourself is how is your teams’ resources (time) allocated to achieve these goals?

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2. Collect cash more efficiently

Interestingly enough, collecting cash more efficiently is very closely tied to the same areas
of collecting more cash. The questions related to each area are slightly different, but the
fundamental issues remain the same — how much attention is paid to these areas?

Clean claims
• Do all departments in your facility reconcile charges daily?
• Do you use charge capture software (clean vs. complete claims)?
• Do you use CDM software?

Bill efficiently
• What % claims are billed electronically?
• Have you verified that all EDI payors are being billed electronically?
• Do you use automated secondary billing software?

Collector productivity
• Does your system track this?
• Is the process segmented? Best collector matched to toughest payor?

The answers to these questions can provide some insight into the efficiency of the process.
A significant amount of the efficiency equation today relates to how technology is used in all
phases of the Revenue Cycle. Technology should never be used just for the sake of it, but where
it is applied in thoughtful and efficient manner, it can produce great results.

Conclusion

Whether it is business or sports, the basics/fundamentals are the key to success. Doing the
basics correctly on a daily basis and having the tools to measure the basics is the foundation on
which great Revenue Cycle results are built.

Today’s Revenue Cycle is highly complex and fragmented, yet at its core it is relatively simple. It
is often difficult to break away from the many tasks and chores that eat up our time on a daily
basis — but it is necessary to make sure that the basics are taken care of. After all, nothing makes
any of us feel better than beating that cash goal month in and month out.

For more information, contact us today at 800-228-0647
or email sales@ht-llc.com
HealthTech hopes that the information contained herein will be informative and helpful on industry topics. However, please note that this information is not intended to
be definitive. HealthTech and its affiliates expressly disclaim any and all liability, whatsoever, for any such information and for any use made thereof. Recipients of this
information should consult original source materials and qualified healthcare regulatory counsel for specific guidance in healthcare reimbursement and regulatory matters.

Page 3

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REVENUE CYCLE PRINCIPLES SERIES
Part 2

Getting the correct time allocation by
focus area
Derek Morkel, President & CEO, HealthTech, LLC

Part 2: Getting the correct time allocation
by focus area

Part 1 Recap:

The message of Part One was simple - our work is to collect cash in the most efficient
manner possible.

As complicated as it all is, our work can be segmented in two focus areas on a daily basis:
Part One Recap: 2. Collect cash more efficiently
Performing the It sounds very simplistic, but if all of our daily activities were structured around either of these
basics correctly two areas, I would bet that our results would improve dramatically.

on a daily basis Perhaps an easier way to put this is that all of our daily activities (no matter what the job title)
and having should answer one of the following two questions:

the tools to • Does it improve cash collections?
• Is it improving a process (fixing a broken one permanently)?
measure the
basics is critical These two basic principles can then be broken down into three main areas of focus:

in Revenue Cycle - Clean claims
- Bill efficiently
management.
- Collector productivity

Introduction:

It is hard today to pick up a healthcare magazine today that either focuses on finance or
receivables management that doesn’t have an article on the importance of clean claims. The
majority of these articles focus on the myriad of technical problems that cause claims to be
reworked or rejected – thus creating problems downstream.

Our first paper in this series on the basics of Revenue Cycle had “clean claims” as the first
main area of focus. Part 2 – much like the first in this series takes a slightly different angle to
the same problem and starts at the beginning to answer some very basic questions about time
and resource allocation.

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w w w. h e a l t h te c h s o l g ro u p . c o m

Why is it important?

The key takeaway from Part One was that the entire focus of any Revenue Cycle operation is to
collect cash in the most efficient manner possible.

Consider this: Industry statistics estimate the following relative to registration data and accuracy:
► 70% of the data required for billing comes from registration
► Registration accuracy related to this data is ~ 50%
► 50% of the denials can be traced back to admission based errors

Different studies have come up with slightly different numbers, but they all come up with the
same basic conclusion – registration accuracy is the foundation for a successful Revenue Cycle
process.

A series of short quizzes (be brutally honest in answering these) might help illustrate where the
problem starts and also what the solution is:
Registration
accuracy is vital Quiz 1:
Please rate the relative importance (by %) that you believe each of the three sections contributes
to a successful
to a well run Revenue Cycle process.
Revenue Cycle
Functional Area % Allocation
program and
Clean claims
greatly impacts Bill efficiently
a hospital’s Collector productivity
TOTAL 100%
bottom line.
Quiz 2:
Please estimate the amount of the time that you (or your managers) focus on each of these 3
areas on a daily basis.

Functional Area % Allocation
Clean claims
Bill efficiently
TOTAL 100%

Quiz 3:
Please estimate the average talent level of each area relative to the others, i.e. best, average,
worst.

Functional Area Allocation
Clean claims
Bill efficiently

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Results
The answers to these three questions at most facilities will produce startling results. Almost every
facility that I have ever visited or been associated with allocates the best resources to either the
billing or collections function and almost never to the registration process. Registrars are often
the lowest paid and least trained people in the business office and yet control not only the
accuracy of the registration data, but are also the customer service face of the organization.

One of the most important positions in any Business Office is the one that checks registration
accuracy (QA). Some facilities do not even have this position (or complete this function) and very
rarely is the position filled by the best available person. It is truly amazing to think that a facility
would not have their best person in admitting focused on this on a daily basis – especially since
we have determined that 70% of every claims data comes from admitting.

For more The old adage of “Garbage in – Garbage Out” is still very relevant today in healthcare. Part One
information, of this series established that to build an effective process there are three focus areas. The answer
to Quiz 1 should provide you with the starting point that you need to take a fresh look at what
contact us resources you have allocated where – relative questions that need answering are:

today at
• Do you have the right people in admitting?

800-228-0647 • Do you provide them with right training and incentives?
• Is your best person responsible for admitting QA – DAILY?
sales@ht-llc.com • Do you QA all accounts? (Hint: QA for an account takes far less time than rebilling)
• How much of your time do you spend on this function daily?
• How important do you make this in terms of rewards and accountability?

Conclusion
Clean claims are the foundation - the building block of an efficient Revenue Cycle operation. I
think that we all know this – the question is do we allocate the time and resources to make this a
reality on a daily basis?

This paper did not touch on the many technology applications that are available today that
can help improve the registration process and improve claims accuracy. The first step is to
acknowledge that “clean claims” is the critical first step in the process and that it deserves the
time and resources to make it successful. Making sure that everything is airtight at the beginning
of any process in any business is critical – collecting receivables is no different. Billing efficiently
and having superior collector productivity will be significantly enhanced if you get the first step
100% correct on a daily basis.


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Part Three

The Fundamentals of Producing Clean
and Complete Claims
A more focused approach to reducing denials
Derek Morkel, President & CEO, HealthTech

Part Three: The Fundamentals of Producing Clean and Complete Claims —
A More Focused Approach to Reducing Denials

Part One Recap

The message of part one was simple — our work is to collect cash in the most efficient manner possible.

As complicated as it all is, revenue cycle work can be segmented in two focus areas on a daily basis:
2. Collect cash more efficiently

The two basic principles can then be broken down into three main areas of focus:

1. Clean claims
2. Bill efficiently
3. Collector productivity

Part Two Recap

Part two focused on matching your facility’s resources — both people and time to the key factors that
improve clean claims and revenue cycle efficiency.

Making sure that all business processes are well established and communicated regardless of the process is
critical. Collecting receivables is no different.

Billing efficiently and having superior collector productivity will be significantly enhanced if you get the first
step 100% correct on a daily basis.

Introduction

The first two parts of our series focused on the broader aspects of why it is important to focus on clean and
complete claims and the resources necessary to ensure success. Part three takes a step further to dig into
the specific components of which processes produce both clean and complete claims. The end result of
getting this right is not only better collections, but typically better net revenue, higher collections and greater
efficiency.

An examination of the most common reasons for claim denials almost always provides some insight into
what needs to be fixed to correct the errors. Even though the reasons we discuss here come from national or
regional analysis of claim denials, it is always useful to analyze your own hospitals denials (at least monthly) to
make sure that you are addressing the root causes at your own facility.

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Most common causes for claim denials

Trailblazer Health Enterprises — one of the largest Fiscal Intermediaries (FI) analyzed claim denials from its
database and published (June 2010) the following listing of principal causes for hospital claims denials.
1. Duplicate claim/service
2. Non-covered service
3. Medicare Advantage plan
4. National Correct Coding Initiative (NCCI)
5. Screening/routine services
6. Patient supplies
7. Beneficiary eligibility
8. Medicare Secondary Payer (MSP)
9. Provider eligibility
10. Hospice

As a comparison, an analysis of several studies of physician claim denials produced the following list of the
top 10 reasons.

Top ten reasons for physician claim denials are the following:
1. Incorrect or missing ICD-9 diagnosis
2. Incorrect or missing modifiers
3. Duplicate claim
4. Additional information needed to process the claim
5. Billed amount is correct
6. Incorrect/missing CPT procedure codes
7. Physician’s name and/or NPI number is missing or incorrect
8. Incorrect or missing place of service code
9. Incorrect or missing quantity, multiples or services
10. Services are unbundled

There are a number of different studies regarding the cost to rebill and rework a claim denial — most of
them identify the amount around $25-$35 per account. Whichever number you use, it is clear that it is very
inefficient and expensive to rework a claim. Both of the listings also include a number of categories that
would cost the provider additional reimbursement even if the claim is paid the first time.

A grouping of the reasons by functional area is extremely revealing and proves the point that an intense focus
on the front end is critical to efficiency. The physician breakdown is slightly different as significantly more
work is done by the billing function to produce a clean claim.

Category Hospital Physician
Admitting 6 2
Coding 1 3
Billing 1 3
Charge Capture 1 1
Administrative/System Setup 1 1

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Focus areas to improve clean claim rates & reduce denials

Admitting QA

The claims process actually begins with preadmission and then the admission process. Admitting staff not
only need to be trained to make sure the right forms are filled out, but they also need to be able to verify
that the patient’s insurance information is correct, collect any co-payments due and check that any necessary
pre-authorization forms from physicians and insurances are on file. 70% of the data required to complete the
billing process comes from admitting. As we can see from the denial analysis, 60% of the denials in a hospital
can be directly attributed to admitting errors.

With each error potentially costing $25-$35 to correct on the back end, it makes sense to have a robust QA
function for admitting. 100% of all the claims should be checked for the denial reasons listed above and your
own analysis of your facility’s denials. The QA should also be done by someone who is knowledgeable about
admitting. Quite often the task is relegated to a lower level employee and/or only done sporadically as an
afterthought.

Tip: It is sometimes good to rotate this function between your admitting staff so they can see the errors being
made throughout the department. It is also good to periodically have them sit with the billers to see what the
result of an error is in the billing cycle.

On the back end, you need a clear understanding of where your denials are coming from in terms of both
the reason for them and the payer involved. That means creating some type of denial management database.
This will ensure that the QA process is always evolving and matching the current needs of your facility.

Charge Capture & Coding

Correctly documenting the services and procedures a patient receives during an inpatient stay or even in a
visit to the emergency room — i.e. charge capture — is a vitally important step in the process. For example,
if a clinician documents a medication the patient receives (by infusion) but forgets to record how the
medication was delivered, the insurer won’t pay for the delivery, just the medication. It’s unlikely that the
medication miraculously made it into the blood stream; thus, the fact still remains that the provider will not
be paid correctly for the claim.

Implant charges are another typical culprit. Not only can missing implant charges cause potential denials,
but they can also result in lost reimbursement — up to $40,000 for certain cardiac and neurological/spinal
implants. Potentially a very costly error.

Charge capture should be a daily discipline that is the responsibility of many different departments in the
hospital. Much like the admitting QA function a review/reconciliation should be part of each department’s
responsibilities. If this is completed each day correctly by every department, then the amount of charge
capture errors should be greatly reduced.

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Technology

Much of what we have discussed so far can be accomplished by improving the
originating processes and having a review function. However, it is important to note
that there are many applications available today that can aid in the review and control
process and make it even more comprehensive. Almost all of the parts of the revenue
cycle discussed within this series are prone to human error — even the review/QA
process.

Technology applications like CDM maintenance software, Charge Capture, Medical
Necessity, Bill Scrubbers, etc. should be an integral part of the front end of any
As complicated as hospital’s revenue cycle. It is not possible for any human being to remember or review
all the line items of a hospital CDM — it can only be done properly by software. The
it all is, revenue
same can be said for Charge Capture and Bill Scrubbing. These applications can scan
cycle work can still thousands of claims in seconds looking for potential errors. It is for this reason that
be segmented into these should be integrated into the setup, review and QA functions at the hospital.

two focus areas on a
Eliminating one $40,000 error provides an attractive ROI for all the applications listed
daily basis: above.

1. Collect more cash Conclusion

2. Collect cash more On the front end, a variety of seemingly unrelated steps in the process — including
efficiently payer contract negotiations, admitting, charge capture and billing — all contribute to
the potential success or failure of getting a claim paid correctly and on time. A process
that focuses on the components discussed within this document will result in a much
higher clean claims rate.

• Clean claim focus by all departments — not just admitting
• Robust review/QA function — including use of technology applications
• Continuous feedback — monitoring of QA results and denials keeps the focus
on current issues

By promoting a culture of cross-departmental cooperation that attacks the breakdowns
in various steps in the claims life cycle, denial rates will begin to fall, collector
productivity will increase and CASH will improve.

For more information, contact us today at 800-228-0647
or email sales@ht-llc.com


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Part Four

Boost collector productivity through
segmenting and value-added processing
Derek Morkel, President & CEO, HealthTech

Revenue Cycle Principles Series — Part Four
Boost collector productivity through segmenting and value-added processing

Part 2: Match resources
to needs
Key to revenue cycle is
clean & complete claims:
» Where are your resources
allocated?

Part 1: Collect more Part 3: Focus areas
cash more efficiently to improve clean &
complete claims
3 basic areas of focus:
» Admitting QA
» Clean & complete claims
» Charge capture & coding
» Bill timely » Collect more cash » Effective use of technology
» Collector productivity » Collect more
efficiently

Introduction to Part 4:

The first three segments of this series has focused on the importance of producing clean and complete claims; making
sure that we allocate the necessary resources to achieve this and finally to make sure that the process has the right
structure to ensure success.

One of the points made in the first segment was that the best way to achieve collector productivity was to have a
comprehensive program focused on clean and complete claims the first time. Outside of the fact that there are countless
studies that have proven this point, pure common sense will tell you that rework is far more time consuming than
getting it right the first time.

Unfortunately it seems unlikely that we will achieve a completely error free revenue cycle in the near future. The
complexity of the process; the manual nature of the constituent parts and the payor provider dynamic all contribute to
the fact that even the most efficient hospital still needs collectors to resolve claims. The task is then how to make them
more productive.

How do we improve collector productivity?

One of the keys to improving the back end of the process – collector productivity – is to match your resources to the
areas that fit their talent/experience level. Much of what is done in the collection process is relatively repetitive and can
be done by less experienced collectors. There are also technology solutions that can automate certain of the non value
added processes, thus allowing your collection staff to focus on the tougher to collect payors/accounts.

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Segmenting payors by level of difficulty

Most hospitals deal with a wide range of payors in the collection process. There is often a high degree of variability
within the group of payors as to how long they take to pay; what is considered a high $ claim; requirements to pay the
claim without medical records and what the resolution process is. It is probably not a positive fact for the healthcare
industry that Medicare is typically the most efficient payor.

Segmenting the payors into buckets like – 1) most difficult 2) medium
difficulty 3) least difficult will allow you to then match your best collectors
to segment 1) and so on. Today there are companies that have been started + =
just to help hospitals segment their payors into similar buckets – I am not
sure it is that complicated. Take a list of your Top 10 Payors and sit down
with your collection staff and ask them to assign each one to a group – they
will do a pretty effective job in less than 10 minutes. To validate this, you can
calculate what the average number of days it takes for claims to pay for each payor. It should match fairly closely to
your collector’s survey.

Once you have done this, you will probably realize that not every claim for the toughest payor is difficult to collect
– it is often just a subset – say high $ claims. You now have a segmented roadmap to match up to your talent and
experience level. The matrix is also a useful tool for deciding where to slot in new employees. Some facilities have
even used this as the basis to start hiring a pool of entry level people that are entirely focused on the easy payors and
the parts of the collections process that don’t require high levels of experience to add value – e.g. statusing of claims.

The result should be a well thought out matching of talent and experience to deal with the thornier claims and payors
– improving cash collections and potentially lowering your cost to collect. This one project thus meets both of the
overriding principles – more cash, more efficiently.

Using technology to focus on value added processes

As with any part of healthcare today, there are various technologies in the marketplace that have been designed to
improve a process. The collections arena is no different. In the previous parts of this series we have mentioned some
that can assist in making sure that claims are clean and complete – these are the most important tools for improving
collector productivity.

There are however some newer tools that can dramatically improve collector productivity by automating some of the
processes that are currently being done manually.

Automated claims statusing

Claims statusing is a task that takes up a significant amount of a collector’s time. A typical patient claim status takes
7-10 minutes via a web portal and roughly double that amount when done telephonically. The information is then
taken and either copied into the patient accounting system or transcribed into the patient’s account. Unless there is
something immediate that the collector can do with that account, the collector has added little or no value to the
process.

There are tools available that can automate this process (myClaimIQ AutoStatus). Either through a direct connection
to the payor database or through automating the web data extraction process, the account status can be extracted
and put back into the patient accounting system without any collector intervention. The process is typically done

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overnight with each response mapped to the hospital’s standard collector codes. The automated functionality also
eliminates any possibility of keying data errors back into the patient accounting system.

This process then allows the collectors to focus on value added activities like dealing with the harder to collect claims.
The responses from the payor are also now in a separate database and can thus be used as a denial management tool
and/or a QA function.

Integrated eligibility checks & denial management

The results from the auto status tool typically fall into 3 areas:
1. Needs immediate action - Payor doesn’t recognize the claim, or recognizes but denies claim
2. Needs follow up - Payor recognizes the claim but has not determined the status
3. No follow up unless payment not received - Payor pays claim as planned

In the case of point 1 – claim needs immediate action, it is now possible to use the tool to automatically route the
claim to either the denials team or to have the eligibility status of the claim run against the payor database as this is
the most common cause of claims rejecting initially.

The eligibility step can be automatically done through the software, thus saving a collector from doing another
repetitive date entry function.

Estimated payment contract compliance prior to payment

Software that calculates payment compliance to managed care contracts has been in place for a long time now. It is
typically used once the payment has been received from the payor. This can now be moved forward in the timeline to
the point where the payment data is received by the AutoStatus tool. This then streamlines the process and saves
the facility 14-21 days in addressing any payment related issues.

Each of the 3 areas that we have addressed under technology have been focused on eliminating or reducing non value
added tasks that are being performed by experienced and expensive collection staff.

Conclusion

I think everyone would agree that a significant amount of work is done in healthcare and in the collection process
specifically where the tasks performed are extremely routine and the person performing them doesn’t necessarily add
any value to the process – it is merely data extraction and data transfer. Unfortunately in most cases these tasks are
performed by highly experienced and well compensated employees.

In certain instances (like claims statusing) some of this can be replaced by technology. In the areas where experience
and expertise counts it is thus prudent to match your resources appropriately by segmenting your receivables by
payor.

The combination of segmentation and using technology appropriately can produce meaningful results in accelerating
the cash cycle and also reducing the cost to collect.

For more information, contact us today at 800-228-0647 or email sales@ht-llc.com
HealthTech hopes that the information contained herein will be informative and helpful on industry topics. However, please note that this information is not intended to be definitive. HealthTech and its affiliates expressly disclaim
any and all liability, whatsoever, for any such information and for any use made thereof. Recipients of this information should consult original source materials and qualified healthcare regulatory counsel for specific guidance in
healthcare reimbursement and regulatory matters.

Page 3

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